Hat tip Marketwatch

Category: Economy, Psychology, Video

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “Dalio: How The Economic Machine Works”

  1. Seaton says:

    Uhm, point by point pretty good until the productivity increases & is consistently rewarded commensurate with productivity gains. Productivity increases haven’t gone to vast majority of citizenry, nor to the workers. When vast amounts of productivity gains go to top 1%, routinely that money ends up “dead” from my perspective. Oh, sure, triple-tax-free-muni bonds are purchased, for example, and thusly streets are paved, sewer districts are built, etc., etc. But how does one square the huge productivity gains over last 30 years with meager increases in average workers’ wages. Indeed, isn’t it trumpeted long and often how over the last 10 years average workers’ wages have gone down? Hmm…good presentation, pretty theoretical, but once again not taking into consideration some practical problems, such as international off-shoring of products produced at substantially lower wages, etc. Sorry, I’m for America first, and “gaming-the-system” for the benefit of 1% (politics aside–it’s own nasty cesspool) at expense of higher wages…should have been addressed.

  2. GB says:

    BR, didn’t you put up a similar Dalio transcript a few months back? Anyway, this is much easier to digest. That said…

    22:00 — “Even though debt disappears, debt restructuring causes income and asset values to disappear faster. So the debt burden continues to get worse.”

    The mechanism that connects debt restructuring speed to income/asset reduction speed (“faster”) is not clear to me. Can someone explain?

    • d_nut says:

      If a bank restructures your debt it is taking a loss on an asset to make sure they at least get a portion of the asset. They are making a positive number on the balance sheet smaller, meaning fewer, smaller loans can be made.

      Fewer assets, less money, and less loans are the result. It’s an amputation, you chop off the arm to save the body. You still lose the arm though, and the body is worse off with that loss.

  3. Biffah Bacon says:

    I’m with Seaton.
    It’s all fun and games for the Eloi to theorize on and pontificate about until the Morlocks start coming around looking for sustenance.

  4. mpappa says:

    Productivity drives wage growth or at least it used to.

  5. RecencyEffect says:

    There are very few people who make the world a better place using youtube. Ray just became one. Nit pick the details if you wish but if just a few more people learn how credit is more important than money then we will have a better informed public capable of understanding why we need to hold our politicians, policy makers and bankers to account.

    Ray has blocked comments on the video but I for one say thank you to the most unlikely narrator/author of a basic economics lesson.

    • vital88 says:

      With all due respect to Mr Dalio – his success certainly precedes him – and he, unlike I, truly due have “skin in the game” – but I would have to say that his famous characterizing of the market as a machine – a machine with very simple, basic core operations – really is totally inaccurate. This may sound totally presumptuous but I don’t believe Mr Dalio’s ever read George Soros, who clearly has a more accurate understanding of the undefinability of financial markets – and, more exactly, how acquired knowledge (and, as we know now through Kahneman, etc.) and the various cognitive biases impact virtually all financial transactions – most specifically, the perceptions about value, etc. which then impact actual pricing etc. There is no simplicity of effect in this supremely complex system – and also, Dalio’s characterization absolutely does not take into account “black swan” events which, by definition, come in out of the blue and distrupt everyting, most especially the disrupt previous/prior preconceptions about literally everything: price, need, value, etc. Furthermore, Dalio shows no appreciation whatsoever for how governmental financial policy – ie BAILOUTS and Federal Reserve printing press policies – decisively impacts the workings of the markets, from perceptions about investing possibilities and actual values, etc. Mr Dalio – and again I am writing this with all due respect for his “skin in the game” success – seems to show no awareness that even his best, most successful and most solid fund – his “all weather fund’ portfolio – is supremely vulnerable to market events which, inevitably, come in, black swan like, from out of the blue and, like so much of the real moving events in financial markets, don’t express themselves or operate according to any simple, mechanistic model. The entire idea of mechanistic processes is really a misguided fantasy – who knows, had all of the central banks not bailed out all of those banks, both here in the US and in Europe and everywhere else, post 2008, Mr Dalio might not be on top of the same hill that he’s on – we’ll never know. The survivorship bias lives on…

  6. yohami says:

    Confused. I thought dollars represented credit – so all money is debt already.

    Isnt printing new money the same as getting new credit? which means printing money is actually making things worse in the future.