Global M2 Money Supply Growth (GDP-Weighted)

📊 Global M2 Money Supply Growth (GDP-Weighted)

This indicator tracks the weighted aggregate M2 money supply growth across the world's four largest economies: United States, China, Eurozone, and Japan. These economies represent approximately 69.3 trillion USD in combined GDP and account for the majority of global liquidity, making this a comprehensive macro indicator for analyzing worldwide monetary conditions.

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🔧 KEY FEATURES:

📈 GDP-Weighted Aggregation
Each economy is weighted proportionally by its nominal GDP using 2025 IMF World Economic Outlook data:
• United States: 44.2% (30.62 trillion USD)
• China: 28.0% (19.40 trillion USD)
• Eurozone: 21.6% (15.0 trillion USD)
• Japan: 6.2% (4.28 trillion USD)

The weights are fully adjustable through the indicator settings, allowing you to update them annually as new IMF forecasts are released (typically April and October).

⏱️ Multiple Time Period Options
Choose between three calculation methods to analyze different timeframes:
• YoY (Year-over-Year): 12-month growth rate for identifying long-term liquidity trends and cycles
• MoM (Month-over-Month): 1-month growth rate for detecting short-term monetary policy shifts
• QoQ (Quarter-over-Quarter): 3-month growth rate for medium-term trend analysis

🔄 Advanced Offset Function
Shift the entire indicator forward by 0-365 days to test lead/lag relationships between global liquidity and asset prices. Research suggests a 56-70 day lag between M2 changes and Bitcoin price movements, but you can experiment with different offsets for various assets (equities, gold, commodities, etc.).

🌍 Individual Country Breakdown
Real-time display of each economy's M2 growth rate with:
• Current percentage change (YoY/MoM/QoQ)
• GDP weight contribution
• Color-coded values (green = monetary expansion, red = contraction)

📊 Smart Overlay Capability
Displays directly on your main price chart with an independent left-side scale, allowing you to visually correlate global liquidity trends with any asset's price action without cluttering the chart.

🔧 Customizable GDP Weights
All GDP values can be adjusted through the indicator settings without editing code, making annual updates simple and accessible for all users.

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📡 DATA SOURCES:

All M2 money supply data is sourced from ECONOMICS (Trading Economics) for consistency and reliability:
• ECONOMICS:USM2 (United States)
• ECONOMICS:CNM2 (China)
• ECONOMICS:EUM2 (Eurozone)
• ECONOMICS:JPM2 (Japan)

All values are normalized to USD using current daily exchange rates (USDCNY, EURUSD, USDJPY) before GDP-weighted aggregation, ensuring accurate cross-country comparisons.

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💡 USE CASES & APPLICATIONS:

🔹 Liquidity Cycle Analysis
Track global monetary expansion/contraction cycles to identify when central banks are coordinating loose or tight monetary policies.

🔹 Market Timing & Risk Assessment
High M2 growth (>10%) historically correlates with risk-on environments and rising asset prices across crypto, equities, and commodities. Negative M2 growth signals monetary tightening and potential market corrections.

🔹 Bitcoin & Crypto Correlation
Compare with Bitcoin price using the offset feature to identify the optimal lag period. Many traders use 60-70 day offsets to predict crypto market movements based on liquidity changes.

🔹 Macro Portfolio Allocation
Use as a regime filter to adjust portfolio exposure: increase risk assets during liquidity expansion, reduce during contraction.

🔹 Central Bank Policy Divergence
Monitor individual country metrics to identify when major central banks are pursuing divergent policies (e.g., Fed tightening while China eases).

🔹 Inflation & Economic Forecasting
Rapid M2 growth often leads inflation by 12-18 months, making this a leading indicator for future inflation trends.

🔹 Recession Early Warning
Negative M2 growth is extremely rare and has preceded major recessions, making this a valuable risk management tool.

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📊 INTERPRETATION GUIDE:

🟢 +10% or Higher
Aggressive monetary expansion, typically during crises (2001, 2008, 2020). The COVID-19 period saw M2 growth reach 20-27%, which preceded significant inflation and asset price surges. Strong bullish signal for risk assets.

🟢 +6% to +10%
Above-average liquidity growth. Central banks are providing stimulus beyond normal levels. Generally favorable for equities, crypto, and commodities.

🟡 +3% to +6%
Normal/healthy growth rate, roughly in line with GDP growth plus 2% inflation targets. Neutral environment with moderate support for risk assets.

🟠 0% to +3%
Slowing liquidity, potential tightening phase beginning. Central banks may be raising rates or reducing balance sheets. Caution warranted for high-beta assets.

🔴 Negative Growth
Monetary contraction - extremely rare. Only occurred during aggressive Fed tightening in 2022-2023. Strong warning signal for risk assets, often precedes recessions or major market corrections.

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🎯 OPTIMAL USAGE:

📅 Recommended Timeframes:
• Daily or Weekly charts for macro analysis
• Monthly charts for very long-term trends

💹 Compatible Asset Classes:
• Cryptocurrencies (especially Bitcoin, Ethereum)
• Equity indices (S&P 500, NASDAQ, global markets)
• Commodities (Gold, Silver, Oil)
• Forex majors (DXY correlation analysis)

⚙️ Suggested Settings:
• Default: YoY calculation with 0 offset for current liquidity conditions
• Bitcoin traders: YoY with 60-70 day offset for predictive analysis
• Short-term traders: MoM with 0 offset for recent policy changes
• Quarterly rebalancers: QoQ with 0 offset for medium-term trends

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📋 VISUAL DISPLAY:

The indicator plots a blue line showing the selected growth metric (YoY/MoM/QoQ), with a dashed reference line at 0% to clearly identify expansion vs. contraction regimes.

A comprehensive table in the top-right corner displays:
• Current global M2 growth rate (large, prominent display)
• Individual country breakdowns with their GDP weights
• Color-coded growth rates (green for positive, red for negative)

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🔄 MAINTENANCE & UPDATES:

GDP weights should be updated annually (ideally in April or October) when the IMF releases new World Economic Outlook forecasts. Simply adjust the four GDP input parameters in the indicator settings - no code editing required.

The relative GDP proportions between the Big 4 economies change very gradually (typically <1-2% per year), so even if you update weights once every 1-2 years, the impact on the indicator's accuracy is minimal.

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💭 TRADING PHILOSOPHY:

This indicator embodies the principle that "liquidity drives markets." By tracking the combined M2 money supply of the world's largest economies, weighted by their economic size, you gain insight into the fundamental liquidity conditions that underpin all asset prices.

Unlike single-country M2 indicators, this GDP-weighted approach captures the true global picture, accounting for the fact that US monetary policy has 2x the impact of Japanese policy due to economic size differences.

Perfect for macro-focused traders, long-term investors, and anyone seeking to understand the "tide that lifts all boats" in financial markets.

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Created for traders and investors who incorporate global liquidity trends into their decision-making process. Best used alongside other technical and fundamental analysis tools for comprehensive market assessment.

⚠️ Disclaimer: M2 money supply is a lagging macroeconomic indicator. Past correlations do not guarantee future results. Always use proper risk management and combine with other analysis methods.