Shadowing Practice: How The Economic Machine Works by Ray Dalio - Learn English Speaking with Video
Choose a practice mode
Each mode opens a full-screen practice room.
362 sentences
If sentences are too short or too long, click Edit to adjust them.
1
How the economic machine works in 30 minutes.
2
The economy works like a simple machine, but many people don't understand it or they don't agree on how it works.
3
And this has led to a lot of needless economic suffering.
4
I feel a deep sense of responsibility to share my simple but practical economic template. Though it's unconventional,
5
it has helped me to anticipate and to sidestep the global financial crisis
6
and it has worked well for me for over 30 years.
7
Let's begin.
8
Though the economy might seem complex, it works in a simple, mechanical way.
9
It's made up of a few simple parts
10
and a lot of simple transactions that are repeated over and over again a zillion times.
11
These transactions are, above all else, driven by human nature, and they create three main forces that drive the economy.
12
Number one, productivity growth.
13
Number two, the short -term debt cycle.
14
And number three, the long -term debt cycle.
15
We'll look at these three forces
16
and how laying them on top of each other creates a good template for tracking economic movements
17
and figuring out what's happening now.
18
Let's start with the simplest part of the economy, transactions.
19
An economy is simply the sum of the transactions that make it up.
20
And a transaction is a very simple thing.
21
You make transactions all the time.
22
Every time you buy something, you create a transaction.
23
Each transaction consists of a buyer exchanging money or credit with a seller for goods, services, or financial assets.
24
Credit spends just like money, so adding together the money spent and the amount of credit spent, you can know the total spending.
25
The total amount of spending drives the economy.
26
If you divide the amount spent by the quantity sold, you get the price.
27
And that's it.
28
That's a transaction.
29
It's the building block of the economic machine.
30
All cycles and all forces in an economy are driven by transactions.
31
So, if we can understand transactions, we can understand the whole economy.
32
A market consists of all the buyers and all the sellers making transactions for the same thing.
33
For example, there is a wheat market, a car market, a stock market, and markets for millions of things.
34
An economy consists of all of the transactions in all of its markets.
35
If you add up the total spending and the total quantity sold in all of the markets,
36
you have everything you need to know to understand the economy.
37
It's just that simple.
38
People, businesses, banks, and governments all engage in transactions the way I just described,
39
exchanging money and credit for goods, services, and financial assets.
40
The biggest buyer and seller is the government, which consists of two important parts, a central government that collects taxes and spends money,
41
and a central bank, which is different from other buyers
42
and sellers because it controls the amount of money and credit in the economy.
43
It does this by influencing interest rates and printing new money.
44
For these reasons, as we'll see, the central bank is an important player in the flow of credit.
45
I want you to pay attention to credit.
46
Credit is the most important part of the economy and probably the least understood.
47
It's the most important part because it's the biggest and most volatile part.
48
Just like buyers and sellers go to the market to make transactions, so do lenders and borrowers.
49
Lenders usually want to make their money into more money, and borrowers usually want to buy something they can't afford, like a house or a car,
50
or they want to invest in something like starting a business.
51
Credit can help both lenders and borrowers get what they want.
52
Borrowers promise to repay the amount they borrow, called principal, plus an additional amount called interest.
53
When interest rates are high, there is less borrowing because it's expensive.
54
When interest rates are low, borrowing increases because it's cheaper.
55
When borrowers promise to repay, and lenders believe them, credit is created.
56
Any two people can agree to create credit out of thin air.
57
That seems simple enough, but credit is tricky because it has different names.
58
As soon as credit is created, it immediately turns into debt.
59
Debt is both an asset to the lender and a liability to the borrower.
60
In the future, when the borrower repays the loan plus interest, the asset and the liability disappear and the transaction is settled.
61
So why is credit so important?
62
Because when a borrower receives credit, he is able to increase his spending.
63
And remember, spending drives the economy.
64
This is because one person's spending is another person's income.
65
Think about it.
66
Every dollar you spend, someone else earns.
67
And every dollar you earn, someone else has spent.
68
So when you spend more, someone else earns more.
69
When someone's income rises, it makes lenders more willing to lend him money because now he's more worthy of credit.
70
A credit -worthy borrower has two things, the ability to repay and collateral.
71
Having a lot of income in relation to his debt gives him the ability to repay.
72
In the event that he can't repay, he has valuable assets to use as collateral that can be sold.
73
This makes lenders feel comfortable lending him money.
74
So increased income allows increased borrowing, which allows increased spending.
75
And since one person's spending is another person's income, this leads to more increased borrowing and so on.
76
This self -reinforcing pattern leads to economic growth and is why we have cycles.
77
In a transaction, you have to give something in order to get something.
78
And how much you get depends on how much you produce.
79
Over time we learn and that accumulated knowledge raises our living standards.
80
We call this productivity growth.
81
Those who are inventive and hardworking raise their productivity and their living standards faster than those who are complacent and lazy.
82
But that isn't necessarily true over the short run.
83
Productivity matters most in the long run, but credit matters most in the short run.
84
This is because productivity growth doesn't fluctuate much, so it's not a big driver of economic swings.
85
Debt is, because it allows us to consume more than we produce when we acquire it,
86
and it forces us to consume less than we produce when we have to pay it back.
87
Debt swings occur in two big cycles.
88
One takes about 5 to 8 years, and the other takes about 75 to 100 years.
89
While most people feel the swings, they typically don't see them as cycles because they see them too up close, day by day, week by week.
90
In this chapter, we're going to step back
91
and look at these three big forces and how they interact to make up our experiences.
92
As mentioned, swings around the line are not due to how much innovation or hard work there is.
93
They're primarily due to how much credit there is.
94
Let's for a second imagine an economy without credit.
95
In this economy, the only way I can increase my spending is to increase my income,
96
which requires me to be more productive and do more work.
97
Increased productivity is the only way for growth.
98
Since my spending is another person's income, the economy grows every time I or anyone else is more productive.
99
If we follow the transactions and play this out, we see a progression like the productivity growth line.
100
But because we borrow, we have cycles.
101
This isn't due to any laws or regulations.
102
It's due to human nature and the way that credit works.
103
Think of borrowing as simply a way of pulling spending forward.
104
In order to buy something you can't afford, you need to spend more than you make.
105
To do this, you essentially need to borrow from your future self.
106
In doing so, you create a time in the future
107
that you need to spend less than you make in order to pay it back.
108
It very quickly resembles a cycle.
109
Basically, any time you borrow, you create a cycle.
110
This is as true for an individual as it is for the economy.
111
This is why understanding credit is so important, because it sets into motion a mechanical, predictable series of events that will happen in the future.
112
This makes credit different for money.
113
Money is what you settle transactions with.
114
When you buy a beer from a bartender with cash, the transaction is settled immediately.
115
But when you buy a beer with credit, it's like starting a bartab.
116
You're saying you promise to pay in the future.
117
Together, you and the bartender create an asset and a liability.
118
You just created credit out of thin air.
119
It's not until you pay the bar tab later that the asset and the liability disappear, the debt goes away, and the transaction is settled.
120
The reality is that most of what people call money is actually credit.
121
The total amount of credit in the United States is about $50 trillion, and the total amount of money is only about $3 trillion.
122
Remember, in an economy without credit, the only way to increase your spending is to produce more.
123
But in an economy with credit, you can also increase your spending by borrowing.
124
As a result, an economy with credit has more spending and allows incomes to rise faster than productivity over the short run,
125
but not over the long run.
126
Now, don't get me wrong.
127
Credit isn't necessarily something bad that just causes cycles.
128
It's bad when it finances overconsumption that can't be paid back.
129
However, it's good when it efficiently allocates resources and produces income so you can pay back the debt.
130
For example, if you borrow money to buy a big TV, it doesn't generate income for you to pay back the debt.
131
But if you borrow money to, say, buy a tractor, and that tractor lets you harvest more crops and earn more money,
132
then you can pay back your debt and improve your living standards.
133
In an economy with credit, we can follow the transactions and see how credit creates growth.
134
Let me give you an example.
135
Suppose you earn $100 ,000 a year and have no debt.
136
You are creditworthy enough to borrow $10 ,000, say on a credit card.
137
So you can spend $110 ,000 even though you only earn $100 ,000.
138
Since your spending is another person's income, someone is earning $110 ,000.
139
The person earning $110 ,000 with no debt can borrow $11 ,000,
140
so he can spend $121 ,000 even though he has only earned $110 ,000.
141
His spending is another person's income, and by following the transactions, we can begin to see how this process works in a self -reinforcing pattern.
142
But remember, borrowing creates cycles, and if the cycle goes up, it eventually needs to come down.
143
This leads us into the short -term debt cycle.
144
As economic activity increases, we see an expansion, the first phase of the short -term debt cycle.
145
Spending continues to increase and prices start to rise.
146
This happens because the increase in spending is fueled by credit, which can be created instantly out of thin air.
147
When the amount of spending and incomes grow faster than the production of goods, prices rise.
148
When prices rise, we call this inflation.
149
The central bank doesn't want too much inflation because it causes problems.
150
Seeing prices rise, it raises interest rates.
151
With higher interest rates, fewer people can afford to borrow money, and the cost of existing debts rises.
152
Think about this as the monthly payments on your credit card going up.
153
Because people borrow less and have higher debt repayments, they have less money left over to spend.
154
So spending slows.
155
And since one person's spending is another person's income, incomes drop, and so on and so forth.
156
When people spend less, prices go down.
157
We call this deflation.
158
Economic activity decreases, and we have a recession.
159
If the recession becomes too severe and inflation is no longer a problem,
160
the central bank will lower interest rates to cause everything to pick up again.
161
With low interest rates, debt repayments are reduced, and borrowing and spending pick up, and we see another expansion.
162
As you can see, the economy works like a machine.
163
In the short -term debt cycle, spending is constrained only by the willingness of lenders and borrowers to provide and receive credit.
164
When credit is easily available, there's an economic expansion.
165
When credit isn't easily available, there's a recession.
166
And note that this cycle is controlled primarily by the central bank.
167
The short -term debt cycle typically lasts five to eight years and happens over and over again for decades.
168
But notice that the bottom and top of each cycle finish with more growth than the previous cycle and with more debt.
169
Why?
170
Because people push it.
171
They have an inclination to borrow and spend more instead of paying back debt.
172
It's human nature.
173
Because of this, over long periods of time, debts rise faster than incomes, creating the long -term debt cycle.
174
Despite people becoming more indebted, lenders even more freely extend credit.
175
Why?
176
Because everyone thinks things are going great.
177
People are just focused on what's been happening lately.
178
And what's been happening lately?
179
Incomes have been rising.
180
Asset values are going up.
181
The stock market roars.
182
It's a boom.
183
It pays to buy goods, services, and financial assets with borrowed money.
184
When people do a lot of that, we call it a bubble.
185
So even though debts have been growing...
186
Incomes have been growing nearly as fast to offset them.
187
Let's call the ratio of debt to income the debt burden.
188
So long as incomes continue to rise, the debt burden stays manageable.
189
At the same time, asset values soar.
190
People borrow huge amounts of money to buy assets as investments, causing their prices to rise even higher.
191
People feel wealthy.
192
So even with the accumulation of lots of debt, rising incomes and asset values help borrowers remain creditworthy for a long time.
193
But this obviously cannot continue forever.
194
And it doesn't.
195
Over decades, debt burdens slowly increase, creating larger and larger debt repayments.
196
At some point, debt repayments start growing faster than incomes, forcing people to cut back on their spending.
197
And since one person's spending is another person's income, incomes begin to go down, which makes people less creditworthy,
198
causing borrowing to go down.
199
Debt repayments continue to rise, which makes spending drop even further, and the cycle reverses itself.
200
This is the long -term debt peak.
201
Debt burdens have simply become too big.
202
For the United States, Europe, and much of the rest of the world this happened in 2008.
203
It happened for the same reason it happened in Japan in 1989 and in the United States back in 1929.
204
Now the economy begins deleveraging.
205
In a deleveraging, people cut spending, incomes fall, credit disappears, asset prices drop,
206
banks get squeezed, the stock market crashes, social tensions rise, and the whole thing starts to feed on itself the other way.
207
As incomes fall and debt repayments rise, borrowers get squeezed.
208
No longer credit worthy, credit dries up, and borrowers can no longer borrow enough money to make their debt repayments.
209
Scrambling to fill this hole, borrowers are forced to sell assets.
210
The rush to sell assets floods the market at the same time as spending falls.
211
This is when the stock market collapses.
212
The real estate market tanks and banks get into trouble.
213
As asset prices drop, the value of the collateral borrowers can put up drops.
214
This makes borrowers even less creditworthy.
215
People feel poor.
216
Credit rapidly disappears.
217
Less spending, less income, less wealth, less credit, less borrowing, and so on.
218
It's a vicious cycle.
219
This appears similar to a recession, but the difference here is that interest rates can't be lowered to save the day.
220
In a recession, lowering interest rates works to stimulate borrowing.
221
However, in a deleveraging, lowering interest rates doesn't work because interest rates are already low and soon hit 0%.
222
So the stimulation ends.
223
Interest rates in the United States hit 0 % during the deleveraging of the 1930s and again in 2008.
224
The difference between a recession and a deleveraging is that in a deleveraging,
225
borrowers' debt burdens have simply gotten too big and can't be relieved by lowering interest rates.
226
Lenders realize that debts have become too large to ever be fully paid back.
227
Borrowers have lost their ability to repay and their collateral has lost value.
228
They feel crippled by the debt.
229
They don't even want more.
230
Lenders stop lending.
231
Borrowers stop borrowing.
232
Think of the economy as being not creditworthy, just like an individual.
233
So what do you do about a deleveraging?
234
The problem is debt burdens are too high and they must come down.
235
There are four ways this can happen.
236
One, people, businesses and governments cut their spending.
237
Two, debts are reduced through defaults and restructurings.
238
Three, wealth is redistributed from the haves to the have -nots.
239
And finally, four, the central bank prints new money.
240
These four ways have happened in every deleveraging in modern history.
241
Usually, spending is cut first.
242
As we just saw, people, businesses, and even governments tighten their belts and cut their spending so that they can pay down their debt.
243
This is often referred to as austerity.
244
When borrowers stop taking on new debts and start paying down old debts, you might expect the debt burden to decrease.
245
But the opposite happens.
246
Because spending is cut, and one man's spending is another man's income, It causes incomes to fall.
247
They fall faster than debts are repaid, and the debt burden actually gets worse.
248
As we've seen, this cut in spending is deflationary and painful.
249
Businesses are forced to cut costs, which means less jobs and higher unemployment.
250
This leads to the next step.
251
Debts must be reduced.
252
Many borrowers find themselves unable to repay their loans, and a borrower's debts are a lender's assets.
253
When a borrower doesn't repay the bank, people get nervous that the bank won't be able to repay them,
254
so they rush to withdraw their money from the bank.
255
Banks get squeezed and people, businesses and banks default on their debts.
256
This severe economic contraction is a depression.
257
A big part of a depression is people discovering much of what they thought was their wealth isn't really there.
258
Let's go back to the bar.
259
When you bought a beer and put it on a bar tab, you promised to repay the bartender.
260
Your promise became an asset of the bartender.
261
But if you break your promise, if you don't pay him back and essentially default on your bar tab,
262
then the asset he has isn't really worth anything.
263
It has basically disappeared.
264
Many lenders don't want their assets to disappear and agree to debt restructuring.
265
Debt restructuring means lenders get paid back less, or get paid back over a longer time frame,
266
or at a lower interest rate than was first agreed.
267
Somehow, a contract is broken in a way that reduces debt.
268
Lenders would rather have a little of something than all of nothing.
269
Even though debt disappears, debt restructuring causes income and asset values to disappear faster, so the debt burden continues to get worse.
270
Like cutting spending, debt reduction is also painful and deflationary.
271
All of this impacts the central government because lower incomes and less employment means the government collects fewer taxes.
272
At the same time, it needs to increase its spending because unemployment has risen.
273
Many of the unemployed have inadequate savings and need financial support from the government.
274
Additionally, governments create stimulus plans and increase their spending to make up for the decrease in the economy.
275
Government's budget deficits explode in the deleveraging because they spend more than they earn in taxes.
276
This is what's happening when you hear about the budget deficit on the news.
277
To fund their deficits, governments need to either raise taxes or borrow money.
278
But with incomes falling and so many unemployed, who is the money going to come from?
279
The rich.
280
Since governments need more money, and since wealth is heavily concentrated in the hands of a small percentage of the people,
281
governments naturally raise taxes on the wealthy.
282
which facilitates a redistribution of wealth in the economy from the haves to the have -nots.
283
The have -nots who are suffering begin to resent the wealthy haves.
284
The wealthy haves being squeezed by the weak economy, falling asset prices and higher taxes begin to resent the have -nots.
285
If the depression continues, social disorder can break out.
286
Not only do tensions rise within countries, they can rise between countries, especially debtor and creditor countries.
287
This situation can lead to political change that can sometimes be extreme.
288
In the 1930s, this led to Hitler coming to power, war in Europe, and depression in the United States.
289
Pressure to do something to end the depression increases.
290
Remember, most of what people thought was money was actually credit.
291
So when credit disappears, people don't have enough money.
292
People are desperate for money, and you remember who can print money.
293
The central bank can.
294
Having already lowered its interest rates to nearly zero, it's forced to print money.
295
Unlike cutting spending, debt reduction, and wealth redistribution, printing money is inflationary and stimulative.
296
Inevitably, the central bank prints new money out of thin air and uses it to buy financial assets and government bonds.
297
It happened in the United States during the Great Depression, and again in 2008 when the United States Central Bank,
298
the Federal Reserve, printed over $2 trillion.
299
Other central banks around the world that could printed a lot of money too.
300
By buying financial assets with this money, it helps drive up asset prices, which makes people more creditworthy.
301
However, this only helps those who own financial assets.
302
You see, the central bank can print money, but it can only buy financial assets.
303
The central government, on the other hand, can buy goods and services and put money in the hands of the people, but it can't print money.
304
So in order to stimulate the economy, the two must cooperate.
305
By buying government bonds, the central bank essentially lends money to the government,
306
allowing it to run a deficit and increase spending on goods and services through its stimulus programs and unemployment benefits.
307
This increases people's income as well as the government's debt.
308
However, it will lower the economy's total debt burden.
309
This is a very risky time.
310
Policymakers need to balance the four ways that debt burdens come down.
311
The deflationary ways need to balance with the inflationary ways in order to maintain stability.
312
If balanced correctly, there can be a beautiful deleveraging.
313
You see, a deleveraging can be ugly or it can be beautiful.
314
How can a deleveraging be beautiful?
315
Even though a deleveraging is a difficult situation, handling a difficult situation in the best possible way is beautiful.
316
A lot more beautiful than the debt -fueled, unbalanced excesses of the leveraging phase.
317
In a beautiful deleveraging, debts decline relative to income, real economic growth is positive, and inflation isn't a problem.
318
It is achieved by having the right balance.
319
The right balance requires a certain mix of cutting spending,
320
reducing debt, transferring wealth and printing money so that economic and social stability can be maintained.
321
People ask if printing money will raise inflation.
322
It won't if it offsets falling credit.
323
Remember, spending is what matters.
324
A dollar of spending paid for with money has the same
325
effect on price as a dollar of spending paid for with credit.
326
By printing money, the central bank can make up for the disappearance of credit with an increase in the amount of money.
327
In order to turn things around, the central bank needs to not only pump up income growth,
328
but get the rate of income growth higher than the rate of interest on the accumulated debt.
329
So what do I mean by that?
330
Basically, income needs to grow faster than debt grows.
331
For example, let's assume that a country going through a deleveraging has a debt -to -income ratio of 100%. That means
332
that the amount of debt it has is the same as the amount of income the entire country makes in a year.
333
Now think about the interest rate on that debt.
334
Let's say it's 2%.
335
If debt is growing at 2 % because of that interest rate, and income is only growing at around 1%,
336
you will never reduce the debt burden.
337
You need to print enough money to get the rate of income growth above the rate of interest.
338
However, printing money could easily be abused because it's so easy to do and people prefer it to the alternatives.
339
The key is to avoid printing too much money
340
and causing unacceptably high inflation the way Germany did during its deleveraging in the 1920s.
341
If policymakers achieve the right balance, a deleveraging isn't so dramatic.
342
Growth is slow, but debt burdens go down.
343
That's a beautiful deleveraging.
344
When incomes begin to rise, borrowers begin to appear more creditworthy.
345
And when borrowers appear more creditworthy, lenders begin to lend money again.
346
Debt burdens finally begin to fall.
347
Able to borrow money, people can spend more.
348
Eventually, the economy begins to grow again, leading to the reflation phase of the long -term debt cycle.
349
Though the deleveraging process can be horrible if handled badly, if handled well, it will eventually fix the problem.
350
It takes roughly a decade or more for debt burdens to fall and economic activity to get back to normal, hence the term lost decade.
351
In closing, of course, the economy is a little bit more complicated than this template suggests.
352
However, laying the short -term debt cycle on top of the long -term debt cycle,
353
and then laying both of them on top of the productivity growth line, gives a reasonably good template for seeing where we've been,
354
where we are now, and where we're probably headed.
355
So, in summary, there are three rules of thumb that I'd like you to take away from this.
356
First, don't have debt rise faster than income, because your debt burdens will eventually crush you.
357
Second, don't have income rise faster than productivity because you'll eventually become uncompetitive.
358
And third, do all that you can to raise your productivity, because in the long run, that's what matters most.
359
This is simple advice for you, and it's simple advice for policymakers.
360
You might be surprised, but most people, including most policymakers, don't pay enough attention to this.
361
This template has worked for me, and I hope it will work for you.
362
Thank you.
Download App
Everything you need to speak fluently
AI PronunciationScore every sentence
IPA PracticeMaster every sound
VocabularyBuild your word bank
Vocab GameLearn while playing
Same Channel
B21
Master What You Can Control
Daily ConversationWorking Adults
C11
Ray Dalio: Long Island University Commencement Speech
Daily ConversationUniversity Students
B24
My Advice to People in Their 40s and 50s
Daily ConversationWorking Adults
C143
Ray Dalio on the AI Bubble
Business EnglishUniversity StudentsWorking Adults
B15
Why You Should Create Your Own Principles
Business EnglishUniversity StudentsWorking Adults
B22
The Secret to My Success
Daily ConversationWorking Adults
B24
Principles for Success: “Embrace Reality and Deal With It” | Episode 2
Business EnglishUniversity StudentsWorking Adults
C14
Principles for Success: "The Call to Adventure" | Episode 1
Business EnglishUniversity StudentsWorking Adults
C123
How Japan Dealt With Their Debt Problem
IELTS PrepBusiness EnglishUniversity Students
C16
Ray Dalio Explains Money vs. Credit
Business EnglishUniversity StudentsWorking Adults
C14
The Tribute System: The new World Order
IELTS PrepTOEFL PrepBusiness English
C1Ray Dalio On The Holy Grail of Investing
Business EnglishUniversity StudentsWorking Adults
FOR YOU
Recommend Video
C12
322 sentences
How Money & Banking Work (& why they're broken today) - Lyn Alden
Daily ConversationUniversity StudentsWorking Adults
C11
40 sentences
The Engineering that Runs the Digital World 🛠️⚙️💻 How do CPUs Work?
Daily ConversationUniversity StudentsWorking Adults
B25
42 sentences
Derek Sivers' TED Talk 'How to Start a Movement'
Daily ConversationUniversity StudentsWorking Adults
C15
170 sentences
What Happens When Capitalism Doesn't Need Workers Anymore?
Daily ConversationUniversity StudentsWorking Adults
C11
39 sentences
Warren Buffett: How To Analyze a BALANCE SHEET
Daily ConversationUniversity StudentsWorking Adults
C18
48 sentences
Gift economy, commodity fetishism, and what we owe each other #capitalism #environment #philosophy
Daily ConversationUniversity StudentsWorking Adults
B22
12 sentences
The Formula For Economic Growth | Intellections
Daily ConversationUniversity StudentsWorking Adults
C12
532 sentences
Marxism vs libertarianism: The economic calculation problem
Daily ConversationUniversity StudentsWorking Adults
C13
246 sentences
$15 Trillion Money-Making Machine | How BlackRock Became Too Powerful to Ignore
Daily ConversationUniversity StudentsWorking Adults
C15
183 sentences
The Gig Economy is Full
Daily ConversationUniversity StudentsWorking Adults
B22
166 sentences
The 'Luxury Poverty' Trap, Explained
Daily ConversationUniversity StudentsWorking Adults
Vocabulary and speaking notes for this lesson
This speaking lesson is built on the video “How The Economic Machine Works by Ray Dalio”. The speaker keeps coming back to these words: debt, credit, income, spending, economy. This video has 272 sentences and 4415 words to shadow. The speech runs for 30:46. The speaker talks at a steady 143 words per minute, a comfortable pace for shadowing. 84% of the words are among the 3,000 most common in English; the rest is worth studying before you start.
Key vocabulary in this video
15 words from the video worth learning, with pronunciation and meaning:
| Word | Pronunciation | Meaning |
|---|---|---|
| transaction noun | /tɹænˈzækʃən/ | The act of conducting or carrying out (business, negotiations, plans). |
| burden noun | /ˈbɝdn̩/ | A heavy load. |
| borrow verb | /ˈbɑɹ.oʊ/ | To receive (something) from somebody temporarily, expecting to return it. |
| lender noun | /ˈlɛn.dɚ/ | One who lends, especially money; specifically, a bank or other entity that specializes in granting loans. |
| asset noun | /ˈæsɛt/ | A thing or quality that has value, especially one that generates cash flows. |
| borrowing noun | /ˈbɔrəwɪŋ/ | An instance of something being borrowed. |
| productivity noun | /ˌpɹɒdʌkˈtɪvəti/ | The state of being productive, fertile, or efficient. |
| repay verb | /ɹiˈpeɪ/ | Synonym of pay back in all senses. |
| earn verb | /ɝn/ | To gain (success, reward, recognition) through applied effort or work. |
| disappear verb | /dɪsəˈpɪɹ/ | To vanish. |
| inflation noun | /ɪnˈfleɪ.ʃən/ | An act, instance of, or state of expansion or increase in size, especially by injection of a gas or liquid. |
| recession noun | /ɹɪˈsɛʃn̩/ | The act or an instance of receding or withdrawing. |
| buyer noun | /ˈbaɪ.əɹ/ | A person who makes one or more purchases. |
| template noun | /ˈtɛm.plɪt/ | A physical object whose shape is used as a guide to make other objects. |
| thin adjective | /ˈθɪn/ | Having little thickness or extent from one surface to its opposite. |
Phrasal verbs you will hear
| Word | Pronunciation | Meaning |
|---|---|---|
| pay back verb | /peɪ bæk/ | To pay (a debt or the lender) so as to provide the entire amount of money owed. |
| go down verb | To descend; to move from a higher place to a lower one. | |
| come down verb | To descend, fall down, collapse. | |
| go up verb | To move upwards. | |
| pay down verb | To partially repay (a loan or, metonymically, the thing financed by it). | |
| pick up verb | To lift; to grasp and raise. | |
| add up verb | To take the sum of; to total. | |
| break out verb | To escape, especially forcefully or defiantly. |
Sentences worth repeating
Short, complete lines from the video that you can reuse in everyday conversation:
- Let's for a second imagine an economy without credit.
- Basically, anytime you borrow you create a cycle.?
- You're saying you promise to pay in the future.
- Let's go back to the bar.
- People are desperate for money and you remember who can print money?
Grammar in this video
The structures the speaker uses most, with the exact words from the video:
| Structure | In the video |
|---|---|
| Present perfect continuous have/has been + -ing — an action that started earlier and is still going on | what's been happening · have been rising · have been growing |
| Present perfect have/has + past participle — a past action that still matters now | has led · has helped · has worked |
| Passive voice be + past participle — the focus is on what happens, not who does it | are repeated · are driven · is created |
| Relative clauses who / which + clause — extra information about a person or thing | bank, which is · Those who are · credit, which can |
Pronunciation to watch
The speaker uses 42 contractions and reduced forms, such as don't, isn't, can't. Say them the short way, as you hear them.
- The “th” sounds: thin /ˈθɪn/, wealthy /ˈwɛl.θi/, worthy /ˈwɝ.ði/, withdraw /wɪðˈdɹɔ/, thumb /ˈθʌm/
- The “sh” and “zh” sounds: transaction /tɹænˈzækʃən/, inflation /ɪnˈfleɪ.ʃən/, recession /ɹɪˈsɛʃn̩/, essentially /ɪˈsɛnʃəli/, rush /ɹʌʃ/
- Long words — get the stress right: productivity /ˌpɹɒdʌkˈtɪvəti/, liability /laɪəˈbɪlɪti/, collateral /kəˈlætəɹəl/, essentially /ɪˈsɛnʃəli/, unemployment /ʌn.ɪmˈplɔɪ.mənt/
How to practise with this video
- Listen to the whole video once without speaking and note the words you do not know.
- Shadow it sentence by sentence at normal speed, repeating each one until your rhythm matches the speaker.
- Record yourself and compare with the original, paying attention to words like transaction, burden, borrow.
What is the Shadowing Technique?
Shadowing is a science-backed language learning technique originally developed for professional interpreter training and popularized by polyglot Dr. Alexander Arguelles. The method is simple but powerful: you listen to native English audio and immediately repeat it out loud — like a shadow following the speaker with just a 1–2 second delay. Unlike passive listening or grammar drills, shadowing forces your brain and mouth muscles to simultaneously process and reproduce real speech patterns. Research shows it significantly improves pronunciation accuracy, intonation, rhythm, connected speech, listening comprehension, and speaking fluency — making it one of the most effective methods for IELTS Speaking preparation and real-world English communication.