Why Global Liquidity is not Global M2

Most analysts use Global M2 as a proxy for liquidity because it is easy to download. The two measure different things. M2 counts cash, bank deposits and retail money funds, most of it on the liability side of retail banks. Global Liquidity counts balance-sheet capacity: central bank money plus the government debt that banks, funds and dealers borrow against. It is a wholesale measure, not a count of what banks owe their depositors.

• What it sums. The M2 of 33 economies, the euro area counted as one, about 95% of the world’s M2 in July 2026 (BlockPhi’s estimate). Where a country publishes no comparable M2, its broad money: India, Australia, Thailand and New Zealand. Each figure is converted to US dollars at the month’s own exchange rate and summed by BlockPhi.
• Its level. US$91.2 trillion in January 2020 and US$137.5 trillion in July 2026, the latest month every member had published by 28 September 2026.
• The publishers. United States (Federal Reserve Board); Euro area (European Central Bank); China (People’s Bank of China); Japan (Bank of Japan); United Kingdom (Bank of England); India (Reserve Bank of India); South Korea (Bank of Korea); Hong Kong (Hong Kong Monetary Authority); Australia (Reserve Bank of Australia); Taiwan (Central Bank of the Republic of China (Taiwan)); Canada (Bank of Canada); Russia (Bank of Russia); Brazil (Banco Central do Brasil); Switzerland (Swiss National Bank); Mexico (Banco de México); Saudi Arabia (Saudi Central Bank); United Arab Emirates (Central Bank of the UAE); Poland (National Bank of Poland); Thailand (Bank of Thailand); Singapore (Monetary Authority of Singapore); Malaysia (Bank Negara Malaysia); Turkey (Central Bank of the Republic of Türkiye); Indonesia (Bank Indonesia); Sweden (Statistics Sweden (for the Riksbank)); Norway (Statistics Norway); Czechia (Czech National Bank); Philippines (Bangko Sentral ng Pilipinas); South Africa (South African Reserve Bank); Denmark (Danmarks Nationalbank); Egypt (Central Bank of Egypt); New Zealand (Reserve Bank of New Zealand); Colombia (Banco de la República (Colombia)); Chile (Banco Central de Chile).

• Credit made outside banks. Broker-dealers, funds and corporate cash pools lend and borrow in wholesale markets. At end-2024 banks held 38.0% of global financial assets and non-bank financial intermediaries 51.0% (FSB, Global Monitoring Report on Nonbank Financial Intermediation, 16 December 2025).
• Secured lending and repo. Since 2008 wholesale lending has run largely on collateral, most often US Treasuries. US repo averaged about $12.6 trillion of daily exposures in the third quarter of 2025, 69.4% of it against Treasuries (OFR, 4 December 2025). M2 does not count repo as repo.
• Central bank operations. The injection and withdrawal of public liquidity, including the Treasury General Account, reverse repo and the shift to bill issuance. None of it shows up in a headline rate. The Global Liquidity Model counts central bank total assets and does not net these accounts out.
• Cross-border flows. Offshore dollar pools, FX swaps and the Eurodollar market create dollar credit outside the United States, and M2 does not count it. A dollar that crosses a border can be used by a foreign bank as collateral and lent against again.

On the Global Liquidity Model, the collateral base in the week ending 9 October 2026 was $104.84 trillion. Sovereign debt was $78.77 trillion of it and central bank money $26.06 trillion. The Global Liquidity Model is a composite that measures the balance-sheet capacity behind global credit: the balance sheets of five central banks plus 17 government debt markets, revalued every Friday in US dollars and multiplied by a collateral multiplier keyed to the US ten-year Treasury yield. The multiplier has two parameters, estimated once and frozen, and stood at 1.8905 that week. Figures are rounded, so the parts may not add exactly. Model estimate as of 9 October 2026. Past results do not indicate future results.

Late. US M2 for July 2026 was published on 25 August 2026, and euro area M3 for July 2026 on 27 August 2026. The BIS global liquidity indicators for end-March 2026 were published on 31 July 2026. The Global Liquidity Model is published every Friday after the US close. It is weekly, not real time. Some of its components are monthly or quarterly and are held until the next release is usable.

Partial. M2 counts cash and deposits. Much of the credit system now runs on collateral, in repo and securities financing markets that M2 does not count. When the Federal Reserve stopped publishing M3 on 23 March 2006, the lines dropped with it included repurchase agreements and Eurodollars: the wholesale funding lines. Its notice said M3 did not appear to carry information about economic activity beyond what M2 already carried. It did not describe M2 as a measure of funding. The US repo market was sized from transaction data in an estimate the OFR published on 4 December 2025 (table below).

Revised. M2 itself moves little on revision: the first print of US M2 for July 2026 and the next release’s figure are in the table below. The fault is the fit. Overlays shift M2 forward by a lead chosen on past data and re-tune it each cycle (section IV). Published work on backtest overfitting shows how few such trials it takes to make a signal with no skill look strong in sample (table below). A backtest on refitted history finds signals nobody could have seen at the time. Collateral data are revised too: BIS debt securities statistics change after release, and weeks of the Global Liquidity Model before 31 July 2026 are a reconstruction with the current method, not a record of what was known each week.

Two dated periods. Both fall before the live record began on 31 July 2026, so the BlockPhi figures use reconstructed history.

From late September 2023 to late March 2024 the Federal Reserve shrank its balance sheet, and US M2 was lower than a year earlier in every month from September 2023 to February 2024. Read from those two lines, liquidity was tightening. The Federal Reserve’s own report on the period shows the other side: money left its reverse repo facility and bank reserves rose. US Treasury prices also recovered after the ten-year yield peaked in October 2023 (table below).

On the Global Liquidity Model, the collateral base changed between 29 September 2023 and 29 March 2024 by +3.83%. Sovereign debt changed by +5.69%, central bank money by −0.32% and Global Liquidity by +4.03%. The two dates are the Fridays after the dates in the Federal Reserve’s report (table below). These weeks are a reconstruction with the current method. Model estimate as of 9 October 2026. Past results do not indicate future results.

In the Global Liquidity Model the rise in the collateral base came from sovereign debt, which is revalued every Friday in US dollars, at current exchange rates and, for six markets, current government bond yields; central bank money was little changed. M2 does not count that collateral, and the Federal Reserve’s balance sheet total fell over the same months.

Over these twelve months a published global M2 series rose faster than US M2, while the dollar fell against other currencies (table below). A global M2 is usually local money summed in US dollars, so a weaker dollar raises it even when no new money is created. The publisher of that series does not state how it is built.

On the Global Liquidity Model, Global Liquidity changed between 7 February 2025 and 6 February 2026 by +10.47%. The collateral base changed by +10.02%, with sovereign debt changing by +12.74% and central bank money by +2.88%. These weeks are a reconstruction with the current method. Model estimate as of 9 October 2026. Past results do not indicate future results.

Global Liquidity rose too, so the level alone does not separate it from a global M2. What separates them is what the rise was made of. Between 7 February 2025 and 6 February 2026, about half of the rise in the collateral base came from the weaker dollar. The rest came from larger quantities, mainly new sovereign debt, less a small fall in bond prices. This is a model estimate, derived from the components, which are offered under licence; on this site they are shown frozen at the week ending 18 September 2026. A dollar-summed M2 carries its currency effect inside one line.

On the Global Liquidity Model, the six-week change of Global Liquidity on 7 November 2025 was −1.12%. It was below zero in every week from 17 October to 5 December 2025 and positive again from 12 December 2025. The series did not call the 10 October 2025 sell-off. These weeks are a reconstruction with the current method. Model estimate as of 9 October 2026. Past results do not indicate future results.

US M2 rose in each month from October to December 2025 (table below). US M2 has no currency effect. The dollar rose in the six weeks to 7 November 2025 (table below), and the model moves with the dollar, so part of its fall over these weeks may be currency.

Most liquidity theses at funds run on a proxy. By category:

• Global M2 overlays. Deposits, summed in US dollars at spot exchange rates, then shifted forward by a lead the user sets.
• Fed net liquidity. The Federal Reserve’s balance sheet less the Treasury General Account and the reverse repo facility. Weekly and public, and one central bank.
• The BIS global liquidity indicators. Credit in US dollars, euros and yen to non-bank borrowers outside the United States, the euro area and Japan respectively. Documented by the BIS, and published quarterly, about four months after quarter end.
• Proprietary indices. Varies by vendor.
• Building it in-house. What one analyst defined, kept up by whoever is left.

The public proxies each stop somewhere: they count deposits, or one central bank, or arrive months late, or rest on a lead refitted to past data.

A dollar-summed global M2 is local money translated at spot exchange rates. M2 is published monthly, so between releases a daily global M2 line moves only with the exchange rate. When the dollar falls, as it did in the twelve months to 6 February 2026, the line rises even when no new money is created (section III). The Global Liquidity Model carries the dollar too, by design: it is revalued every Friday in US dollars, at current exchange rates and, for six markets, current government bond yields. The difference is that its change can be split, from the components, into currency, central bank balance sheets, sovereign debt issuance and bond prices, so the dollar’s part can be measured rather than left inside one line.

Overlays then shift the M2 line forward by a lead chosen because it lines up with past turns in Bitcoin. A lead chosen that way is a fitted parameter, and every new choice is another trial on the same history (section II). The edge in the backtest is not the edge in the book. The Global Liquidity Model itself is not shifted: each week is dated to its own Friday. The horizon used in our published research was also chosen on past data, on an earlier composite measure of Global Liquidity (weekly data from 18 February 2022 to 24 April 2026). The research page sets out how.