The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means

by George Soros

Book Overview

In the midst of one of the most serious financial upheavals since the Great Depression, George Soros, the legendary financier and philanthropist, writes about the origins of the crisis and proposes a... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 1586486837
• ISBN13: 9781586486839
• Release Date: May 2008
• Publisher: PublicAffairs
• Length: 162 Pages
• Weight: 0.85 lbs.
• Dimensions: 0.8" x 5.8" x 8.8"

Customer Reviews

Detailed account of the Crash

Mr. Soros wrote a detailed description of the crash of 2008. His expertise in making money off changes in currency truly allowed him to foresee this horrendous crash. Interestingly, he present a new theory (Reflexivity) in which he argues the actions a market take undermines the market's ability to truly understand the situation. He also strongly argues that market fundamentalist that believe markets should be un-regulated are totally wrong, and the market do not want equilibrium or equality of information. The support for this claim is cited in a detailed history of actions for several of the past US crashes. In all the first 9 chapters are a very interesting and in some cases riveting account of the crash and his theories. The last chapters give his recommendation of what the world financial authorities should do to rectify the crash, and he did this for good reason given he was requested a congressional meeting to discuss the crash with other hedge fund managers. Interesting book I would recommend it. Dr. Brian Glassman Ph.D in Innovation Management Purdue University

About the BOOK, not Soros' politics

Actually, I read the earlier version, and found the book helpful and illuminating. I only came here to look into the more recent version and get sense of what he has added. And I find several inaccurate reviews posted by people who apparently glanced at the book only to have a hint enough to write something nasty here. Sunshine T, the conversation you mention was a reprinted piece of an NYTimes Mag article (written in first person) by Ron Suskind, NOT a conversation Soros had with Karl Rove. It was introduced and opened with a colon. It was a fully indented block of text. Have you been reading English long enough to know that these things mean something is being quoted? Then, next paragraph, Soros himself said "...the aide, presumably Karl Rove..." Furthermore, Soros points out repeatedly that he is presenting a theory he expects others to investigate. If you want to trash someone's book, READ IT. Another one-star reviewer, Marius R. completely MISSES THE PRIMARY POINT of the whole book, which is that previous market theories have consistently overlooked the effect humans and our psyches have on the economy. Soros' MAIN POINT is that humans and their psyches are a HUGE factor in the economy. You got it 180 degrees wrong, M.R. Did you only skim the book also, or is this conscious disinformation? Yet another, Booklover, didn't review the book either. Did you read it? Your claim as to the "underlying premise" of this book is NOT in this book. That may be Soros' intentions (I doubt it) but it's not in the book. This is a book review area. Please take your political outrage somewhere else, you guys. Soros has EARNED the right to have his economic theories analyzed and discussed by intelligent adults. And some of us other intelligent adults appreciate his thoughts and theories. And some of us even come here to get info on the book itself. And now that I've vented a little of my own outrage.... It was quite a surprise to me actually to get a sense of economic theory and that the so-called experts for ages have not considered the human effect any more than they have. Astonishing. No surprise it would come from someone who has decades of very successful real world experience rather than academia/science labs.

The New Paradigm for Financial Markets

Book Review submitted by: Stephen J. Hage, SteveH9697@aol.com Books about economics and finance, for most people, are as appealing as having a root canal done without anesthesia. This is not one of those books. The subtitle: The Credit Crisis of 2008 And What it Means succinctly explains what the book is about. And, surprisingly, it's in small format and has only 162 pages including acknowledgements. It's impossible today to turn on the news without hearing something about the credit crisis and there's no shortage of individuals willing to tell anyone who'll listen what caused it and who's responsible. The problem is, there are lots of conflicting opinions and it's, at best, difficult to determine who actually knows. To be sure, almost everyone has been touched in some way by the credit crisis and its impact will ripple through the global economy for years. In attempting to understand it, I believe it's important to choose carefully among those willing to offer an explanation. I chose George Soros because: The Quantum Fund he co founded with Jim Rogers in 1970 returned 42.6% per year for 10 years and, in 2007 returned almost 32% netting Soros $2.9 billion. Soros is a spectacularly successful hedge fund manager with an estimated current net worth of around $9 billion and ranked by Forbes as the 99th richest person in the world. Additionally he's an economist and philosopher. Nothing succeeds like success. Yowza! There's nothing dry or tweedy about what he has to say. Soros disagrees with economists who believe economics is or ever can be a scientific pursuit like physics, chemistry or mathematics. And even though there are courses in mathematical economics and entire industries devoted to it Soros believes the "Quants" are wrong. The central theme of his conceptual framework is, economics is a social science. If you really want to understand it, you must focus on what people do and why. The prime driver of economic dynamics is not money, or mathematics, or science, or technology it is rather what he calls Reflexivity which, more than anything else, is driven by human nature. Current economic theory holds that markets naturally tend toward equilibrium. Soros believes that conviction is not only wrong but one of the central reasons we find ourselves in such dire economic straits. On the housing bubble he offers this: "Taken on its own the United States housing bubble faithfully followed the course prescribed for it by my boom-bust model. There was a prevailing trend--ever more aggressive relaxation of lending standards and expansion of loan-to-value ratios--and it was supported by a prevailing misconception that the value of the collateral was not affected by the willingness to lend. That is the most common misconception that has fueled bubbles in the past, particularly in the real estate area. What is amazing is that the lesson has still not been learned." (Italics mine) Soros credits Karl Popper with the underpinnings o

Hmmm...

About the previous review, I find it interesting that you say the subprime issue is: "a situation that has perplexed all economists" and then you proceed to give your own solution at the end of what you wrote. Are you saying that you alone have the solution to something that has "perplexed all economists?" Anyway, not all economists are "perplexed" by the issue...they merely speak in technical terms so most people don't understand the gravity of what they are saying. They have known of this issue for a long time. In fact, Bernanke wrote a book on what he is about to do with interest rates. It is called "Inflation Targeting." He will seek to maintain a certain "core inflation rate." Note that *food* and *fuel* are NOT included in the "core rate." They are part of what he is calling "headline inflation." The FED will not react to changes in food and fuel (headline) inflation directly...only after they have affected the "core inflation rate." This lag in control will likely create oscillations in the system. Great for stock traders, but tough for the average person with a life. The FED will have tough times politically. Further, you say that it has "instilled fear in anybody who wasn't vacationing in the space station in the last year." Perhaps you have forgotten that Soros fought hard during the last election (longer than a year ago) for a change in these very policies. Buffett spoke out against derivatives long ago. Jim Rogers (co-founder of Quantum Fund with Soros) wrote about the commodities boom in 2004 in his book "Hot Commodities." Implicit in the view that commodities will boom is the view that there will be hyper-inflation, since everything is made of commodities and the hyper-inflated prices will be passed along or the companies will go out of business. Greenspan also alluded to hyper-inflation in his book. Anyway, Soros is an expert in this field and has been quite prescient on this topic for years. Following advice such as his (as well as that of Rodgers, Buffett, Graham, and other notables) has permitted me to position my portfolio defensively for these times. I started years ago (hence my knowledge of what was known more than a year ago.) I sold my home at the peak of housing and bought a home in an area that did not have the same unrealistic home inflation. The remaining cashed-out home equity was invested in other defensive things. My home value has not fallen nearly as much as it would have had I kept my other home, thanks to Mr. Soros' foresight. I look forward to what he has to say about the coming financial winds so I can plot my next step in capital preservation/expansion. Don't judge the book based on theoretical criticisms. Look at the reality of the track record of the man himself. Also, consider the fundamental fact that most "bubbles" occur because of over leveraging and greed. Years ago there was the LBO bust and today, we have a bust from over leveraged banks and improperly leveraged homeowners. I say "improperly" beca