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The New Paradigm for Financial Markets: The Credit Crash of 2008 and What It Means | 
 enlarge | Author: George Soros
Publisher: PublicAffairs
Category: Book
List Price: $22.95
Buy New: $9.99
You Save: $12.96 (56%)
New (41) Used (8) from $9.99
Avg. Customer Rating:  26 reviews
Sales Rank: 179
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
Availability: Usually ships in 1-2 business days
Shipping: Expedited shipping available
Condition: good condition
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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 21 more reviews...
 Excellent insights July 2, 2008
George soros brings in an unbiased perspective of impact of current events in capital markets and shifting paradigms of dominance from US to other countries A must read for global citizens
 Compelling, But Massive Fraud Is At Work Here As Well June 30, 2008
1 out of 2 found this review helpful
Soros, the master manipulator, takes the reader on a journey through market machinations that have landed us in our current predicament, himself no doubt a shrewd but willing participant in the wild ride. However, he fails to give sufficient weight to the outright fraud that has riddled the mortgage market over the last five years. Every single excess in the financial markets over the last 30 years can be traced to corruption, fraud and outright theft. Our current meltdown? Lies on the mortgage applications, lies on the financial statements, lies on the appraisals, lies and misrepresentations in the rating agencies, etc. etc.
 The New Prardigm for Financial Markets: The Credit Crash of 2008 and What It Means June 28, 2008
0 out of 2 found this review helpful
I was surprised how poor a writer Mr. Soros is. He should have had someone ghost write it for him His concepts were not fully developed in an understandable way. The conclusion I came to is that his success comes more from his "back pains" than in definalble concepts.
 Cliff Notes on Soros June 20, 2008
1 out of 1 found this review helpful
This 208 page book might be thought of as Cliff Notes for his previous 367 page book, The Alchemy of Finance, and will appeal to the same audience. During the 21 years between the books, Soros has mellowed somewhat and now describes his extreme Popperian position as radical falsification. I think he fears being called a skeptic. We know what happened to Socrates.
Soros continues to refine and advocate his philosophy of Reflexivity. For this book Soros acknowledges the editorial help from philosopher Colin McGinn. A career in academic philosophy begins with critical appraisal of prior work, followed by the creation of a new paradigm with a unique language and definitions. The philosophic basis for his market insights deserves its own book which might be called The Epistemological Roots of Reflexivity.
Soros defines Reflexivity as a fuzzy connection between knowledge and reality, belief and action, individual action and group behavior. We perceive reality within a context of prior knowledge. Our knowledge leads to actions which influence reality and produce new knowledge which leads to new actions. In engineering this is called a feedback loop and when the feedback gain is positive it produces an unstable system. In financial markets a positive feedback loop produces increased volatility, a boom and a bust.
Reflexivity is not unique to finance and appears in many walks of life including warfare and medicine. In warfare an officer makes decisions based on incomplete and perhaps false information, knowing that any action will change reality and demand new knowledge, decisions and actions. In medicine there is an unresolved problem of patient informed consent. The physician explains the diagnosis and treatment to the patient. The patient relates this new knowledge to his reality, hopes and fears, perhaps missing some important nuances and facts. The patient's imperfect knowledge impacts a series of choices as additional information and treatment are provided by the physician.
Soros dislikes the concepts of market equilibrium and probably does not support the strong and the weak form of the Efficient Market Hypothesis. His world view is more like the recursive loops described by philosopher Douglas R. Hofstadter.
Soros ends his book with an entry dated March 23, 2008. The financial markets continue to unravel. He admits that his Foundation portfolio has a slight year-to-date loss. Although he discusses oil, housing, currency, Europe and Asia, he omits other commodities and countries. Perhaps Soros has a unique problem with Reflexivity. Soros has such world fame that any prognostication will surely affect financial markets.
Difficult Reading, but Worth It! June 16, 2008
2 out of 3 found this review helpful
The "bad news" about George Soros is that he wants to be known as a philosopher, and fills "The New Paradigm for Financial Markets" with arcane language in that pursuit. The "good news" is that the book is worth plowing through.
Soros opens with "This is the worst crisis since the Great Depression," and goes on to explore its origins and implications. Soros sees the housing bubble as not merely another bubble bursting, but also the end of a "super-bubble" that has covered the last 25 years or so. This super-bubble is caused by a prevailing credit expansion, accompanied by the Fed bailing out investors one crisis after another (creating a moral hazard), along with an increasingly laissez-faire market environment. Globalization further encouraged the super-bubble as the U.S. (via IMF and World Bank positions) forced developing nations to adhere to cyclical policies while bending the rules for itself - thus creating a higher-yielding haven in the U.S. for investors in those nations. Reagan-era deficits also served as a source of credit expansion. Still another was the new financial instruments and greater use of leverage by banks and hedge funds.
The housing bubble had its origins in the late 2000 bursting of the Internet bubble, followed by 9/11. The Federal funds rate went from 6.5% to 1% (7/03); for 31 consecutive months the base short-term rate was negative. The bubble was also fueled by new vehicles to keep positions off balance sheets and shift risks to eg. pension and mutual funds. Meanwhile, rising home values boosted asset values on banks' balance sheets, prompting them to loan more. Prices rose still further, etc., etc.
Half of GDP growth in the first half of 2005 was housing related (includes indirect effect of spending cash from refinanced mortgages). Forty percent of homes purchased in 2005 were investments or 2nd homes. Since income growth during that period was anemic, loans required increasingly strained ingenuity to qualify those involved. Complex mortgage-protection deals reached $43 trillion (1.5% margin requirements), vs. a U.S. stock market capitalization of $18.5 trillion, U.S. treasuries only $4.5 trillion; obviously the "protection" was superficial at best. Collapse of the housing bubble is now leading to an increasingly unwillingness of other nations to continue holding dollars.
Why the repetitive bubbles? Soros contends that financial markets are not perfect - in fact, they are usually wrong. The problems began in the '70s when defense conglomerates saw their earnings falling with the end of the Vietnam War, so they used their then still high-multiples to acquire other firms, creating the ILLUSION of sustainable earnings growth. Eventually the acquisitions required to sustain the growth were too large to pass even a limited perception of reality; at the same time, accounting shenanigans began coming to light, a recession loomed, and it all collapsed. Basically the same thing with REITs - accompanied by ever relaxation of lending and regulatory standards, and expansion of loan-to-value ratios, LTCM, international markets (Russian Ruble, Mexican Peso, etc.).
Soros confuses his discourse with an extended discussion of "reflexivity" - a term he never well defines, though I sense he means the trend-following habits of speculators. Alternatively, the "bigger fool" theory is a much simpler and similar explanation, though not as inclusive.
A brief review of Soros' investments over the years suggests he has made billions investing on the front-end of over-shooting bubbles, and shorting their similarly over-reacting down-sides.
Where do we go from here? Soros believes that credit conditions have been relaxed so far it is difficult to see how they could continue as such. (However, he also admits being wrong in the past, and also sees printing more money as an option. The latter, however, is somewhat inhibited by existing popular outcries against rising oil prices and other commodities - especially food.) He also believes regulatory authorities need to prohibit financing mechanisms that are beyond basic comprehension. The 2008 market will go below 2007's low. About 40% of subprime loans and ARMs will default over the next 2+ years - housing prices will need to decline over 20% to clear the market, and government intervention is essential. Unfortunately, Soros does not comment on what would happen if Asian and Arab states stop holding dollars.
What's Soros doing now? He's short on U.S. and European stocks, U.S. ten-year government bonds, and the dollar; long on Chinese, Indian and Gulf States stocks (even though he sees them as overvalued) and non-US currencies (China's in particular seems guaranteed to rise).
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