How The Economic Machine Works by Ray Dalio

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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:

[Also Available In Chinese] 经济这台机器是怎样运行的:

[Also Available In Russian] Как действует экономическая машина. Автор: Рэй Далио (на русском языке):


Sean O'Leary says:

How do you really measure productivity? Is that just measured by what people are willing to pay for goods and services? Is it measured by peoples' values? Is it measured by giving people what they want in the most efficient way?

amit deora says:

I really like this video. Saved for me for my children and grand children. Yup we are living in cycle. Thank Bridgewater.

Bhavesh sinha says:

ok simple take loans on a lower rates from a bank and then lend at a higher rate such as peer to peer lending onlie infinte money cycle

sainath thorat says:

This video must be shown to kids every day at school. So that our future generation knows how good or bad credit can get.

Daniel Wong says:

I need to thank Ray for producing this concise video. This is the first time I understand the meaning of deleveraging. In the process of deleveraging, when spending is cut, and debt is being reduced, deflation is bound to happen. The process is very painful, but it seems that this process is necessary, in order to bring back a healthy economy. It is noted that in China, borrowing heavily supports the real estate market. The prices of properties now rise to sky-high. What would happen next? Moreover, productivity in the western countries has remained low for the past decades. How to raise productivity is very difficult.

Vilius Kraujutis says:

* Don't have debt rise faster than your income.
* Don't have income rise faster than productivity.
* Do all that you can to raise your productivity.

Luca Grassia says:

So the economy would pretty much be simple if credit wasn't a thing


nice summary – however, the beautiful deleveraging has not taken place so far… quite the contrary, corporates and governments increased their debt burden… and most debt in the western world finances unproductive assets…

Bradley Beistad says:

gotta check the youtube comments to see what the experts have to say. right babe?


Pretty good clip. Like the animations too.

Mr Brain says:

and people pay money and spend years to learn this in universities.

Chloe Girl says:

Excellent Excellent summary of how the economy functions.. A must-watch.

Matthew Ellison says:

yeah. its like a clock. it starts at 12 (government) and ends at 12 also. Its that simple. So ask, where the 20 trillion $$ is.??
He never explains where the debt is from. he hinted at it when he said Government can't print $$$ (LIE) . The $$$ is not from USA. USA has a constitution that TELLS US where the real money comes from. it comes from the HOR house.

RandomThoughts says:

Dalio's definition of the Economy is the old way of looking at things. He got one thing down, he's a good salesman.

Sharath Bhushi says:

so sir,
why are unemployment benefits, benefits regarding job security (a person can be in rolls inspite of he/she not turning up for years!) even provided in the first place in developed economies???…doesn't it flout the 1st 2 rules stated in the end??…debt raising faster than income (unemployment benefits is a debt for govt.) and income rising faster than productivity (the same people with zero contribution have income)….haven't the governments thought about this??

Melvin says:

At first I thought we were going really bad because all the "bad" things is what our gouvernments are doing right now. But what they actually trying to do is to balance the deflationary state we're in right now. Pretty calming thoughts actually. Thanks for this politcal neutral video. It's like someone just knew a resession was coming, so started a european union to handle it well, now we're almost back in the reflation zone it's no longer needed and party's start to rise against the EU. It has done all the good it can and let the countries free again.

Scorpio Snake says:

one of the neatest youtube videos i have ever seen . GOOD OL' FASHIONED .

Asha Kanta Sharma says:


semih oguzcan says:

Currencies, international and local trade agreements, interests, limitless ownership, infinite growth… To be okay with them, you have to be brainwashed to a limit that your brain simply can't think outside of the ideas what you have been told. You are the one who is causing wars, environmental degradation, greed, paid slavery, hunger, you are the death. 20000 children die every single day just because corporations think it does not bring profits while so called "developed countries" throw away 40% of their food into landfills.

Please learn about Resource Based Economy.

Mark Okhman says:

At what part of cycle is our world economy these days (April 2017) and how to evaluate my country?

semih oguzcan says:

This is called theft. Please learn about Resource Based Economy!

Dags Eris says:

so Have greater Productivity growth than Income growth,
have greater Income growth than Credit growth,
and have as big of a Credit growth as possible?

Dave says:

The problem isn't in loaning someone who makes a hundred thousand dollars a year ten thousand…. It's when you lend someone who makes ten thousand dollars a year a hundred thousand. Which is what really happens… On purpose to acquire wealth, through intentional deception, in the name of "free enterprise".

Đỗ Thị Thu Trang says:

Great video!

Chinmay Khandalkar says:

Can someone explain rule no.2 : Dont have income rise faster than productivity. Why will it be noncompetitive.

Kevin Garry says:

Although this is a great explanation its based on the completely warped American concept that debt is to be used and abused. A lot of thought should be put into taking on debt of any amount. It can be incredibly useful, yes, but only when you have a detailed and systematic method for repayment.

moist faucet says:

If the Economist is so smart and so right, why our world is so wrong ?

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