Do you feel intimidated by economics? Don’t be!
This 31-minute animated film by Ray Dalio does an excellent job of explaining how the economy works, what caused the recent crisis, and how to fix it.
Most money consists of credit created through lending and borrowing, not currency printed by government, and expansion or contraction of credit during “credit cycles” is the main cause of economic booms and recessions. The film also describes the policy choices available to societies for dealing with financial crises, and explains which are the right ones. Using stick figures and a few simple graphs, this film makes understanding the economy easy.
Ray Dalio is very credible on economic matters. Although not a trained economist, he correctly called the 2007-2008 crisis before it happened, because he understands how economic cycles work. As Dalio explains, following that crisis, we’re in a “deleveraging cycle” and it will take about 10 years of slow growth for the economy to fully recover. The real-life economy is, in fact, almost exactly tracking this prediction, and for the reasons stated in this film.
(Not much can be done to speed this up, so the sluggish recovery isn’t Obama’s fault and doesn’t mean his policies are wrong. To the contrary, he made the right policy decisions, and deserves credit for the fact we have rising employment instead of a depression.)
The film also explains why the hyperinflation predicted by the gold, guns, and grub survivalist crowd — and some conservative politicians — never materialized despite the Federal Reserve’s “money printing.”
Dalio isn’t popular with conservatives, because he won’t ratify their economic views; and because, frankly, he’s right and they’re wrong, which is hard for them to swallow. No doubt some of these skeptics (who don’t know about Ray Dalio) will ask in a demanding tone, “If he’s so smart, why isn’t he rich?” Well, er, he is. Extremely rich. As the self-made founder of the world’s largest hedge fund, Bridgewater Associates, he’s one of the world’s richest people, worth over $15 billion, all of which he earned from investing. How’s that for a credential? Good enough to qualify him to speak authoritatively about money and economies?
So, unless you’re a stubbornly closed-minded rightwinger who believes the Federal Reserve is part of a sinister plot to establish a communist world government, watch and get an education in economics.