A central bank balance sheet counts money created, not money circulating. Two large pools sit inside that total without reaching markets: the government’s own cash account and the facility where money funds park overnight.

Taking both back out leaves a closer approximation of what the financial system can actually use. It is not an official number, and it has tracked risk assets more closely than the headline balance sheet does.

What it actually measures

The direction is the reading. Whether more or less central bank money is reaching markets than last month says more than the level does, because the level depends on construction choices that vary between the people publishing it.

The two adjustments swing on their own timetables. Tax collection fills the government account and spending drains it again, while the parking facility empties whenever short-term debt is issued at rates that beat leaving money there.

Large moves often have a plumbing explanation. A refunding programme or a quarterly tax date can shift the reading substantially while policy has not changed at all, which is worth checking before a move gets read as a decision.

Money created and money circulating are different quantities

The headline balance sheet gets quoted as though every dollar on it were loose in the system. A large share of it has never been anywhere near a market, and treating the gross figure as the liquidity figure overstates support in some periods and understates it in others.

This is why the adjusted series is worth the extra complexity. It is a rougher number that answers a better question, and a precise answer to the wrong question is not an improvement.

What it does not tell you

It is a convention, not an official statistic. Different analysts subtract different things, so a level quoted from one source will not match another.

The adjustments are approximations. Money in the government’s account is not entirely inert and money in the parking facility is not entirely out of reach, and the subtraction treats both as absolute when neither is. The error is small and it is not zero.

It covers one jurisdiction. Liquidity created elsewhere reaches the same markets and is nowhere in this reading, so a period where domestic conditions tighten while conditions abroad loosen will look more restrictive here than it felt anywhere.

How to read it

Expanding. More central bank money is reaching the financial system.

Flat. Neither adding nor withdrawing to any meaningful degree.

Draining. Money is being pulled back out of the system.

Find Net Liquidity on the Macro dashboard, alongside Fed Policy, M2 Money Supply and Macro Grip.

Common questions

Why adjust the balance sheet?

Because money sitting in the government’s account or parked overnight is not circulating. Subtracting both gets closer to what markets can actually put to work.

Is this an official figure?

No. It is widely used and the exact construction varies between analysts, so the direction carries more weight here than the level.

Why does it swing with no policy decision?

Because the two adjustments follow their own calendars. Tax dates and debt issuance shift them considerably, and a large move often has a mechanical explanation rather than a monetary one.

How exact are the adjustments?

Roughly right rather than precise. Neither pool is entirely cut off from markets, and the subtraction treats them as though they were.

Does it cover global liquidity?

It does not. Money created by other central banks reaches the same markets and appears nowhere in this series, so a domestic drain offset by expansion abroad will read here as a tightening that markets never felt.