How the Economic Machine Really Works

Ray Dalio, the founder of Bridgewater Associates, put together a 30-minute video that explains the basic driving forces behind the economy, and explains why economic cycles occur by breaking down concepts such as credit, interest rates, leveraging and deleveraging.

He explains his motivations on LinkedIn: “I have a very different view of how the economic machine works than most people and I feel a responsibility to share my template in order to help people avoid financial crises like the one that occurred in the U.S. in 2008, the one that is going on in Europe right now and the one that has plagued Japan for nearly 25 years.”

To test and defend his theory, Dalio accepted an invitation from former Treasury Secretary Larry Summers to go to Harvard University to have “an open discussion on the merits of my view about how the economic machine works.”

It’s a fascinating conversation and worth listening to after you watch the video.