Ray Dalio, the founder of Bridgewater Associates and a top economic thinker, shares captivating insights about how the economy functions. He breaks down the economy as a collection of transactions, emphasizing the significance of credit cycles and productivity growth. Dalio explores how debt influences economic dynamics and discusses the critical balance between income and debt for stability. He also examines deleveraging's impact and the pitfalls of austerity during downturns, making complex concepts accessible for smarter investment decisions.
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insights INSIGHT
Economy Built From Transactions
An economy is simply the sum of all transactions where buyers exchange money or credit for goods, services, or assets.
Understanding transactions lets you understand markets and the whole economy.
insights INSIGHT
Credit Is The Economy's Power Lever
Credit is the largest and most volatile part of the economy and functions like money when spent.
Creating credit increases spending because a borrower's spending becomes someone else's income.
insights INSIGHT
Borrowing Pulls Spending Forward
Borrowing pulls future spending forward and creates predictable cycles of expansion and contraction.
Any borrowing creates a cycle because you must later spend less to repay the debt.
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I think you are going to love this episode!
What I’m excited to share with you today is the audio portion of one of the greatest videos ever produced that explains how the economy works. More specifically, it’s titled “How the Economic Machine Works”. The 30-minute video was produced and narrated by Ray Dalio.
Who is Ray Dalio?
Ray Dalio is an American businessman and the founder of the investment firm Bridgewater Associates. He is one of the wealthiest people on the planet, with an estimated net worth of $15.4 billion (Forbes, 2015). And Time magazine considered him one of the Top 100 most influential people in the world.
I reached out to Ray last week and asked him if I could share his great explanation with my listeners, and he graciously agreed.
Ray says that an economy is simply the sum of the transactions that make it up. A transaction is a simple thing. Because there are a lot of them, the economy looks more complex than it really is. Instead of looking at it from the top down, it’s much easier to understand if we look at it from the transaction up.
Regardless of how important the economy may be to you, I think having a basic understanding of it will make you a smarter investor. And having a better understanding of it will help make you far more successful in all your financial and investment decisions.
I’m sure many of you will want to listen to this episode more than once because of the amount of content packed into this audio-only reply. My suggestion is to listen to it at least once, then click the link in the show notes to watch the animated video. The animations give it another dimension that helps you visualize and better understand the concepts. So don’t feel overwhelmed if this is your first time hearing this.
Plus, Ray shares his three rules-of-thumb that you can take away and apply to your own personal economy.
Now, just sit back and enjoy this audio-only portion of “How the Economic Machine Works”.
If you missed our last episode, be sure to listen to Viewing Properties Just Got Easier – WeGoLook.
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