This is an old animated video produced by Ray Dalio, CEO of Bridgewater, the largest hedge fund in the country. It's 30 minutes long, but it does a good job of showing the basics of economics. Many of you have probably already seen it. He does a good job of explaining economic growth with a simple chart of linear productivity, 8-10 year short term debt cycles, and 75-100 year long term debt cycles.
In it, he says that if taxes are cut, debt burden has to be cut faster and productivity increase faster or it can lead to deleveraging. With Fed raising interest rates, the recent tax cut package, but congress increasing our overall debt and deficit, seems we could be entering a tricky period of initiating a long term deleveraging (ie depression). The money the corporations are saving from taxes need to go to reinvestment to improve productivity instead of holding it or buying assets or it will decrease economic growth. Let's hope the corporations act wisely with the tax cuts and reinvest here. Gonna take a lot of QE if they don't and we enter a long term deleveraging since interest rates are already low with not much room to go lower.
In it, he says that if taxes are cut, debt burden has to be cut faster and productivity increase faster or it can lead to deleveraging. With Fed raising interest rates, the recent tax cut package, but congress increasing our overall debt and deficit, seems we could be entering a tricky period of initiating a long term deleveraging (ie depression). The money the corporations are saving from taxes need to go to reinvestment to improve productivity instead of holding it or buying assets or it will decrease economic growth. Let's hope the corporations act wisely with the tax cuts and reinvest here. Gonna take a lot of QE if they don't and we enter a long term deleveraging since interest rates are already low with not much room to go lower.
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