#USM2MoneySupplyGrowthHitsFourYearHigh

US M2 Money Supply Growth Hits Four Year High: Liquidity Turn That Fuels Risk Bid

US M2 growth just printed 4.5% year over year, fastest in four years, up from 0.3% a year ago and 4.1% last month. M2 level rose to $21.4 trillion, up $210 billion month over month, with M1 at $18.1 trillion and checkable plus saving share driving 78% of gain.

This is first real turn since 2021 when M2 spiked 26.9% and then fell to -4.6% in 2023, deepest drop on record. Now growth is back, and market that lives on liquidity feels it.

Why M2 Growth Is Back

Three drivers.

One, Treasury spend and buyback. Federal outlay rose $112 billion year over year, debt tops $40 trillion, and buyback of old bond hit $4 billion per week. That cash moves from Treasury General Account at $760 billion to private bank, which lifts deposit, which lifts M2.

Two, bank credit. Commercial loan growth rose 2.8% year over year, with consumer loan up 3.4% and real estate loan up 2.1%. Bank did not tighten as Fed held rate near 5.33%. Loan creates deposit, deposit lifts M2.

Three, Fed balance sheet drag is less. QT run-off slowed from $95 billion to $40 billion per month. Reserve drain fell, and repo facility use near $5.31% eases cash. Less drain means more cash stays in system.

What 4.5% M2 Means For BTC, Gold, And Stocks

History is clear. When M2 growth rose above 4% after long fall, risk bid followed with 3 to 6 month lag.

BTC case: BTC above $81k now, up 92% year over year, while M2 bottomed a year ago at -4.6%. Lag was 11 months. In 2020, M2 spike from 6% to 26.9% led BTC from $9k to $69k in 14 months. Now M2 at 4.5% is softer but still tailwind.

Gold case: Gold above $2,650, up 38% year over year. M2 growth plus 10-year yield near 4.70% and Dollar Index soft on week gives gold bid. Central bank buy plus M2 lift pushes hard asset.

Stock case: S&P above 5,400 with price to sales near 3.1x. M2 growth of 4.5% plus buyback yield of 4% in Japan and 3% in US keeps equity bid. Past cycle, S&P rose 18% on average in 12 months after M2 growth turned from negative to above 4%.

Velocity And Hold

M2 growth alone is not enough. Velocity still low at 1.12, near 70-year low, versus 1.42 in 2019. Money sits in money market fund at $6.2 trillion, not in spend. If velocity rises to 1.20, nominal GDP could rise 7% even with same M2.

Stable coin reserve near $42 billion on major venues shows that crypto side sees same hold. Cash waits for entry.

Watch Points Into Q4

If M2 growth holds above 4% for 3 months and Fed cuts once, past pattern says BTC could hold $79k floor and push to $86k to $90k, gold could hold $2,500 floor, and S&P could hold 5,200.

If M2 growth slips back below 3.5% on renewed QT or debt ceiling fight, risk bid could fade.

For now, four year high in M2 growth marks end of liquidity drain that started in 2022. That drain forced -4.6% M2 fall and 75% BTC drawdown. Reverse is now in play.