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The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means | 
| Author: George Soros
Publisher: PublicAffairs
Category: Book
List Price: $22.95
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Avg. Customer Rating:  38 reviews
Sales Rank: 878
Media: Hardcover
Number Of Items: 1
Pages: 208
Shipping Weight (lbs): 0.7
Dimensions (in): 7.7 x 5.2 x 0.8
ISBN: 1586486837
Dewey Decimal Number: 332.0973
EAN: 9781586486839
ASIN: 1586486837
Publication Date: May 5, 2008
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Condition: Great condition, just arrived from publisher
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Product Description
In the midst of the most serious financial upheaval since the Great Depression, legendary financier George Soros explores the origins of the crisis and its implications for the future. Soros, whose breadth of experience in financial markets is unrivaled, places the current crisis in the context of decades of study of how individuals and institutions handle the boom and bust cycles that now dominate global economic activity. “This is the worst financial crisis since the 1930s,” writes Soros in characterizing the scale of financial distress spreading across Wall Street and other financial centers around the world. In a concise essay that combines practical insight with philosophical depth, Soros makes an invaluable contribution to our understanding of the great credit crisis and its implications for our nation and the world.
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| Customer Reviews: Read 33 more reviews...
 Practical insights and new rules from George Soros August 14, 2008
Legendary financier George Soros is worried. The financial markets face the worst credit crisis since the Depression and their existing paradigm needs to be replaced. The new paradigm Soros recommends is based on what he calls the "theory of reflexivity." This book-length essay provides a crash course in the billionaire investor's philosophy and view of financial markets, the origins and consequences of the current credit crunch, the boom-bust model and the behavior of market participants. Soros intersperses his market analysis with enough personal details from his early life and career to keep the book lively. He is also quite vocal in his political beliefs; Democrats will probably appreciate the case he makes against President George W. Bush's administration and its policies. One weakness of the book, other than its repetitiveness as Soros explains his theory, is that he relies heavily on technical and financial jargon, which makes it tough to penetrate and may prove a barrier to some readers. Ironically, he seems to be fully aware of this shortcoming when he writes that readers may find one of his particularly theoretical chapters to be "somewhat repetitive and hard-going." Nevertheless, his warm personal voice and the depth of his financial experience, which spans more than half a decade, is hard to match. Thus, getAbstract notes that this book has much to offer executives, investors, and students of financial markets and theory. (As is true of every Abstract, the following views are those of the author and not of getAbstract.)
 Amateur philosophy by a speculator whose success has gone to his head August 10, 2008
The core idea of this book is a concept that Soros calls "reflexivity". He describes this concept as "a two way connection between participants' thinking and the situation in which they participate." Reflexivity in the financial markets, according to Soros, leads to "an element of uncertainty in the course of events that is absent from natural phenomena."
What Soros fails to explain is why the uncertainties caused by reflexivity are special and need to be treated differently from other uncertainties in the financial markets (and in life) that we take for granted. No one believes that financial markets behave deterministically. Much of the activitiy in the financial world aims at measuring and allocating risks of all sorts, including those that arise from behavior that is widely acknowledged as psychologically driven.
The New Paradigm for Financial Markets (Soros)
Thus, despite claiming a philosophical advance that he implies is on a par with those of Karl Popper and Emmanuel Kant, Soros has a hard time offering up any suggestions for improvement upon current approaches to risk management or regulation. He does offer some specific policy prescriptions, but most of these are narrow proposals for dealing with the 2008 credit crisis, and none are particularly original. For the most part, he resorts to vague suggestions such as that credit creation must be regulated more strictly (but how, exactly?).
Amusingly, at the end of a book whose core thesis is that there are intractable uncertainties in financial markets, Soros provides a journal of his investment decisions at the beginning of 2008 beginning which he starts by making, with great confidence, specific predictions about market direction (so much for reflexivity??). In last journal entry, he goes on the record as having lost money on his bets.
The bottom line: having been a successful speculator some years ago does not make one qualified to pontificate on the nature of the human condition of the limitations of knowledge.
 No Holy Grail August 8, 2008
Having read all of the Soros books I would say this is less convoluted and less disappointing than most. If you are looking for concrete investment ideas prepare to be let down. Interesting discussion of markets and the current crisis in particular-as the title suggests Soros is bearish and not without good reason. Only time will tell if he got it right this time.
superbubble worry, but it is heuristic August 6, 2008
1 out of 2 found this review helpful
Soros' little book is a delightful read due to an exceptional sincerity and intellectual honesty. His youthful curiosity and seemingly consuming desire for philosophical debate is disarming and infectious but also a bit narcissistic, as student "bull sessions" tend to be. In fact, the two smiling photographs of him at the end of the book corroborate the aura of a person eager and happy for philosophical discourse and being entertained by and thoroughly enjoying a reciprocal and progressive discussion.
He admits trying to be a philosopher who worked out a new theory, reflexivity, that is to say humans engage in two functions: l. cognitive objective analysis and 2. manipulative and subjective actions designed to evoke change and personal benefits. The two functions interact, hence reflexivity.
Karl Popper was Soros' philosophical mentor at LSE, and Soros denies Popper's Unity of Method, i.e. the scientific method and the social scientific method are and should be the same. Soros denies this and rightly so. Though he mentions Hayek only once very briefly as being anti-communist, he seems unaware that Hayek had already exhaustively analyzed the need for an entirely different method for economic analysis and the social sciences. In fact, Hayek believes the attempt to mimic the method of the natural sciences in the social sciences, in particular in economics, has done substantial harm. Soros, who seems quite pre-occupied with outmatching Popper and limited to him, could have benefited from Hayek, Dilthey, Wittgenstein and many others who have already partially or fully worked through epistemologically what he is doing to Popper. But it's quite understandable that he wants to outmatch his professor. Lots of students have that impulse and lots of profs have experienced this pattern. It's proof that Soros retained a youthful disposition throughout his life.
Soros correctly denounces both the Enlightenment's objectivity and rationalism as well as the post-modern idiom which he ties to Bush and Karl Rove. Though being aware that ignorance determines far more than knowledge and rationality, he still believes that understanding reality should take precedence over manipulating it. For this was not done by Bush and cohorts, who hoodwinked the nation into the Iraq war, causing a precipitous decline in U.S. power and influence. Soros has it absolutely right here and shows the same honesty and objectivity he personally displayed when he characterizes his experience as a 14 year old Jewish youth in Budapest in '44 hiding under false identification as "exhilarating" and "high adventure," an admission that may cause some criticism.
Soros seems to overemphasize the impact ideas and philosophical notions have on politics. Politics is quite indifferent to ideas and philosophical analysis. Power and influence mediate and resolve issues in the political arena, not rational debate.
Too often, Soros assumes that having made what he calls "a killing" in the markets is proof of superior intellectual analysis relative to overall economic analysis outside the financial sector. This is a somewhat egotistical and a logical flaw, for too many who lost a fortune in the stock markets have, nevertheless, given brilliant and valid analyses of socio-economic events. His contrary-mindedness and, to be sure, many aspects of his theory of reflexivity, no doubt were crucial in making fortunes. But will he admit that this involves redistributing wealth from many smaller investors to the few and, thus, one can conclude that the heavy participation of tens of millions of Americans in the stock markets actually kept them from increasing the median family/individual net worth? It made them poorer than they would otherwise have been.
Criticizing both classical equilibrium analysis and the Rational Expectation School, Soros then ventures into a more detailed analysis of the background, causes and course of the current economic malaise. Credit expansion, the Japanese carrying trade, budget deficits, expanding leverage funds, etc. all interacted to create what he terms a "superbubble" of which the subprime mortgage fiasco is just a trigger. It all began with the recycling of the petrodollars in the late sixties and early seventies. He covers the banking crisis of the '80s, the international crisis of the '90s and, quite correctly, faults Greenspan for taking interest rates down to 1 percent between '01 to '04. In so doing, Greenspan caused the real estate bubble. It spread the risk, causing more risks to be assumed. Here Soros is at his best. He believes that risk in this period was passed on through newly fangled instruments and sophisticated formulae from those who knew it best to those who knew it far less. Regulators lost track of risk assessment and catastrophically abdicated their duties.
China will challenge the U.S. faster than is believed and thus, Soros asserts, again quite correctly, that the Project for a New American Century, which Bush and cohorts used extensively to guide policy, will prove to be highly ironic. Though he doesn't say so, he agrees with Kevin Phillips' conclusion that the financial industry was allowed to get too big. Finally, Soros affirms Barney Frank's solution for the subprime mess.
Unfortunately, Soros' analysis is limited to the financial markets and does not deal with lots of other factors that heavily determine and impinge on the U.S. economy. For that, the reader may want to consult my own assessment on why the U.S. needs an economic miracle by accessing "http://comparativegems.blogspot.com/" which provides an overall comparative historical evaluation of the U.S. economy which Soros does not deal with.
 Absolutely mindbreaking!! August 5, 2008
0 out of 2 found this review helpful
Soros goes where nobody has ever gone before, he actually proposes a new paradigm that contradicts actual economic theory common sense, which can be empirically proved on an everyday basis. This new paradigm, based on his theory of reflexivity, helped me understand better how markets tend to behave sometimes, and will surely help every reader in the same way. Definately recommended for everyone who is interested in the subject, from economic theory grad students, to hedge fund managers.
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