M2 Update: 12th Consecutive Weekly Increase, The Seasonal Adjustment Inflection Point, And The FDIC's "Free Capital Transfer" Plan Is Working

M2 continues its seemingly endless rise higher...at least on a seasonal adjusted basis. In the week ended September 27, M2 rose to a fresh record of $8,741.9 trillion: a$30.9 billion W/W jump which was the 4th largest weekly rise year to date. This was the 12th sequential increase in M2, which in 2010 has increased by over quarter of a trillion dollars.

We are not sure what the real reason for the surge in "real" money is (and not magically seasonally adjusted money) in Q4 is, when the NSA "deficit" catches up with the SA numbers, but whatever it is: liquidations, pick up of spending into the holidays, etc., we think "this time may be different." Which means that the next several weeks will be very critical to confirm if the actual priced in surge in NSA M2 will actually occur. And since this is real money that goes into the economy for a variety of GDP boosting endeavors, this may serve as yet another accrued source of weakness. Because should not only the $125 billion in NSA monetary aggregates (that already are priced in by the government), but an additional pick up into EOY not occur, then the impact to GDP, from a monetary basis, may be quite severe, and amount to as much as 1% of GDP. We will keep a close eye on this differential and confirm or deny whether this hypothesis is playing out.

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