The Economic Machine

The Economic Machine

Mutual investors who plan to be more active in their mutual fund investing; instead of just buying and holding a diversified portfolio of different types of mutual funds, need to understand the historical patterns of the economy, the stock market and how the economy really works. It is this knowledge of historical patterns; which mutual fund investors can make use of to avoid missing out on opportunities that arise from changes in the stock market.

So how does the economy really work? This simple but not simplistic video by Ray Dalio, founder of Bridgewater Associates, shows 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. Ray Dalio founded Bridgewater Associates out of his apartment in 1975, is now the longest-running hedge fund and is recognised as the world’s largest by assets under management (AUM) with over $166 billion.

Ray Dalio identifies three principal economic phenomena, which are explained: long run productivity growth as the central driver of increasing economic activity, short-term and long-term debt cycles. The latter two are explained to some detail with reference to money creation, central banking and long term crisis tendencies. With regards to the long run debt cycle, which leads into deleveraging and recession, some policy measures which can smoothen the crisis are discussed.

The economy is like a machine. At the most fundamental level it is a relatively simple machine, yet it is not well understood by most individuals and mutual fund investors. In this 30-minute video, Ray Dalio; billionaire and financial genius, will explain some timeless insights of how the economy works and share his long term market perspectives that illustrate these stock market forces playing out.

The information, analysis and opinions expressed herein are for education purposes only and are not intended to provide specific advice to invest in mutual funds or mutual fund recommendations. This material is not an offer, solicitation or recommendation to purchase any financial products or services. Always remember that all investments carry some level of risk, including the potential loss of principal invested.