The economy is like a machine. At the most fundamental level it is a relatively simple machine. But many people
don’t understand it – or they don’t agree on how it works – and this has led to a lot of needless economic
suffering. I feel a deep sense of responsibility to share my simple but practical economic template, and wrote this
piece to describe how I believe it works. My description of how the economy works is different from most
economists'. It has worked better, allowing me to anticipate the great deleveragings and market changes that
most others overlooked. I believe that is because it is more practical. Since I certainly do not want you to blindly
believe in my description of how the economic machine works, I have laid it out clearly so that you can assess the
value of it yourself. So, let’s begin.