Global money supply hits $142T, liquidity rises
World’s Money Is More Than $142,000,000,000,000: The Trickle-Up Zone Something is brewing in the global economy (left).
The financial heart of the world is pumping more strongly than ever. By September the world’s money supply hit a record $142 trillion, climbing 6.7% year over year a phenomenon without precedent. This surge, propelled for the most part by China, the European Union and the United States itself, suggests that central banks are once again letting loose after cycle after cycle of tightening. In other words, the days of easy money may be returning and markets are already responding. The Liquidity Wave Returns
Following almost two years of quantitative tightening (QT), central banks are reversing course. The New York Fed’s John Williams suggested recently that asset purchases might not be resumed until bank reserves are “ample.” In Fed-speak, that’s a definitive nod toward the next Quantitative Easing (QE) cycle perhaps as soon as 2026. Investors understand what that means: When liquidity rebounds, risk assets surge. The last time the money printer ran hot during the pandemic in 2020 global asset prices soared. In the wake of a pandemic that has left governments around the world already weakened and heavily indebted, central banks are once more being asked to maintain liquidity.
Defining the Money Supply, To understand why this matters, let’s first clarify what we mean by “money supply.” Economists have measures like M2 that incorporate cash, checking deposits and other highly liquid assets. As M2 rises, so does the amount of cold hard cash that is woodenly moving through the economy to promote spending, investing and plain old speculation. Think of it as the bloodstream of the world’s financial system and at this moment, it is pumping furiously.
The Big Three: Driving the Surge
That $142 trillion figure isn’t evenly distributed around the world. It is dominated by the “Big Three” China, the EU and the U.S.
China by itself has around $47 trillion in broad money, growing rapidly to prop up its property market and keep the wheels of industrial output turning. Officially, the European Union is committed to controlling inflation but it continues to supply abundant credit throughout its member nations.
The United States paves the way, as always. Every suggestion of a shift toward easing from the Fed has global liquidity models rippling. Together, they are like synchronized pumps that ensure the global financial system never runs too dry even when policymakers talk tough about austerity. It’s a Game-Changer That $142 Trillion Is the Estimated Cost of Quitting Fossil Fuels
Two things we know from this record number. First, however much tightening was discussed, liquidity never really vanished; it just took a break. Second, the space for prolonged restrictions too much tightening will snap credit markets and funding channels and the financial system. That is why markets now anticipate a shift toward easing well before inflation has been thoroughly tamed. Money supply is growing at an annual rate of 6.7%, faster than real economic output. That would imply there being more money searching for the same amount of goods and assets a recipe for inflation or an asset bubble, depending on where that excess moves.
The Fed’s Gentle Warning, When John Williams, a New York Fed official, said that the central bank could start buying assets again “once reserves were broadly ample,” he was not being casual. It’s an early sign that QT is starting to end, and QE could make a comeback very soon. Investors, particularly in crypto and tech, are paying attention. The market trades not on today but on tomorrow.
Crypto’s Favorite Fuel, Whenever liquidity rises, crypto thrives. Bitcoin, Ethereum and other risk assets have done best in history as money supply expands. The logic is simple: More liquidity → Lower yields → More risk taking → Crypto booms.
From 2020’s pandemic response to a balance sheet expansion in 2024, each liquidity wave has ushered in new crypto bull markets. If global M2 keeps rising, the next era of the crypto cycle is already developing. A Century’s Scale: 446 Percent Growth Since 2000
Data from The Kobeissi Letter reveals a shocking long-term trend: since 2000 only twenty years ago the global broad money supply has surged an astonishing 446%, ballooning by $116 trillion in just 25 years. This is evidence that the modern economy is structurally addicted to liquidity. As markets tremble, policymakers grab for the same elixir more money.
When Money Outruns Growth, Of course, there’s a catch. If the money supply increases faster than real economic productivity, it doesn’t create wealth on a sustainable basis it merely inflates prices. Such inflation can manifest in
Consumer products (buying power rise) Assets (stocks, real estate, Bitcoin) Government bonds (helping to suck up $323 trillion in global debt by the end of 2024)
Liquidity is what keeps the system going, but it also obscures structural weaknesses most of all, dependence on debt. End of QT? Investors Are Betting On It
Markets are forward-looking. Even the mere hint that QT could end has already begun to re-allocate capital. Investors become emboldened deploying leverage, rotating into crypto and funding startups at strength — when liquidity floors are established. For risk assets, this is the most bullish setup in years.” Inflation vs. Liquidity
The Tightrope Act, For central banks, the challenge is clear: to squelch inflation without stifling growth. Each time they raise rates to stem prices, they risk causing pain in brittle credit systems. That’s why most are quietly moving back in the direction of liquidity support, whatever their public pronouncements. Put another way, inflation isn’t vanquished it’s being kept down within a liquidity trap.
Where Does the Money Go?
When cash courses through the system, it doesn’t just lie around. It flows into:
Assets primed to return money, such as Treasuries and money market funds As demanded growth assets like AI and tech stocks
In the case of scarce assets, such as gold, Bitcoin, or tokenized real world assets our primary focus is to prove legitimacy and prevent double spending. That’s why gold just reached all-time highs, and we’re seeing the hot, bubbly feeling in crypto markets again. 10So long as liquidity is in the system, money goes where it’s treated best and these assets swim in excess of the stuff. The Hidden Fragility
Yet there’s an uncomfortable truth. If the world needs $142 trillion in broad money just to avoid falling apart, it’s a tightrope. Governments, businesses and markets now need a steady drip-feed of liquidity. That’s not productivity led growth it’s financial floatation. We are keeping a huge ship afloat because we keep pumping water under it. It works … up until an expensive part fails.
Looking Ahead Short of a major economic shock that forces the Fed to once again tighten the screws, all signs point toward more liquidity. With debt loads high and growth fragile, central banks are expected to keep the taps open. What does this mean for investors? The liquidity tide is turning as it has throughout history, when the tide compels crypto and high risk assets to rise first.
Conclusion, The world’s money supply reaching $142 trillion is not just another statistic it is a sign. It informs us that the tightening is winding down, that liquidity is coming back and markets are trying to gear up for the next big run. Risk assets from Bitcoin to tech stocks may ride that flood once again, even as central banks quietly prepare to inject more money. The one real question now: when does the firehose come out to play?
