The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means | 
 enlarge | Author: George Soros
Publisher: PublicAffairs
Category: Book
List Price: $22.95
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Rating:  64 reviews
Sales Rank: 1457
Media: Hardcover
Pages: 208
Number Of Items: 1
Shipping Weight (lbs): 0.7
Dimensions (in): 7.6 x 5.4 x 0.8
ISBN: 1586486837
Dewey Decimal Number: 332.0973
EAN: 9781586486839
Publication Date: May 5, 2008
Availability: Usually ships in 1-2 business days
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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 59 more reviews...
 Hmmm... April 5, 2008
Me (United States)
165 out of 213 found this review helpful
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" because the way those contracts were written practically assures a bust...prepayment penalties that are really refinance penalties, interest rates dependent on LIBOR (London Inter-Bank Offerring Rate) instead of US rates, etc.
In short, if the FED can't use its tools to avoid the foreclosures, it will cause a depression in the housing market. In fact, the housing market is already in depression by definition. That is, interest rate changes cannot be used to avoid the harm...therefore, severe price deflation (i.e., "depression") and job losses result. Since 78% of the US economy is housing related (e.g., furniture sales, appliance sales, insurance, lawn care, carpeting, mortgage banking, etc.) the situation is clearly serious.
Now...all of this has a deeper level. There is a larger case of over-leveraging that is starting to unwind right as you read this review: The National Debt. Yes, deficits *do* matter. They are obligated taxes...with interest. The payment of the trillion dollar national debt will be painful and require a type of tax that noone voted for: Inflation. Why? Well, how is one going to get people to vote for a tax to pay off the debt when they were already voting against the taxes they already had? The only solution is an involuntary, hidden tax: Inflation. Over time, Inflation makes debts look smaller and more managable. The hidden inflation tax is *already* here because of the current interest rate cuts and will grow to a size people haven't yet imagined. Buy gold, oil, or any other commodity. This will be about a ten year cycle, overall, so inflation has a long time to run.
Since inflation has already started, it will be difficult to stop. Like a fire, it will continue to burn until susceptible assets are destroyed. The remaining assets will be helped by it though.
Buffett warned of this years ago. He recently said that more and more deficit spending and rate cuts would eventually make the dollar "worthless" (a statement he later "corrected" under some pressure to "worth less".) Anyway, the situation is serious. Don't trust any particular review of the book...not even this one. Look at the book yourself and make your OWN judgement regarding Soros' acumen.
a powerful deconstruction of the tools of economics April 7, 2008
Eric Paradis (Canada)
31 out of 40 found this review helpful
A book review from my blog:
George Soros has written a new book called The New Paradigm for Financial Markets:
The Credit Crash of 2008 and What It Means. It is currently available as an E-Book, but
will be published on paper in May, 2008. It is his best and most informative book in
terms of information and content. It avoids the difficulties inherit in the Alchemy of
Finance with regards to his obscure syntax- there is none of that. It avoids the political
criticism that you find in his books on Globalization and the Open Society initiatives.
The book is useful for finding blindspots inherent in the economic system. For traders,
he is criticizing the nature of Credit Default Swaps in that there really is no absolute
guarantee that someone will pay you in the event of a default. He argues this because
the margins are so low that systematic risk and exogenous risks can culminate into a
disaster situation. This is similar to the one we have been having, but worse. This is why
Soros rushed out his book early before printing it, because he is sick with worry about
the whole credit mess and suggests that it will be the worst economic event in his life
(which is scary given that he is almost 80, and has survived World War II).
A recent newspaper article in the Toronto Star on Sunday, April 13th noted that Soros
funds had managed to return 32% in 2007. A very significant return. We understand he
was short US stocks and US Financials and long emerging Markets. It doesnt sound like
he used CDS to short subprime as he apparently was unfamiliar with their use before
the Credit Crisis.
Remember that Soros did, in 1998, write the Crisis of Global Capitalism, a critique of
the Financial Markets, which if you acted on the suggestion and went ahead shorting
the Markets would have caused almost 3 years of serious pain. What it led to was a
break off between Stanley Druckenmiller and Soros in 2000.
Beyond all this issue with the current financial situation, the deepest and most
provocative argument by Soros is from his criticism of classical economics.
A simple explanation is his criticism of supply and demand curves.
Have you ever physically seen a supply or demand curve of copper, potash, rice, or RIM
stock? It doesnt exist. Unfortunately, economists see this as a given, which it is not.
The price of something in a stock or commodity is a picture of relationships, but it does
not rely on a predetermined supply and demand curve.
Soros takes this particular argument very far. It is worth paying attention to, because he
uses it to explain further exactly what reflexivity is (Reflexivity is Soros theory about
how humans can affect the outcome of things). Soros has always been somewhat vague
about reflexivity, but it is clear as day in this new book. For that reason, you should read
the book. Soros new book is probably going to be one of the top investment books of
2008.
briliant October 4, 2008
Syco Analyst (HK)
3 out of 3 found this review helpful
I agree with Sosors predictions on market crisis...i particularly enjoyed the second half of the book which focussed more on the market and his theory on how the crisis would unfold...if u r not interested in philosophy or mathematics, just open the book in the middle and read the rest to the end! Soros is still a market genius.
Soros at his best October 2, 2008
Franco Arda (Switzerland)
7 out of 9 found this review helpful
Don't buy this book if you're looking for an in depth analysis of the credit burst. There are many other books out there with depth. Buy this book if you love (or curios about) what one, if not the GREATEST MIND IN THE MARKETS, thinks currently (well, with a bit of delay).
ON REFLEXIVITY; Soros finally explains his philosophy of reflexivity clearly. He 'failed' in his book Alchemy of Finance and left millions of readers like me puzzled. That's already worth the price of the book. He offers his philosophy as an alternative for the market equilibrium theory. Hence the titel of the book. A new pardigm.
THE SUPER BUBBLE HYPOTHESIS; short and to the point, Soros explains his hypothesis. he sees two bubbles: the super bubble and the real estate bubble. get ready, it's gonna be nasty.
Soros shows some major mistakes been done in the financial system, the consequences, and potential solutions. Simply Soros at his best.
Leverage, Complex Products, Massive Deception October 15, 2008
Andre Morgan
2 out of 2 found this review helpful
Legendary investor George Soros explains a wide variety of market upheavals over several decades. Although this book was published in May, he identified the problems that would cause a liquidity crunch and capital shortfalls for Wall Street's former investment banks, now part of the banking system. He identifies too much leverage contributing to the housing bubble and lack of regulation as key problems. I am a quant trader and also recommend Janet Tavakoli's new book, Structured Finance and Collateralized Debt Obligations: New Developments in Cash and Synthetic Securitization (Wiley Finance)(for market professionals) which covers the flawed evolution and lack of regulation of leveraged products including asset backed (home equity) CDO's, SIVs, and credit derivatives. Short hedge funds made billions. The securities were overvalued partly due to market euphoria, as Soros theorizes (reflexivity), but also due to some dealing from the bottom of the deck by investment banks putting together packages of assets, which led to lack of trust about the asset values. Soros could have made a stronger case for more effective regulation, but he makes his strongest case for government intervention. It has been done in the past, and it seems much more is needed this time due to the massive scale of the problem.
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