Productivity growth, measured as a percentage of GDP, is driven by various factors such as learning, accumulating knowledge, and working. According to Ray Dalio, the economy’s behavior can be largely explained by three main forces: productivity growth, the short-term debt cycle, and the long-term debt cycle. These principles cover three basic forces driving the economy: productivity growth, the short-term debt cycle, and the long-term debt cycle.
Over time, we learn, accumulate knowledge, and work, which drives productivity growth. However, credit matters in the short run, as productivity growth doesn’t fluctuate much, making it less of a driver of economic swings. Productivity growth is not a significant driver of economic swings, but debt does.
In an interview with the World Economic Forum, Ray Dalio shared five key trends – debt, populism, conflict, climate, and technology – reshaping the economy. He also highlighted the importance of investing in education and bipartisan action to boost productivity.
In conclusion, productivity growth is driven by cost-effectiveness and competitiveness, and it is crucial for countries to focus on these factors to ensure long-term health. The study examines the determinants of productivity growth, which are the determinants of a country’s long-term health. The productivity growth rate is a function of how much productivity increases for a certain number of people over time.
📹 How The Economic Machine Works by Ray Dalio
Economics 101 — “How the Economic Machine Works.” Created by Ray Dalio this simple but not simplistic and easy to follow 30 …
What was Ray Dalio’s famous quote?
Ray Dalio, a renowned investor and educator, has successfully transitioned control of Bridgewater Associates, the world’s largest hedge fund, to the next generation of leaders after twelve years. Founded in 1975, Dalio’s top-down, macro investing approach involves understanding the current state of the economy, determining risks, and positioning the portfolio accordingly. In 2008, he predicted a crisis and reallocated his portfolio to benefit from it, leading to positive growth in a period where the average hedge fund lost around 20 percent. Dalio’s expertise in financial markets has been invaluable, as he has a unique perspective on the market and the importance of understanding the market’s dynamics.
How are productivity and growth related?
Productivity is defined as the ability of an economy to produce and consume more goods and services for the same amount of work. This is a crucial concept for individuals, business leaders, and analysts alike.
What are the three rules of thumb when understanding how the economy works?
Steve Glaveski, co-founder of Collective Campus, advises against a debt-to-income ratio ratio of faster than productivity, as debt burdens can lead to financial strain. He emphasizes the importance of increasing productivity in the long run, as it is the most crucial factor in a company’s success. Glaveski is a chronic autodidact, passionate about 80s metal, high-intensity workouts, surfing, and standup comedy.
What is Ray Dalio’s strategy?
Ray Dalio, an American financial expert and billionaire investor, developed the All Weather Portfolio in 1996 to protect investors’ assets in any economic situation. This strategy focuses on diversification, risk management, and forecasting economic cycles. The portfolio consists of four asset classes: stocks, bonds, gold, and commodities. Despite earning less in favorable market conditions, it would not lose during a crisis.
The All Weather Portfolio aims to demonstrate stable yields in any economic environment and minimize risks for investors. The strategy’s advantages include stable yields in any economic environment and minimal risks for investors.
What are the 4 phases of the business cycle?
The business cycle is a series of four phases: expansion, peak, contraction, and trough. It describes the fluctuations in an economy over a period, typically from the start of one recession to the start of the next, including periods of growth. Despite being complex and intertwined, business cycles are not predictable. Despite signs of changes in an economy like inflation and production, predicting an all-out change in the business cycle is difficult or even impossible. Economies are complex machines that function in various ways, making it difficult to predict their movements.
What are the phases of economic growth?
The economic cycle consists of four phases: expansion, peak, contraction, and recovery. The duration of these cycles varies, making them difficult to predict. Some sectors tend to outperform others during different phases. Phase 1 of the cycle is expansion, where low interest rates make borrowing easier for consumers and businesses. As demand for consumer goods grows, businesses ramp up production, hire more workers, or invest capital to expand their operations. Corporate profits and GDP rise as the economy enters its “boom” phase, with stock prices and corporate profits also rising.
Which leads to the end of economic expansion in the short-term debt cycle?
The short-term debt/credit cycle, which typically lasts between five and ten years, is characterised by an economic expansion phase during which the level of debt in the system increases. This is followed by a contraction and deleveraging phase, which is triggered by an adverse event or catalyst.
Is Ray Dalio still investing in China?
Bridgewater Associates founder Ray Dalio has expressed concerns about China’s economic slowdown and the potential for real issues to arise in the country. He stated that a small portion of his family office’s portfolio remains invested in China, but emphasized the need for a more balanced approach to investment. Additionally, Dalio highlighted California’s anti-speeding bill as a potential traffic safety breakthrough.
What is the main analogy that Ray Dalio uses to explain how the economic machine works and why is it a useful analogy?
Dalio views the economy as a machine composed of credit, debt, and the central bank. A healthy economy is one where these components work together smoothly. However, imbalances, like excessive debt or a sudden credit contraction, can lead to a crisis. The economy is the sum of all transactions carried out by people, businesses, banks, and the government in society. Understanding transactions helps us understand how the economy works, as every transaction involves a buyer exchanging money or credit with a seller for goods, services, or financial assets.
What does Ray Dalio believe in?
Populist politics and the growing wealth divide are causing division in many countries, according to Dalio. Wealth and value differences create populism, leading to internal conflict and disorder. The rise of new global powers is destabilizing the Western-led world order, which Dalio describes as a cyclical process that will continue to influence the global economy. The World Economic Forum is working to ensure sustainable global markets, but the rise of new powers is destabilizing the Western-led world order.
What does Ray Dalio say to invest in?
Raymond T Dalio, a renowned investor, suggests that for the next five or ten years, investors should focus on investing in innovation and productivity, minimizing debt assets, and diversifying into various locations. He emphasizes that no single asset class, country, or currency should be concentrated in due to its nature. Dalio also highlights the importance of good leadership, particularly Prime Minister Modi’s, and the stability and support provided by the country.
He also considers the country’s financials, internal competitiveness, and the presence of a neutral environment during international conflicts. He believes that countries with sound finances, productivity, and civil cooperation can maximize returns. He also emphasizes the need for countries to maintain a balance between debt and productivity, ensuring that they are not in the middle of an international conflict.
📹 Principles For Success by Ray Dalio (In 30 Minutes)
Join me on a thought-provoking adventure in my new animated mini-series, Principles for Success. I’ve taken my book Principles, …
Tired of the “recession is coming!” threat. Recessive periods come along with equivalent market opportunities if you are well informed and equipped, I’ve seen folks amass wealth in the midst of economic turmoil and even pull it off easily in favorable conditions. Invariably, the collapse is getting somebody somewhere rich
In thid present decade We Are in Unchartered Financial Waters! every day we encounter challenges that have become the new standard. Although we previously perceived it as a crisis, we now acknowledge it as the new normal and must adapt accordingly. Given the current economic difficulties that the country is experiencing in 2024, how can we enhance our earnings during this period of adjustment? I cannot let my $680,000 savings vanish after putting in so much effort to accumulate them.
It’s amazing really. We have a financial crisis, caused by greedy, reckless financial institutions. Congress passes legislation requiring those institutions to be less greedy and reckless. The institutions then lobby to have those restrictions removed, usually in the name of “remaining competitive”. This leads to another financial crisis. It’s completely predictable, and we have been doing this dance since the Great Depression almost 100 years ago.
Since Biden took office, there seem to have been more unfavorable results in America. I am really worried about the current bank crisis/interest rates, these are all the signs of yet another 2008 market crash 2.0, so my question is do I still save in the United States dollar or is this a good time to buy gold?
I heard of people who made hundreds of thousands of dollars during these crashes, and I recently listened to a podcast where someone made over $650K in less than a year. What is the strategy behind such returns? I’m in my 50s, and I’m more interested in investments that could help me save for retirement.
I lost over $80k when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that’s what everyone said. I’m still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I’m really grateful I found one source to recover my money, at least $10k profits weekly. Thanks Karen Preston
The US government debt is on an exponential free fall and the only way to pay that debt is to keep printing . Hyper inflation is coming, housing crash, a recession and a possible depression too. i think is time investors redirected their focus to the equities market cause despite the severe bear market, I am aware of certain investors that have earned over $365,000.
Insightful article provides great insight into what is happening in America today .The only American who won’t acknowledge this Administration’s failed economic policies is Joe Biden. “Shrink-flation’ is the least of our worries compared to rising rents and stagnant wages, but it is an undeniable indicator of how bad our inflation has gotten. I have $100k that i like to invest in a non-retirement account, any advice on that?
I recently sold a house in Portland, and I’m considering investing the proceeds in stocks. I know it’s a wonderful time to buy, but is this the right moment? When will I fully recover? I’m honestly just perplexed at this point as to how other folks in the same market are making over $450,000 in gains in a matter of months.
I’m 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can’t seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
Putting well-earned money into the stock market can be over emphasize for first time investors,unlike a bank where interest is sure thing! Well, basically time are uncertain, the market is out of control,and banks are gradually failing. I’m working on a ballpark estimate of $5m for retirement, and I’ve a good 6 figure loaded up for this, could there be any opportunity a boomer like me?
According to Bipan Rai, North America director of FX strategy at CIBC Capital Markets, “there is growing concern that incoming data is showing that the Fed may be slightly behind the curve than perhaps they expected heading into this year.” More red than green is seen in my portfolio. How are other people in this making huge sums of more than $350K in this dowturn?
The most important thing that should be on everyone mind currently should be to invest in different sources of income that doesn’t depend on the government. Especially with the current economic crisis around the word. This is still a good time to invest in various stocks, Gold, silver and digital currencies
The Treasury have to sell Bonds to cover the trade imbalance and the government spending imbalance. In order to sell them they have to raise interest rates and the old long-term, low risk, low interest, AAA investments (including Treasury Bonds), held by the banks (often due to government regulatory policy), become next to worthless. The next milestone is the 15th when the government issue a new batch of Bonds. I have approximately 350k stagnant in my portfolio that needs growth. What is the best way to take advantage of this downturn?
With markets tumbling, inflation soaring, the Fed imposing large interest-rate hike, while treasury yields are rising rapidly—which means more red ink for portfolios this quarter. How can I profit from the current volatile market, I’m still at a crossroads deciding if to liquidate my $125k bond/stock portfolio
Nobody can become financially successful overnight. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals. you have to contend with inflation, recession, decisions from the Feds and all. I was able to increase my portfolio by $589k in months. You have to seek for help in the right places.
This article is a true masterpiece, along with Mike Maloney’s Hidden Secrets Of Money. I’ve tried sharing this with people who could really benefit from understanding, but none of them bothered to watch. In the end, I came to the conclusion that when a person is ready to learn they will search on their own. Even when people ask for advice they rarely follow it. Their journey usually begins alone after making the decision in that silence. My only concern is that as time goes by this information will become increasingly difficult to find.
History teaches us that a crash is inevitable. I and my wife are adding a variety of stocks/ETF to our present holdings and we’ve set asides a good amount to start following inflation-indexed bonds and stocks of companies with solid cash flows. I believe it is a good time to capitalize on the market for long-term gains, but it wouldn’t hurt to know means of actualizing short term profits as well. I have approximately $750k stagnant in my port_folio that needs growth.
Recessions are part of the economic cycle, all you can do is make sure you’re prepared and plan accordingly. I graduated into a recession. My 1st job after college was aerial acrobat on cruise ships. Today I’m a VP at a global company, own 3 rental properties, invest in stocks and biz, built my own business, and have my net worth increase by $500k in the last 4 years.
I’ve a degree in economics from UC, and still have the books from school on my shelf. I thought I would add my two cents. This is so well done, it’s stunning. It’s a terrific introduction to the basic concepts of the market economy and presented in a very digestible, easy to listen-to form. Because it’s easy to listen to and understand, the material is assimilated by the brain very well. So, even though there is no higher level math here, it’s enough to get someone started in the field– and a higher level course is useless if the viewer cannot understand the material, no matter how high quality the material may be. This article does so much with so little time. At least, it casts light on something that many would find hopelessly obscure. Mr. Dalio hit this one out of the park.
Success is dependent on the actions or steps you take to achieve it. Show me a man or woman who doesn’t have an investment, and i will tell you how soon he will go broke. Investment is building a safe heaven for the future. With the right choice of Investment that has at least 1% minimum risk and with an expert guidance, profit and Intrest is 100% guaranteed.
In light of the ongoing global economic crisis, it is crucial for everyone to prioritize investing in diverse sources of income that are not reliant on the government. This includes exploring opportunities in stocks, gold, silver, and digital currencies. Despite the challenging economic situation, it remains a favorable time to consider these investments.
Stocks are falling and bond yields are rising, but markets still don’t seem convinced the Federal Reserve will pursue plans to keep increasing interest rates until inflation is under control. I’m still at a crossroads deciding if to liquidate my $117k stock portfolio, what’s the best way to take advantage of this bear market?
To my understanding this just proves how much we need an edged as an investors because playing the market like everyone else just isn’t good enough. I’ve been quite ensured about investing in this current market and at the same time I feel it’s the best time to get started on the market,what are your thoughts?!
The tightening was too aggressive to begin with. The rate hikes have broken an already fragile economy that would have worked out the inflation in the free market. The Fed chose to spark inflation buy napalming the public with stimulus right when the global supply chain was broken and production of good and service basically did not exist during Covid. It was gasoline on the perfect firestorm. Then, instead of letting the inflation work itself out… we hiked rates thousands of times higher than they were in the most massive pounding the Fed has ever given an economy. They chose to break the inflation they created over the backs of the middle class. Now they’re providing a little relief and everyone is acting like it’s going to bring back Covid level inflation and end the world….. Anyone feeling the impact of these economic shifts should consider Crypto long-term trading strategies to protect their assets. My advice to anyone feeling the heat in this inflation, just trade long term more than ever, I have made over 720k from day trading with Aria Cookings in few weeks, this is one of the best medium to backup your assets incase it goes bearish….
Step 1: Create Asset Bubble by increasing Money Supply Step 2: Burst Asset Bubble Step 3: Offer help by printing more money and demand structural and political reforms to increase your power Step 4: Buy assets at low prices, force conditions on parties which face problems Step 5: Repeat. For detailed instructions see: Documentary on: Princes of the Yen (on Youtube)
I realized that the secret to making a million is saving for a better investment. I always tell myself you don’t need that new Maserati or that vacation just yet. That mindset helped me make more money investing. For example last year I invested 80k in stocks and made about $246k,but guess what? I put it all back and traded again and now I am rounding up close to a million.
As the economy crisis keep rising, one needs to have different streams of income, a well detailed diversified investment portfolio in the financial markets is needed to survive, as well as secure a profitable investment future! Wondering if viewers here are familiar with Jennifer Allen trading strategies
1:13 Transactions 2:17 A Market 3:31 Credit _The most volatile 5:04 Credit Spending –> Income for someone else Need: Creditworthy Borrowers 6:21 Productivity Growth 8:21 When we borrow, we are placing the cost onto our future self, (because you need the money now) 9:41 50 Trillion in Credit Credit: (+) in the short run, (-) in the long run (because some people don’t pay back what they borrow, businesses go bankrupt, negative things happen to sink your ship) Put credit towards something that allows you to increase your bottom line, net income. 11:50 The Short Term Debt Cycle Boom, Peak, Trough, Depression 14:30 Debts go higher than incomes, lenders lend more by what happens lately (rising incomes) Bubble BUBBLE! 16:15 The Long Term Debt Cycle De-Leveraging, Downward Spiral, LESS of EVERYTHING 18:09 Try Lowering Interest Rates? 19:10 We have to handle this accumulated debt De-Leveraging 20:00 1. Cut Spending – Austerity 20:30 2. Default, Assets Lost, Refinance 21:14 Remember the bar tab? 22:00 Deficits 3. Redistribution 23:00 The Rich! 4. Print more money (Inflationary and Stimulative) 24:20 Money Printer Go Brrrr 25:00 The Central Bank & The Government 26:20 Handling The Deleveraging to make it Beautiful + Find the Right Balance + Maintain Social Security 29:39 Putting The Graphs Together
Video Summary: Part 1 Economy works in a simple mechanical way. It is made of simple parts and simple transactions that are repeated over and over. Transactions are created by human nature. These transactions create three main forces that drive the economy. 1. Productivity growth 2. Short term debt cycle 3. Long term debt cycle. Let us start with simplest part of economy. Transaction. Economy is sum of transactions that make it up. Every time you buy something you create a transaction. Each transaction consists of buyer exchanging money or credit with a seller for goods, services or financial assets. Credit spends just like money. Total spending = Credit+ Money. Total spending is what drives the economy. If you drive amount spent/quantity sold you get the price. This equation is called transaction. If you understand a transaction you understand the economy. Market consists of all buyers and sellers making transactions for the same thing. Eg Wheat/corn/stock market. An economy consists of all transactions in all the markets. If you add total spending and total quantity sold of all all market you call it economy. People, businesses banks and governments all engage in transactions: exchanging money nd credits for goods service and financial assets. Biggest buyer and seller is Government. It consists of two parts : 1. A central govt that collects taxes and spends money 2. A central bank which is different from other buyers and sellers, because it controls amount of money and credit in economy.
Great stream, as always. I appreciate the level-headed approach you take to the news and the markets. A lot has changed and that’s on everything but the truth is I don’t even care much about bullish or bearish market anymore because Michael Christensen got me cover as I am comfortably making 11B T C monthly.
Bitcoin price has not been doing really well lately in-fact the whole stock market, buying the dip isn’t a tough call and it’s a very tough call to figure out what to do aside holding. The good thing about the space is that you can buy the dips and put them into active trades, while confidently waiting for a pump in price because it is inevitable. Most people do not understand how the space work. Charts won’t guarantee what an asset is going to do. Prices is going up and down and despite that the market has been profitable to me. I’ve always played safe implementing trades with insights and signals from a pro trader
Why do discussions about the economy always leave out the impact of greed, corruption, incompetence, etc? Sadly, I believe the number one problem in the United States is ignorant consumers. They don’t have a clue about how their behavior impacts pricing, but more importantly they don’t have a clue about how their government could be helping if it weren’t for the fact that too many government employees are either corrupt or incompetent. We have tax loopholes, government subsidies, massive wealth redistribution schemes the take from the poor and give to the rich and, of course, we have a nearly useless public education system that teaches people to be good factory workers and not much else.
Keep it simple guys: Spend less then you earn. Wanna spend more, earn more. Can’t earn more because of time? Change the current way you get money, in other word; Multiple income streams. And to top it all off, the more passive your income is, the more time you spend spend to be productive somewhere else… or just enjoy life 😉
Question. In my point of view, the best ways to save money without letting the “world” fuck with it (like inflation, corruption, desvalorization, etc), would be by stocking money through Gold, Bitcoin, etc. Am I the only one who thinks that? Is there any other ways? Is there more efficient ways of doing it?
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.” Thomas Jefferson
The big question no one is asking is why are central private banks allowed to print money and lending it to governments and government raises taxes on people. Why the government just print money without bankers and use it to stimulate economy without raising taxes. Thats the trillion dollar question.
What makes a modern economy is quite simple really it’s CIRCULATION OF CAPITAL. And it means the Billionaires the would be trillionairs of our rotted economy is BAD it’s like a fatal clog to our system it can’t take this much hoarding. And it needs banks to work, we’ve tried to regulate them under capitalism and laissez faire hands off approach and giving the banking class the benefit of the doubt, but now a new way the state must seize its assets as the banking industry is to important for its elite to dominate and peruse their narrow intrest.
There will be this awareness that we need to rethink how the money system works, we need to get out of a debt-based economy. We cannot allow a small power elite to create money and reap the profit from lending it with interest. This is something that the state needs to take on, and the state needs to be in control of the money system so that only the state benefits and thereby the people benefit. If the state makes money off of money, people do not have to pay so much taxes. It needs to be seen that the only institution in society that has a right to make money off of money is the state. The state, of course, cannot go into the many forms of schemes that the capitalists have come up with in order to manipulate the economy because the state has no interest in manipulating the economy. It simply has an interest in creating a money system that allows for the greatest amount of creativity, movability of the money, the greatest ability to finance new businesses. This will promote a growth in the economy, and the more the economy grows, the more it is in the interest of all of the people and also, of course, in the interest of the state. These are very, very dramatic shifts compared to what you have today but they are not so unrealistic that they are so far off. It can come to that point where there is such an awareness of the existence of power elites that they will very quickly be put out of commission by the democratic nations. There will be either a raised awareness of how the power elites work and how anti-democratic it is, or there would be an awareness that if we do not reform the money system, then our economies, our debt-based economies, are going to collapse.
00:00 The economy works like a simple machine 02:39 Credit is the most important part of the economy. 05:15 One person’s spending is another person’s income 08:13 Credit creates cycles in the economy and allows for increased spending. 10:56 Credit creates growth in the economy 13:47 Spending is constrained by the availability of credit, which leads to economic expansion or recession. 16:38 Deleveraging leads to economic decline. 19:17 Debt burdens can come down through spending cuts, debt restructuring, wealth redistribution, and printing new money. 21:56 Debt restructuring causes income and asset values to disappear, leading to a worsening debt burden. 24:42 Printing money stimulates the economy but can lead to inflation. 27:25 To turn things around in a deleveraging process, the Central Bank needs to pump up income growth and get the rate of income growth higher than the rate of interest on the accumulated debt. 29:55 Three rules to follow for financial stability and success. Crafted by Merlin AI.
Me considero exitoso en el comercio con la ayuda de mi corredor que administra mi cuenta comercial y me brinda ganancias increíbles. Sus estrategias son de primera categoría junto con la pequeña comisión que cobra por su comercio. Puedo decir inequívocamente que el comercio de criptomonedas o de divisas es uno de los negocios más rentables y lucrativos para todos los inversores con el experto adecuado.
Good as far as it goes. But not one mention of the source of materials and energy which allows the economic machine to function and us to exist: our planet. It’s as if all this activity is taking place within an infinite Aladdin’s cave, endlessly providing everything we need and is not an issue. But the planet is finite, and there are a few planetary crises that some of you might have heard about.
Three rules of thumb: 1. Don’t have debt rise faster than income. Because your debt burdens will eventually crush you. 2. Don’t have income rise faster than productivity. Because you’ll eventually become uncompetitive. 3. Do all that you can to raise your productivity. Because, in the long run, that’s what matters most.
Dear Ray Dalio, We are a group of three students who study finance in Transilvania, on Babes-Bolyai University – Faculty of Business and Economic Administration, and we appreciate your work. We saw that the article is translated to 2 different languages too. We thought that we should translate it to Hungarian, so the information can flow without any barriers for those who are interested in economics. We are asking for your permission to do that. If you agree, let us know please. Sincerely, Ákos.
There’s a great business lesson in here too. Economics is based on transactions and transactions occur when people find value in products/services/financial assets. What does this mean for someone looking to start a business? Well, create something or provide a valuable service, have people pay for it, and use the margin you make off those transactions to create more transactions! That’s all business is!
Very entertaining and informative. I work in finance and you’d be amazed at how many people are calling in to sell all of their investments and go into cash. It’s the same mentality that caused people to lose half their savings in ‘08-09 those that sold at the bottom. Even if we see a crash, that’s still a que to keep putting in my investment dollars. The market will always recover and continue the climb.
What I found incredible about this article was: 1. It summarized complex economic principles so effortlessly 2. There is a key take away section at the end, that’s incredibly amazing. If you have the attention span of 30 min and watch this article till the end, I bet your 30 mins will be worth it for life.
Addendum: The FED is in private hands. Very likely in the hands of the super rich bankers who founded it. They can threaten the government (printing money or manipulating interest rates in a way to cause damage to the economy). And through the ability to create money from thin air, they can buy the favors of politicians, lawmakers etc..
This article just proves what king Solomon said: The servant is borrower to the lender. As smooth talking as Ray sounds he is indirectly admitting that the Central Banks control the short and long term debt cycles. While we are meant to see it as a result of “human nature” this is in fact a problem which has been artificially created. Sadly we have another classical case of the Wizard of Oz occurring with the man behind the curtain. The man behind the curtain being the central government and the central banks operating the levers of this “Economic Machine”. Yet how do people fall for this facade? When the people lose their brains (Scarecrow = No Education), lose their hearts (Tinman = Unfeeling Machine), and become cowardly (Lion = Loss of bravery): then the people are easily terrorized by the ravenous flying monkeys and duped by the spells of the wicked witch.
When humans started living in agricultural based communities and societies about ten thousand years ago, the more sophisticated they became and the more knowledge about the land and planet they gained and the more innovation and technology that they developed along with the more exploration they did, the communities and societies kept growing. The bigger they became, the more rules where needed to help them behave in ways to be able to continue to progress and grow. In fact, the idea of the society growing was considered essential for further progress. In addition to more rules, more stories were also told to help humans follow the rules. When the word economy started being used, the activity and behavior for the innovation, production and exchange of goods and services was also included in the definition. The stories that economist started telling may have been a little bit more realistic than the stories religions were telling but, the imagination of these story tellers got the better of them and too much of their ideas where based on magical type thinking and they were not always honest with themselves or to others. The stories were always fascinating and we can always learn things from good stories regardless if they are true or not but there are limits to progress if the story tellers continue with the fabrications and the myths and magical thinking and are not able to transition into truth, reality, honesty, accuracy, reason, rationality, critical and evidence based thinking.
This has been my 2nd watch of this education. It’s a little clearer compared to my first watch, and I’m glad I attempted to even watch it in the first place knowing I will not understand a word. I’m now a bit more familiar, and will watch this again in the future when I need a refresher. Thank you, Ray.
Our economy has been a “transactions economy” and much less of a “goods production economy.” The purchase and sale of financial assets is tax advantaged, even though real capital goods do not increase in value, they depreciate over time down to scrap value or even zero. Mr. Dalio assumes what neoclassical economists have called “the price mechanism” works to clear all markets. He makes no comment at all regarding the extent to which nature, the source of everything we produce, is subject to monopolistic control. Adam Smith is far better source for how the economies of societies are subject to systems of law that secure and protect privilege.
I like this clear simple explanation. So where are we in this cycle? We printed a lot of money over the last few years. Inflation has gone up. I don’t see where the low income people have increased their income. Certainly home sales has produced more income for the sellers and lots of people in the real estate business. Seems like we increased debt quite a lot as people, businesses and government. Where are we in the big cycle? Where are we going?
In a nutshell. Don’t get a credit to buy a luxury holiday, TV or designer clothes as these will not provide you a financial return on investment. However, if you use your credit to create further additional revenue to then pay off your credit you’ve mastered the art of money management. 99% of people got for the holiday and TV though unfortunately.
@ 6:07 minute, what actually are we ‘borrowing’ in the first place? If this term was only meant for these direct borrowing of goods and money between two people or two organizations that we generally get to see (like one person lending some bucks to the other and impose an interest on it), the ‘borrow’ thingy wouldn’t be this much highlighted, would it?🤔…it must not only be about the trade affairs of common people since this term would’ve been insignificant had they got the money to ‘purchase’ the thing instead of having to borrow it….there must be some other factors like the government taxation or something else that runs along the principles of lending-loaning of things…not being able to see the bigger picture 😢😢😢
I have a bachelors and an MBA with concentrations (majors) in Finance, and work in the industry. I have been returning to this since about when it was released 10 years ago. It is a fantastic overview about how the economy works and provides a great structure to think about where we are at in the cycle at any given point. I have one young son and another on the way. As they age, I will share this with them repeatedly because I think understanding what Mr. Dalio is saying here is incredibly important for anyone who participates in debt or equity capital markets. This should be mandatory curriculum for high school students, at the least.
The problem is interest has been held artificially low for a very long time and not been allowed to increase. So the short term debt cycle has been stretched even longer. It can get stretched even longer still so long as interest keeps on getting lower. Currency has also been somewhat manipulated and technology has improved dramatically to keep inflation in check but this can’t continue forever. Nor can interest continued to be lowered every time there is a problem. There is going to be an enormous mess in the future.
I like how he tried to look at both sides of a given economic equation. Like he said “one man’s liability is another man’s asset”. But one huge juxtaposition he didn’t touch on was the dangers of collectivization of the market vs individualization of the market. For example, austerity measures to counteract an economic contraction might seem like a bad thing for the economy in terms of GDP. But if you look at it in a more “Darwinian” sense, only the strongest businesses will weather the storm. It is corrections like this which allow the free market to stay lean and to incentivize economically sensible decisions. If you let the market pick the best individuals, the economy as a whole tends to do better qualitatively. But if you inflate the currency supply at the central bank in an attempt to help the collective, you stimulate the economy in strictly quantitative terms (eg: “quantitative easing”). Ultimately it’s quality over quantity.
As mentioned in the article, the main rule in the daily life is to increase our productivity in our current field. That comes from passion, and confront reality openly…the “growth mindset”, coined by Carol Dweck. In other words, making contributions constantly, being generous in the common good, decisively with strong signs to improve in all fields, personal and professional. A meaningful life is the effect from that fact.
I think the pandemic has taught people a big lesson, having one stream of income is not really a good idea cause your job doesn’t secure your financial needs. The pandemic has really set out business-minded people from the rest that is why I’m so lucky to be among the investors trading with Mrs. Kamilah Thurston as his student it’s been success and happiness since the beginning of my trades
Experiences i had this year opened me to learning a lot of new things this year. I had losses in the beginning till I started learning how to grow my profits with less stress. Account management helps, I don’t know what people say or do, but for me, account management was the best way to grow my income by a lot of percentages.
The Economic Machine always works for those who own the Economic Machine. The invisible hand of the market is like the hidden hand of the puppeteer. Controlling everything but giving the illusion of freedom to the public. The puppet, much like the market, is controlled by this non-visible hand. No surprise the wealth gap is ever growing and beyond what most can even believe. There has never been so much concentration of power and wealth in human history. Humanity is ENSLAVED by those few trillionaires. The solution: SOCIAL EQUALITY for all. ALL AROUND THE WORLD. So simple but so utterly effective. It would solve every single problem we have and would ever have.
This article is good at explaining the basic concepts of how the economy works, but is not a critique of said system. People in the comments seem to be veering of track a bit. Is the current system the best one, I’d argue no too. But for someone who doesn’t understand the basics of this system this is plenty illuminating. It would be nice to make a follow up explaining the flaws/and or pros of this system over others. I think it’s criminal the public isn’t made well informed about their options.
My spouse and I are adding a variety of stocks/ETF to my present holdings for the long term, We’ve set aside $250k to start following inflation-indexed bonds and stocks of companies with solid cash flows, I believe it is a good time to capitalize on the market for long-term gains, but it wouldn’t hurt to know means of actualizing short term profit.
This article is really insightful and explains everything you need to know about economy and how we’ve been impacted today by inflations and possible reccession. As one who has experienced setbacks with these cycles I would say it isn’t the best way to live, paying mortgage, multiple maxed out credit cards, these debts can be depressing. But you can be a step ahead with compounded ROI, which can be stocks trading, ETFs, digital assets. You’re not free until you’re able to make more than what you spend.
about 3 months ago, I marked a milestone on starting this new journey, this article was one of the first lectures i choosed to learn from. Frankly, it was not so easy for me to understand at all, though Mr.Dalio explained it so simple. Now i can proudly of myself that i can understand it more wholely and specifically.
I’m a fairly simple person. Credit is not something to strive to, especially in today’s markets. Wouldn’t it better if fed.gov protected our constitutional rights instead of trying to indirectly run businesses? If we paid small, limited taxes, we would have more $ to spend and Wouldn’t depend on Credit which gets a lot of ppl in trouble.
24:40 Can somebody tell me why he skipped the government borrowing from the rich i.e. issuing government bonds, and proceeded to talking about borrowing from the central bank? Borrowing from the rich will alleviate their discontent because, unlike taxes, they will get the principal back, plus interest. And it’s less inflationary than borrowing from the Federal Reserve.
There’s simply no price it can pay for each one of the lessons you’re sharing, Ray. I had the pleasure to see you in person in San Francisco, during Dreamforce, and even covering the same topics, it seems that every time we listen to you or watch this article, something else new will pop-up in my head. As someone who moved to another country to live a better life, who’s trying hard to cope with the challenges of building a family, advancing professionally, build my own business, I feel that I need to watch this article every single week. You have my word that I’ll share it as much as I can to as many people as I can. Thank you so much for sharing this content.
Currently I’m just being smart and frugal with my money, I’m in the green 47% over the last 23 months and l’ve accumulated over $70K in pure profits from DCA’ing into stocks, ETFs, dividends and futures. However I’ve been in the red for a month now. I work hard for my money, so investing is making me a nervous sad wreck. I don’t know if I should sell everything, sit and just wait.
Nobody can become financially successful overnight. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals. you have to contend with inflation, recession, decisions from the Feds and all. I was able to increase my portfolio in months. You have to seek for help in the right places.
My wife and I did very well in the amount of money that we amassed for retirement. Well over 80% of that money averaging about $2 million was made because of taking advantage of buying high-end stocks at a deep discount during the Great Recession. 2009 I fired the stockbroker got rid of all mutual funds and bought individual dividend stocks. Be patient don’t get scared and do your homework and you can make a killing.
At the very least, I now grasp the concept of leverage. Creating wealth and financial freedom isn’t as tough as many people believe. Building wealth and remaining financially stable indefinitely is a lot easier with the appropriate information. Participating in financial programs and products is the only true approach to make a high income and remain affluent indefinitely.
As an elder millennial, one of the few advantages is having lived through the Great Recession. My advice. Reduce unnecessary expenses, increase your savings by investing in financial markets and do not sell. One thing I know for sure is that diversifying your income can help insulate you from much of the craziness going on in the world.
Valid and solid points. I used to feel overwhelmed when my portfolio would drop a few dollars. Now that I’ve learned how the booth works, I see bear markets as a giant opportunity to build generational wealth for me and my family. In just 5 monthsof trading ETF/ my portfolio have accrued gains of over $350K under esteemed guidance. Happiest days still yet to come lol
1:08 You Need To Think For Yourself About What Is True 2:25 Time Carries Us Forward, We have to approach them in the best way possible 3:34 Embrace Reality & Deal With It 4:34 Truth Is The Essential Foundation For Producing Good Outcomes 5:32 Dreams + Reality + Ambition 6:35 Pain + Reflection = Progress 7:30 The Five Step Process 1. Know 2. Encounter 3. Diagnose problems 4. Design a plan 5. Execute designs 9:11 Adapt or Die 9:50 The Fall, (in 1982) 11:25 Broke, Giving Up His Great Life 13:14 Everything Is A Machine 27:33 Breakdown & Evolution (Humanistic take, not so much Theological)