Economic Principles – How the Economic Machine Works in 30 Minutes

The EconomyThe free online video, How the Economic Machine Works used simple animations as it explained, “Though the economy might seem complex. It works in a simple mechanical way. It’s made up of a few simple parts and a lot of simple transactions that are repeated over and over again – a zillion times. These transactions are above all else driven by human nature…”

My husband and I wanted our daughters to understand how the economy works, but didn’t know where to start until he found this video, Economic Principles – How the Economic Machine Works in 30 Minutes, which was recommended by Bill Gates, Tony Robbins, The New York Times, and the Khan Academy.

This brilliant video was created by Ray Dalio whom my husband said was a very successful and very wealthy investor. I think that’s an understatement. According to Forbes magazine, Ray Dalio was worth more than $15 billion as of October 2014 and is the founder of Bridgewater, the largest hedge fund in the world which has more than $160 billion in assets under management. Based on his professional success and personal assets, Ray Dalio clearly understands how the economic machine works. His fascinating video (which is actually 31 minutes long) explains the economy in simple terms with easy to understand visuals.

As we watched the video together as a family, we occasionally paused to review the information with our daughters. This included concepts like productivity growth, short and long-term debt cycles, transactions between buyers and sellers, the central bank, credit, and the relationship between lender assets and borrower liabilities. It was a lot to digest in 31 minutes (or more like an hour with all of our pausing for discussions), but it truly helped us to start a real dialogue with our kids about money and the economy.

After watching the video, our 8 year old deftly summarized a recent family transaction. She explained that my husband and I were the lenders who let our 11 year old use credit with us when she bought her bison cartilage (it’s a long story involving the auction at the New York Paleontological Society’s Holidays Party). She continued by saying that unlike the bank which charges us interest on the money they loan us for our mortgage, we charged her 0% interest on her short-term loan so it didn’t cost her sister anything extra to borrow from us.

Economic PrinciplesShe thought her sister had gotten a good deal from us with an interest free loan. We thought our family had gotten an incredible deal from this free video!

If you want your children to better understand how money doesn’t grow on trees, but can be printed by the Central Bank to alleviate a deleveraging, watch this video as a family and start discussing saving, spending, and how the economy works.

Details:

  • Skills: Curiosity
  • Preparation: None – just be prepared to discuss it with your children. I would recommend this for upper elementary school children and beyond.
  • Cost: Absolutely free!
  • Time & Energy: As the title says, it’s a 30-minute (actually 31-minute) video that you can watch anywhere with an internet connection.
  • Contact Info: The web page for the video is at http://www.economicprinciples.org/

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