As the economy continues to improve and move towards a pre-2008 environment, I thought it might make sense to present this video by Bridgewater Associates CEO, Ray Dalio. His video titled, “How the Economic Machine Works” provides perspective on the building blocks of the economy. Which in its simplest form are all the transactions that make it up.
This video breaks down how the economy works into 3 forces:
1) Productivity – getting more out of the assets being utilized
2) Credit in the short term
3) Credit over the long term
By looking at the economy from the transaction side versus the traditional perspective, you can see how the economy works in its simplest form. Overlaying these 3 forces allows you to better understand boom and bust periods and the importance of credit.