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Each transaction consists of a buyer exchanging money or credit for goods, services, or financial assets. Credit spends just like money, so money spend plus credit spend equals total spending. Total spending drives the economy. If you divided the amount spent by the quantity sold, you get the price. That's a transaction.
With that, please find below my summary of how the economic machine works, according to Ray Dalio. How the Economic Machine Works. The economic machine is simple but people don’t understand it and so this leads to economic suffering. While the economy seems complex, it is underpinned by simple transactions that are driven by human nature ...
- Ray Dalio: Economics 101
- Ray Dalio: Income Relation to Debt
- Ray Dalio: The Borrowing Cycle
- Ray Dalio: Short Term Debt Cycle
- Ray Dalio: When Do Borrowers Sell Assets
- Ray Dalio: The Great Depression and Its Effects
An economy is simply the sum of the transactions that make it up and a transaction is a very simple thing. You make transactions all the time. Every time you buy something, you create a transaction. Each transaction consists of a buyer exchanging money or credit with a seller for goods, services, or financial assets. Credit spends just like money, ...
Having a lot of income in relation to his debt, gives him the ability to repay. In the event that he can’t repay, he has valuable assets to use as collateral that can be sold. This makes lenders feel comfortable lending him money. So increased income, allows increase borrowing, which allows increase spending and since one person’s spending is anoth...
Let me give you an example, suppose you earn $100,000 a year and have no debt, you are credit worthy enough to borrow $10,000, say on a credit card. So, you can spend $110,000 even though you only earn $100,000, since your spending is another person’s income, someone is earning $110,000. The person earning $110,000 with no debt can borrow $11,000, ...
The short term debt cycle typically lasts five to eight years and happens over and over again for decades, but notice that the bottom and top of each cycle finish with more growth than the previous cycle and with more debt. Why? Because people push it. They have an inclination to borrow and spend more instead of paying back debt, its human nature. ...
Scrambling to fill this hole, borrowers are forced to sell assets. The rush to sell assets floods the market at the same time as spending falls. This is when the stock market collapses, the real estate market tanks and banks get into trouble. As asset prices drop, the value of the collateral borrowers can put up drops, this makes borrowers even les...
It happend in the United States during the great depression and again in 2008, when the United States central bank, the federal reserve printed over two trillion dollars. Other central banks around the world that could, printed a lot of money too. By buying financial assets with this money, it helps drive up asset prices, which makes people more cr...
Sep 23, 2013 · This is pretty great. Back in 2008, Bridgewater founder Ray Dalio put out a paper titled "How the Economic Machine Works: Leveragings and Deleveragings." It was a long slog through history that ...
Apr 17, 2023 · Understanding how the economic machine works can be useful for anyone looking to make informed decisions when it comes to investing, entrepreneurship, or simply navigating the economy. One of the most successful investors of our time, Ray Dalio, the founder of Bridgewater Associates, has gained a reputation for his unique investing philosophy and his deep understanding of how the economic ...
Dalio discusses a range of topics in-depth to provide a full overview of how the economic machine functions – just a few examples are the inflation/deflation model, de-leveraging and the difference between credit and actual money. Key Takeaways. 01.24 – The premise for today’s show is to gain an insightful overview of economics, thanks to ...
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Jan 27, 2023 · However, since parts two and three are already available as standalone works, the main reason you might want to read this one is probably How the Economic Machine Works, and that is basically just the transcript of a wonderful, animated, 30-minute Youtube video Ray already released in 2012. Both the video and text explain how, by combining graphic representations of the short-term debt cycle ...
