Ray Dalios' video explains the summary of his paper in a more visual way. In my view this should be part of every undergraduate course and emphasizes again the importance of debt. It also points out where we are in the long term debt cycle. In addition, “Beautiful” deleveraging hmm...
Finally, a point which is missing and not easy to get as first glance is the influence of collateral on the amount of debt and on asset prices. Collateral allows optimistic agents to leverage even further and therefore optimists have a higher impact on prices, especially house prices (see Geanakoplos papers on the leverage cycle, or my own paper on “should the FED regulate the leverage cycle”).
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