How The Economic Machine Works by Ray Dalio

Sep 22, 2013
17 679 493 Views

Economics 101 -- "How the Economic Machine Works."
Created by Ray Dalio this simple but not simplistic and easy to follow 30 minute, animated video answers the question, "How does the economy really work?" Based on Dalio's practical template for understanding the economy, which he developed over the course of his career, the video breaks down economic concepts like credit, deficits and interest rates, allowing viewers to learn the basic driving forces behind the economy, how economic policies work and why economic cycles occur.

To learn more about Economic Principles visit:

[Also Available In Chinese] 经济这台机器是怎样运行的:
[Also Available In Russian] Как действует экономическая машина. Автор: Рэй Далио (на русском языке):
For more from Ray:
Principles | #1 New York Times Bestseller:
Buy his new book, Principles for Success:
Connect with him on Facebook:
Follow him on Twitter:
Follow him on Linkedin:
Follow him on Instagram:
Download his free iOs app:

  • This speaker has left one major factor out about the federal reserve or central bank scheme. It creates money from thin air but loans the dollar with debt attached to it. So each time the US borrows money the debt grows bigger and deeper. its not just a cycle it's a trap. quote from Thomas Jefferson "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.... I believe that banking institutions are more dangerous to our liberties than standing armies.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Now we see the result. Even Andrew Jackson fought against these snakes.

    Derrick HarperDerrick Harper10 hours ago
  • The economy is a complex system, not a machine.

    Economist 1970Economist 197017 hours ago
  • 14:16 that "why"...

    Görkem Seven VidsGörkem Seven VidsDay ago
  • Making money!

    Devos MontaigneDevos MontaigneDay ago
  • 10:37

    Michi L.Michi L.Day ago
  • This machine he calls is bullshit, it favors them not you, he can say what ever he wants the reason he’s a 1% is cause he is part of there little satanic worshiping circle, hey you want to be rich go worship the falls looser god money, the 99% will never make it up there you have not partake in the pineapple eating whit them, they are illuminated and your not, but be happy in the end we win they loose, they burn for eternity so f you whit your looser videos and take your billions and burn in hell whit it, or maybe go get some homeless of the street oh it true you evil prick keep it all for yourself selfish pricks.

    Rene BechtoldRene BechtoldDay ago
  • Unbelievably classic.

    Rahul KadavilRahul KadavilDay ago
  • Ray Dalio is THE GOAT

    Mario MikhoMario MikhoDay ago
  • Imagine you are learning in 31 minutes more for your life than 12 years school

    xroadrig is coolxroadrig is coolDay ago
  • you can explain economy principles in 30 minutes

    lu luulu luu2 days ago
  • This what's been happening the past 6 months! The cycle repeats it self every time..... capitalism is a high maintenance system

    Ahmed AG ObaidatAhmed AG Obaidat2 days ago

    crypto vagcrypto vag2 days ago
  • This video represents the "dumbed down" version of banking that the globalist bankers who run the world want us to have.

    Texas RayTexas Ray2 days ago
  • So fed destroys your currency and causes cycles, why do we need it again?

    Abhimanyu KarnawatAbhimanyu Karnawat2 days ago
  • Also if you are a lender in restructuring make it the debt go longer term but raise interest rates save yourself from both inflationary governments and save your assets also take their collaterals.

    Abhimanyu KarnawatAbhimanyu Karnawat2 days ago
  • Tldr;benjamin franklin was right "dishonesty is the second sin first is debt".

    Abhimanyu KarnawatAbhimanyu Karnawat2 days ago
  • Wow thank you soo much!! I really went from knowing absolutely nothing about how the economy works, to knowing the basics and understanding what’s going on when I read economic news! You’re amazing!

  • What is completely ignored is the government ponzi scheme of creating dollars out of nothing.

    John BurketJohn Burket2 days ago
  • is this how the Keynesian economic machine works?

    FutureLaughFutureLaugh2 days ago
  • Most informative video. 4years of school economics explained concisely.

    Artificial IntelligenceArtificial Intelligence2 days ago
  • There are all kinds of markets including our fraud filled market! You forgot that Ray baby!!!!

    Greg MassiGreg Massi2 days ago
  • I am in my 40's and own a business and I am debt free, because I never used credit to get here. Just productivity.

    Jay TemplarJay Templar2 days ago
  • 6:36 ...according to everybody who was born on third base and thinks they hit a home run.

    Ian DunnIan Dunn2 days ago
  • Great video! Finally a glimpse of how the economy works! Thanks!

    A Metalhead's JourneyA Metalhead's Journey2 days ago
  • One of the best teachings I've ever seen. Beautiful!

    James TaylorJames Taylor2 days ago
  • Crazy idea: a system not based on usury. Just a thought.

    saikanonojutsusaikanonojutsu2 days ago
  • Great video, got my economic lessons through Mr Rueben Jacob platform, he taught me more about financial savings through his bitcoin mining platform, which i have really been so grateful to ever since.

    Debbie FlippingDebbie Flipping2 days ago
    • @Ha Vu Thai His company is located in Malta due to the cheap rate of electricity and yes he is a certified manager

      Debbie FlippingDebbie Flipping2 days ago
    • This look legit and real wonderful

      Joel TronJoel Tron2 days ago
    • His he really that trustworthy being, does he have a professional identification towards his work and platform. Where is the company located?

      Ha Vu ThaiHa Vu Thai2 days ago
    • am so surprise with all this wonderful comment am glad my family aren't the only one to benefit through him

      Debbie FlippingDebbie Flipping2 days ago
    • I bless God i met Rueben so happy, i invested on his mining platform which i started with the minimum plan of $1500 which turn out to be so successful.

      Katrina StoneKatrina Stone2 days ago

    Jonas UrbonasJonas Urbonas3 days ago
    • @Michael Hughes not in the Lithuanian school I went to..

      Jonas UrbonasJonas Urbonas19 hours ago
    • it was and it still is - its called basic macro-economics

      Michael HughesMichael Hughes21 hour ago
  • Kindly visit and learn more about stacking gold! And thank you, Mario, for your excellent videos.

    Jim LoganJim Logan3 days ago
    • Mario?

      SN4PSN4P3 days ago
  • so if there are only 3 trillion real dollars in the US and Jef Bezos is gonna be a trillionaire and he wanted to make a Scrooge McDuck money pool he would need 1/3 of all money in the states???

    dystopian sunflowerdystopian sunflower3 days ago
  • Lol Is it possible to increase the credit infinitely only for investment so that there is no debt cycle

    Michael KH ChuMichael KH Chu3 days ago
  • instead of printing money put the prices down for the ones who didn't use the credit for their life.

    01 Utilisateur LAMBDA01 Utilisateur LAMBDA3 days ago
  • can someone tell me the program used to create this presentation?

    Daniel DorerDaniel Dorer3 days ago
  • Go after the international bankers.

    Spam EmailSpam Email3 days ago
  • Ray Your awesome

    Paige Xbox gamer 2000Paige Xbox gamer 20003 days ago
  • This video just adds to the ignorance of the people. The crashes we have every 10 years are because of the intervention of the central bank. If they would stop playing with the interest rate and printing money, there would be no debt crisis and there would be no inflation. I highly suggest you read about the Austrian school of economics, all other trains of thought are programs to give politicians money so they can win the election.

    Guille WilliamGuille William4 days ago
  • And than came the FED...

    Yoni ZivYoni Ziv4 days ago
  • Welp, this seems familiar right now....

    Rodney GreenwayRodney Greenway4 days ago
  • Well, the latest round of debt his blown up this video. Looks like the beautiful deleveraging has turned into a massive borrowing food fight. I guess no one can predict the future. Nice theory, but it looks like it's been overcome by reality.

    Small FrySmall Fry4 days ago
  • Moral of the story: Seriously, stop taking out loans to buy a TV or something you don't absolutely need like a house. Debt is useful but it's dangerous.

    TrippyTrippy4 days ago
    • @khwezelihle shongwe Save money, then buy the TV with cash. That said, as long as you repay your loans, it's ok. Your use of credit has expanded the economy.

      Loanword EggcornLoanword Eggcorn2 days ago
    • But remember if no-one takes those loans then the tv maker will be out of business and the employees

      khwezelihle shongwekhwezelihle shongwe3 days ago
  • Oh ok, I'll be sure not to raise my income faster than my productivity, gothcha! pffff! Who does the narrator think he's talking to? Anyway, suppressing incomes while increasing productivity (ie, forcing employees to work more hours at lower wages while cutting basic benefits like vacation time, which generally means corporations make more money by overworking you yet you don't make much more if any while also losing downtime) is what companies have been doing and still do. If anything, incomes need to keep up better with productivity, because if it doesn't you get, at best, an unhappy discontent population who rightfully don't feel good about working themselves to the bone only to get paid no better or even less over time (at worst, u get increases in poverty, crime, drug addiction, suicide, etc). This is called wage slavery and corporate greed, and these are the real problems that have to be dealt with now. Also, corporations and the wealthiest weaseling out of paying their share of the taxes is a huge part of the problem here too. If u still think trickle-down economics works you've been living under a rock for 40 years or your basic observational skills are very poor.

    unfortunatebeamunfortunatebeam4 days ago
  • Careful what u refer to as "human nature" buddy boy, u may be bullshitting wo even knowing it

    unfortunatebeamunfortunatebeam4 days ago
  • Yes, the "beautiful deleveraging". Uh huh. Lol.

    Quack TuberQuack Tuber4 days ago
    • Lol yeah that is pretty stupid

      unfortunatebeamunfortunatebeam4 days ago
  • This is actually quite mind opening. The fault does not lie in the wealthy. It lies in the stupid majority who borrowed money the can't repay. Who spent ridiculous amounts on things that would give them nothing back. And when it all hits the fan eventually they blame the wealthy.

    family accountfamily account4 days ago
    • @unfortunatebeam Right I remind you of dogs begging for biscuts lmao. I'd LOVE to hear all about your contributionto society to change all of this oh right, you do nothing but reply to youtube comments in a condescending manner to make yourself feel validated and smart while you don't sound so much so. I'm not protecting anyone are you serious? LMAO I'm a 16 year old kid with a computer trying to educate myself. Get a life dude.

      family accountfamily account3 days ago
    • @unfortunatebeam I'm not gonna even reply to the rest. All I'll say is that someone sounds bitter.

      family accountfamily account3 days ago
    • @unfortunatebeam Oh baloney! You just are too scared to do something on your own and sail your own ship. You want the government to feed you because you can't think for yourself. Go build something, go do something. It you hate society so much, go buy a sailboat and start a USkeys channel. You'll get sponsor. I've seen guys who leave society like you to live off the land and become self-sufficient. What baloney. You are jealous someone else has money that you don't. And the name calling ... the real mark of a great thinker.

      Small FrySmall Fry4 days ago
    • Don't be such a bootlicker, u sound like an (open) asshole. The wealthy, ie the ones who actually control the money printing and the interest rate, have a LOT to do with manipulating the economy. It's the ownership class that can suppress your wages, whether the economy is good or bad, take away the benefits that make u feel human and not just a workhorse, and keep your income down. What power do most people have to change this other than getting another job for another company that practices the same poor treatment of their employees? What power or say do YOU have in any of this? Stop defending the kleptomaniacs in power, they got enough assholes protecting them already, they don't need your piddly lil support. People like u remind me of little dogs begging for a biscuit and waiting to have their heads and butts patted.

      unfortunatebeamunfortunatebeam4 days ago
  • Ray, the central bank cannot create money, it can only create credit. Since credit spends like money, it creates short term inflation and long term deflation because you have to pay it back with interest. Federal reserve can only lend and not spend, it is in the federal reserve act. Federal reserve also cannot buy stocks but it can buy bonds through QE, even if it buys corporate bonds, it is still lending. companies still have to pay back their loan or go bankrupt which is deflationary. As you said, central bank buying increases asset price but will lower yield, companies will have less earning due to debt servicing which will make it less attractive relative to risk (ie, high prices) will put downward pressure on risk assets. Also, companies that are not efficient (low productivity or zombie companies) will survive due to financing from central bank lending will create excess capacity causing more goods chasing less money because people are earning less and trying to save more. the only way to inflate the debt away is through debasment of currency which require the federal reserve to spend and not lend. other than that i agree with most of your ideas.

    sam mousam mou4 days ago
    • I don't think they're his ideas, he's just relating information that's already out there. And how can u say the central bank doesn't create money when it actually prints money. When the economy gets really bad the grand solution is to print (create) more money, which of course only participates in a vicious circle and so perpetuates the debt cycle (ie, vicious circle)

      unfortunatebeamunfortunatebeam4 days ago
  • 3:57 damn....That's why the US economy has been doing great. It's operating on borrowed money. But as said in the video it is only a matter of time before the cycle hits and you have to lower your living standards to pay off that debt. In this case the whole drive of the US economy is debt....Oh my god guys you are in some deep shit.

    family accountfamily account4 days ago
  • America - teach your children about money ASAP!!! Credit is valuable, just most of us have no clue how to LOGICALLY use it.

    steven strubesteven strube4 days ago
  • we are and have always been PAWNS for the wicked and wealthy! Until they teach us what we need to know about MONEY, this will continue forever.....

    steven strubesteven strube4 days ago
  • Less than 5 minues into this and I already feel so much more educated and I have finished a whole page of notes. Oddly enough this is actually fun. Why isn't school like this??

    family accountfamily account4 days ago
    • Because teacher don't get paid much to create interesting adobe after effect

      Blue WhiteBlue White2 days ago
  • This is so straight forward and true and good

    ChandlerChandler5 days ago
  • Anyone who thinks this is normal is mentally sick. This system is insane.

    Gus WGus W5 days ago
  • I'm scared people in power will think war is a great way to kick-start the economy

    ink chipink chip5 days ago
    • Nukes mean no big wars.

      Loanword EggcornLoanword Eggcorn2 days ago
  • BITCOIN ..for the bants

    100%Jim100%Jim5 days ago
  • i just want to smash the like button already

    Nam THNam TH5 days ago
  • This is a good learning material more than institutions and textbooks offer.

    Frank S.Frank S.5 days ago
  • Bottom line is BANKS CREATE CREDIT OUT OF THIN AIR. they then get payed back the original sum of credit plus intrest. The back gets money plus intrest even though they never lend/gave andthing away,they just created numbers out of thin air. When people dont pay the bank then the back takes your home( an asset that has real value, unlike the credit they gave in the 1st place) at the same time the banks also rob the population via quantitative easing.(printing cash) they print cash out of thin air and then use that fake money to buy real assets of real value. At the same time printing more cash devalues the cash in your pocket. The bottem line is..... the banks are fkin us all day every day and as we boom and as we bust the bank profits from both

    ala barala bar5 days ago
  • The banks and the people need to maintain a direct connection, control is illusion and makes sense to shrink the government cog and modernize it. Free markets will get America over the top, starting with a legal substance market and since the world is following Americas lead the global substance markets are worth around 300 billion per 150 million heads and we have big pharma infrastructure. Right now people are doing bathtub gin prohibition speed when they could be using super duper from pharmacity. The US can then levy an tax on the global substance market for social nuturing. A pay it forward social policy where workers celebrate not needing the varied rate universal income which averages around 800.00 per adult per month. Pay it forward members get social perks in exchange for their UBI payments. Perks, TBA. Great thank you for all the wonderful education.

    Corpus DominionCorpus Dominion5 days ago
  • Increasing productivity is exactly what China has done over the past 20 years . Credit isnt a bad thing yet it leads us into a big mess like a depression. If we analyze what Ray presented, there are 2 objectives that the system is trying to achieve, a) income growth through productivity growth and b) distribution of wealth. As per Islamic principals, Credit / Debt and dealing in interest is prohibited. Which means, productivity growth / income growth can only be achieved by equity collaboration between government, companies, wealthy and people who are willing to work. Hence no need for credit. Another Islamic principal requires wealthy to give mandatory charity of 2.5% of their wealth to the poor. That reduces inequality. Guess what the poor / needy will do with that more money? They will spend it on good / services which will make the government, companies, wealthy people more rich. Hence, increase in wealth, productivity, jobs and growth without any vicious cycles of credit. This will be like a water fountain affect. Water drops from the top to the bottom and then it gets pumped back up to the top and the fountain continues to work beautifully.

    Ali SheikhAli Sheikh5 days ago
  • Bruh i was jsut playing my game how tf I end up here

    _monoholly __monoholly _5 days ago
  • Addendum: The FED is in private hands. Very likely in the hands of the super rich bankers who founded it. They can threaten the government (printing money or manipulating interest rates in a way to cause damage to the economy). And through the ability to create money from thin air, they can buy the favors of politicians, lawmakers etc..

    RokuroRokuro5 days ago
    • Not how it works, remember the banks lend out more money than what they actually have in their vaults, which is not a problem because they make money from interest over time. If the money doesnt get paid back because people default on their loans and people lose faith in the banks they start withdrawing their money which they dont have because they loaned out it will either go bankrupt or the government will force it to sell itself to a bigger bank. So they have power as long as they dont mess up their finances.

      Omar LopezOmar LopezDay ago
  • Interest is forbidden for a reason. If banks gave me $1 on loan but told me to give them back $1.25 when i have it, it sounds great. But IF the first $ that is ever made is made by these fools, how on earth do you pay it back. where on earth is that $0.25 going to come from... oh i know, borrow it from the bank again. now i got $1.25, but i now owe interest on that additional 0.25.... NEVER ENDING CYCLE. Silve and Gold were a standard throughout history for GOOD reason.

    The Truth Has ArrivedThe Truth Has Arrived5 days ago
  • Thank you very much for this video!

    Jacob GaneaJacob Ganea5 days ago
  • @RayDalio sir, your an inspiration. This is amazing. Simple yet effective way of making us understand the economy and everything related to it. Thank you for this video.

    Anuj KulkarniAnuj Kulkarni6 days ago
  • Ray, Thank you, for this great data, This information is must to be Taught within our Education System., 🙌🙌🙌👏👏👏🤝💯👑

    Renould PRenould P6 days ago
  • I liked it. But what if a government is lying over 90% in is words? And what if the people of that society let that happen for 4 years and maybe 8 or even 30 years and we still allow it to be called a democracy based on law and justice? What does that say about the inhabitants, the people, of such a society and their willingness to pay their debts?? Catastrofe is happening in some places of the world right now. And the people are still asleep and drowsed by misinformation because they let themselves be lied to! Ofcourse this is an educational economics video, i know, but these times need all the words be said!

    Wile CKoyoteWile CKoyote6 days ago
  • So this proves that the more people spends, the more of a value and size of the economy grows. So imagine if the US goes to war against poverty and rehabilitate every one to start their career and then all those ex-poverty folks starts spending like crazy, that would greatly stimulates the economy, no question. Holy crab. Socialism with a free market is a way to go. Look at the Scandinavians today!!

    Ty RushTy Rush6 days ago
  • I Like the straight line more, this is just aksing for choas into something would could be order

    hammie2012hammie20126 days ago
  • Would you need to use higher taxes, debt restructuring, etc. and printing money at the same time to achieve that beautiful deleveraging or just one after the other?

    Chedderbob960Chedderbob9606 days ago
  • Definitely not the economy of my country

    yugyn dprodigyyugyn dprodigy6 days ago
  • WOW!

    Nadeem AshrafNadeem Ashraf6 days ago
  • Great video, thanks a lot!

    Iñaki-NPIñaki-NP6 days ago
  • How do zombie companies impact the economic machine as explained in this video?

    JJ6 days ago
  • This video just proves what king Solomon said: *The servant is borrower to the lender.* As smooth talking as Ray sounds he is indirectly admitting that the Central Banks control the short and long term debt cycles. While we are meant to see it as a result of "human nature" this is in fact a problem which has been artificially created. Sadly we have another classical case of the _Wizard of Oz_ occurring with the man behind the curtain. The man behind the curtain being the central government and the central banks operating the levers of this "Economic Machine". Yet how do people fall for this facade? *When the people lose their brains* (Scarecrow = No Education), *lose their hearts* (Tinman = Unfeeling Machine), and *become cowardly* (Lion = Loss of bravery): then the people are easily terrorized by the ravenous flying monkeys and duped by the spells of the wicked witch.

    Jeremy CastroJeremy Castro6 days ago
    • Dude... I never actually understood or thought about the references you just made. My mind is blown.

      Mr. MeeseeksMr. Meeseeks4 days ago
  • great job here Ray- thorough and simple.

    Christian HolmChristian Holm6 days ago
  • 28:29 Argentina ever time

    Tywin LannisterTywin Lannister6 days ago
  • Why a Debt Cycle has a steeper falling than rising part ?

    Paweł PanasewiczPaweł Panasewicz6 days ago
  • its like what is happening now

    Cherilyn TanCherilyn Tan7 days ago
  • Incredibly educational & entertaining, this should be required viewing for all politicians first & foremost & citizens alike. I would like to know more of foreign exchange & how national deficits are truly paid down, I never understood the US mentality of "buy American" I mean,sure,on the surface & as you said,it increases income,but..of some,but,it's still only passing the buck (aka;govt. debt to fed), I say "Sell American" rather, as you said, productivity is the most important, sell American goods to other countries,therefore making the US money, that which was not printed by the federal reserve & thereby lowering overall national deficit. Always seemed like Marco-Economic common sense to me,but that's not always common, in this day & age of blind patriots. ;~)

    Mc NobodyMc Nobody7 days ago
  • What an amazing video! Thank you

    Raj Vinay MRaj Vinay M7 days ago
  • This video is a total sham. If you listen closely @3:17 you can hear the money printer going "chugga chugga chugga chugga" IRL money printer go BRRRRR

    DarnellDarnell7 days ago