{"id":39055,"date":"2013-11-12T04:54:58","date_gmt":"2013-11-12T09:54:58","guid":{"rendered":"http:\/\/www.hedgeco.net\/news\/?p=39055"},"modified":"2013-11-15T15:08:25","modified_gmt":"2013-11-15T20:08:25","slug":"39055","status":"publish","type":"post","link":"https:\/\/hedgeco.net\/news\/11\/2013\/39055.html","title":{"rendered":"Hedge Fund Manager Explains How Democrats Were Right About The Economy"},"content":{"rendered":"

\"ray-dalio\"<\/a>New York (HedgeCo.Net) –\u00a0\u00a0The founder of hedge fund investment firm\u00a0Bridgewater Associates and one of Time magazine’s\u00a0100 most influential people in the world in 2012, has put together a video<\/a> explaining economics, “How The Economic Machine Works.”<\/p>\n

ValueWalk<\/a> has transcribed the 30 minute video, which includes interesting but simple tidbits such as, “The economy works like a simple machine but many people don\u2019t understand it or they don\u2019t agree on how it works, and this has led to a lot of needless economic suffering.”<\/p>\n

“I feel a deep sense of responsibility to share my simple but practical economic template. Though it\u2019s unconventional, it has helped me to anticipate and to side step the global financial crisis and it has worked well for me for over 30 years. Let\u2019s begin. Though the economy might seem complex, it works in a simple mechanical way, it\u2019s made up of a few simple parts and a lot of simple transactions that are repeated over and over again a zillion times.” Dalio says.<\/p>\n

BridgeWater embraces a corporate culture that encourages transparency and the elimination of the decision making hierarchy,\u00a0and in 2011 was the world’s largest\u00a0hedge fund\u00a0company with $122\u00a0billion in\u00a0assets under management.<\/p>\n

On credit, Dalio said, “Productivity matters most in the long run, but credit matters most in the short run. This is because productivity growth doesn\u2019t fluctuate much, so it\u2019s not a big driver of economic swings, debt is, because it allows us to consume more than we produce when we acquire it and it forces us to consume less than we produce when we have to pay it back.”<\/p>\n

“Debt swings occur in two big cycles. One takes about five to eight years and the other takes about 75 to a hundred years, while most people feel the swings, they typically don\u2019t see them as cycles because they see them too up close, day by day, week by week. In this chapter, we\u2019re going to step back and look at these three big forces and how they interact to make up our experiences. As mentioned, swings around the line are not due to how much innovation or hard work there is, they\u2019re primarily due to ho much credit there is. Let\u2019s for a second imagine an economy without credit, in this economy, the only way I can increase my spending is to increase my income which requires me to be more productive and do more work. Increase productivity is the only way for growth. Since my spending is another person\u2019s income, the economy grows every time I or anyone else is more productive. If we follow the transactions and play this out, we see a progression like the productivity growth line but because we borrow, we have cycles. This isn\u2019t due to any laws or regulations, it\u2019s due to human nature and the way that credit works. Think of borrowing as simply a way of pulling spending forward. In order to buy something you can\u2019t afford, you need to spend more than you make. To do this, you essentially need to borrow from your future self. In doing so, you create a time in the future that you need to spend less than you make in order to pay it back, it very quickly resembles a cycle. Basically, anytime you borrow you create a cycle. This is as true for an individual as it is for the economy.”<\/p>\n

Watch the whole video:<\/strong><\/p>\n