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Nomura’s McElligott: The M2 Pro-Cyclical Signal May Be ‘Triggering’ In Stocks
Last week, Nomura's Charlie McElligott suggested that those looking for a real "reflation signal" should watch for signs that the surge in the US M2 money stock is abating.
A decline in M2 would mean "money is put back to work on the corporate [and] individual levels [as] risk aversion and focus on savings turns into a more opportunistic outlook", he said.
This would likely mean that at least some economic actors deem the economy "healthy enough to see loans and lines of credit paid back".
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Question – How is money supply impacted when depositors withdraw money from their bank account, say to buy job robots? I am guessing that it has an immediate impact on the M-2 measure since it was a withdrawal.
But what if the robot maker puts that money into their checking account? Is it a wash as far as M-2 goes?
Or do we assume the robot maker has to pay their staff and suppliers so money does not return to the banking system right away?
Thanks!