How The Economic Machine Works by Ray Dalio

Video ready, click here to close ×


Economics 101 — “How the Economic Machine Works.”

Created by Ray Dalio this simple but not simplistic and easy to follow 30 minute, animated video answers the question, “How does the economy really work?” Based on Dalio’s practical template for understanding the economy, which he developed over the course of his career, the video breaks down economic concepts like credit, deficits and interest rates, allowing viewers to learn the basic driving forces behind the economy, how economic policies work and why economic cycles occur.

To learn more about Economic Principles visit: http://www.economicprinciples.org.

[Also Available In Chinese] 经济这台机器是怎样运行的: http://www.youtube.com/watch?v=-ZbeYejg9Pk

[Also Available In Russian] Как действует экономическая машина. Автор: Рэй Далио (на русском языке): http://youtu.be/8BaNOlIfMLE

source

43 comments

  • This video brings great practical implications for formulating a long term investing strategy.

  • Can you please tell me which softwares were use for making this sort of animations?

  • Then, the biggest difference between credit and no-credit is: without credit you don't have enough motivation to increase your productivity, while within credit you are legally forced to increase your productivity. A carrot on a stick!

  • Every single individual needs to take individual responsibility to help the entire worlds economy. People need to save energy, be productive, and stop getting into lots of personal debt and never paying it. Too many people take out there first credit card, buy a new TV, lots of shoes and clothes etc: ….And either never pay it back, or continue the same cycle.
    Unless you are borrowing to invest in window cleaning materials for example, something that can make you productive, don't borrow at a young age.

  • 27:16 Wrong! If governments print money to pay off national debt, inflation would rise. This increase in inflation would reduce the value of bonds. If inflation increases, people will not want to hold bonds because their value is falling. Therefore, the government will find it difficult to sell bonds to finance the national debt.

  • Stupid video. Purely ideological. Brainwashing indeed.

  • This story represents well how today's political class understands money, credit, economic cycles, etc. But unfortunately for the rest of us, the political class has a very poor understanding of economics. Probably the most harmful fallacy in this video is the assertion that consumer spending drives economic growth. That's just crazy. By definition, consuming reduces wealth. What increases wealth and quality of life is saving, investment, innovation, and production.

    Even the name of this video gives away it's own misunderstanding. The economy is not a "machine". That's a horrible analogy. An economy is a complex, self-regulating, dynamic process of interactions among millions of cooperating individuals. It's not like an engine or mechanism, but rather more like a flock of birds, or an ecosystem. And because it has such a dynamic and complex nature, interventions by central banks and governments usually create disorder and do harm.

  • KEYNESIAN TRAAAAASH!!!!

  • People they use credit cards and then go bankrupt

  • oh boy… so our lovely bankster pulls out shamanic tricks so that the deleveraging is beautiful… FOR HIM!!! For people the deleveraging would be beautiful if the politico oligarchical culprits were JAILED so that everyone will remember it and this brutal WORSENING OF THE DEBT CYCLE BY BUBBLES will not repeat again.

  • man we need to change this monetery system !!!!!!!!!

  • this is why u dont debt..if you want more money…wotk harder

  • spending does not drive the economy.. Production and savings drives it. If there is no production it doesn't matter if you have currency to spend if there is nothing to buy. This is keynsian nonsense. He misueses the word "money". All this credit is not money by the strickt definition there is no intrinsic value to it. It is a debt based medium of exchange called "fiat currency" and there is never enough principle in existence to cover the interest. It is a game of musical chairs that cause these cycles and reak havock on the economy because of the inherent fraud in fiat currency. Perpetual debt by indavidual or goverments means we need to work harder and harder to maintain the same living standard It litterally steals wealth from the "aggregate" thru "inflation" transfering that wealth to lenders aka banks and also governments. Pay close attention to his example of a "credit free economy" it is the solution. If we had real money based on "productivity growth" rather than debt, these vicious cycles could not exist.

  • The Petrodollar gives the heavily printed dollar its intrinsic value. The US prints trillions, why don't you think it hyperinflates? Hence the 7 wars in the Middle East and why we overthrew Gaddafi and Saddam Hussein. They didn't want to trade their oil in the dollar.

  • This guy just literally gave everybody the secret to becoming rich for free! and dumb Americans reaction is to pitch their best conspiracy theories! Wow if you are so smart why are you here better yet why aren't you rich?

  • no word on compound interest?! the interest and compound interest will always make the down movement of the curve lower than the up curve high as said in the film towards the end. the reserve bank even though named "federal" is owned by a few private and secret groups and individuals, which through the power of printing money control the "government" and buy/ steal whatever they like and write their own laws and anything else that this superpower inheres. most people won't wake up until they can't buy food and loose their jobs and homes. less money for education, welfare, healthcare etc. to stay in control this small group supports war and anything else that suppresses the masses to "recycle" the down curve. there might be too many people consuming too much on this planet and some put themselves in charge to care about this problem.

    now, if dollars and euros etc. can't be trusted we should think about if the block chain technology (bitcoin) is a valid option for exchange to us as it's decentralisation and other favourable attributes by nature make it resistant to many problems of the contemporary global financial system. money has only value if we use and trust it. the bitcoin technology has made tremendous progress since it's invention and you can now charge debit cards with https://bitpay.com/ or buy in several online shops.

  • Couple of words….. GOLD AND SLIVER

  • Does any one know how can I learn to make a video like this ?

  • why pay back debt…when you can just borrow until you die. this is the US mentality today. all feel government will forgive debt. look at student debt.

  • lol…. Greece is an example why the credit factor took over income. productivity has many different definitions.

    cycles are bubbles folks.

  • so when does he get to the part where most of the people are paid in paper manufactured by other few people that dont produce nothing else but that paper ?

  • It is a good presentation but it doesn't explain how wealth gap increases.

  • nice view of economic, at least I know what's the mean of credit

  • learned a lot. THANK YOU.

  • Nice Explanation. Thanks for the upload.

  • At 24:45 you mentioned printing money. In the animation it shows a printer machine and sheets of money flowing out.

    Two points.

    1) Nowadays central banks don't really print out physical fiat money. They don't increase money supply by sheer quantity. They just write off debts, buyback assets using accounting records, through some simpler means with little cost. Increasing the money supply via physical fiat money and minting coins are old school with high cost. They don't use airplanes to drop money from the sky anymore, do they?

    2) Leverage. The part about this term leverage wasn't explained well at all. Nowadays financial assets have the concept of leverage encapsulated within them. It is like you have 10K of real money on hand but you can control an asset valued at 50 million. It makes the central bank or any banks very difficult to assess the intrinsic value of any debt properly.
    Wealth of economies disappeared and evaporated because of statistics we relied upon were mostly exaggerated and dishonest most of the time. The collapse of economies work like falling dominoes because asset values are RELATIVE to one another. When one asset default, the rest of the assets which are associated with it must go down too. Not in a linear fashion but exponentially. Quickly weed out the bad news and let's restart / rebound fast.

  • A far better indicator of the good and bad times on the stock market is military activity. Wars are a drag on the economy, peace is a boost on the economy. The best period of growth in the Dow Jones Index was during the 1990's following the collapse of Soviet Russia. One of the worst periods was during the Vietnam War.

  • Wrong about debt. Someones debt is another person's asset. And some debt is invested to produce a higher rate of return than the cost of the debt.

  • holy shit guys….obama's crew was awesome!

  • The ending was good, it is important to rise your productivity

  • Too much Keynesian, perhaps..?

  • I majored in Economics 16 years ago, but this video make me feel like I am refreshed!

  • I watced half of of the vid, and he calls rising prices inflation. Rising Prices are a result of inflation (the growth of the money supply) which is caused by the central banks manipulation of the interest rate, not the cause of the central bank's changing of the interest rate.
    Also, without saving, there is no money to borrow. Dallio is just a #Keynesian, the current financial crisis was predicted by #Austrian economists (and caused by Keynesians) Hence thumbs down.

  • Stopped watching as soon as it said the central bank prints money. FALSE.

  • This summary although simplified is still misleading. It does not include the role of banks in sufficient detail.

    1. Mentions interest rates but fails to describe the role of usury in putting the brakes on the productive economy. The fact that banks set interest rates also allows them and not the producers of wealth to set the time value of money.

    2. Every major asset bubble from the south sea island bubble, the Dutch tulip mania, the Wall street crash, and even 2008 were fuelled by cheap credit.

    Without usury and centralised interest rates, it is unlikely that these so called cycles would exist. Most of the debt load is usury, not principal, this is not a cycle, but a man made problem. The average mortgage holder will pay 2-3 times the cost of the house over the life of the loan.

    Most people can't appreciate that even wthout interest, loans can still be enforced. The difference is that the 40% price inflation paid by everyone who uses the currency would not be there without is and we would all be much better off.

  • It's a very useful video even if it simplifies a lot of points.

    One point I want to make: all money is actually credit. Money issued by a central bank is a liability of that central bank (and an asset to the banks who hold reserves at the central bank).

    Credit is a wonderful thing. Without credit we would go back to the barter of the Middle Ages. And who wants to live in the Middle Ages again?

Leave a Reply

Your email address will not be published. Required fields are marked *