Friday, January 16, 2015

How the Economic machine works

This is a very interesting animation video by Ray Dalio explaining how the economy works.


Even though I'm a tech guy, I always feel like I need to understand the economy. You know, questions like what affecting my income, how can I say that I'm rich or poor...something like that. But, It's really hard to get started. This video is the thing I'm looking for to achieve that, to have a general picture of the economic machine.

In only 30 minutes, Dalio worked me through all the basic concepts such as transaction, income, credit, deflation... and explained when an economy is in good time or hard time and what the individuals and governments can do. It's so great that you can see the idea presented in animation format. Some of the things in this video are Dalio's patterns and it worked for him, so maybe it will work for me and you.

In the end, he suggested his Three rules of thumb which I can apply to have a better understanding about the super dynamic economical world:

1. Don't have debt raise faster than income.
2. Don't have income raise faster than productivity.
3. Do all that you can to raise productivity.

You can read Dailo's research paper at http://www.economicprinciples.org/

Have fun watching this video!