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Financial Turmoil in Europe and the United States: Essays Hardcover – February 7, 2012
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Soros is someone who has made his billions anticipating the reaction of markets to ordinary realities, pleasant and otherwiseso it’s well worth paying attention to his views on the world’s financial systems. Not for the faint of heart or the innumerate. For policy and financial wonks, a bracing read.”
The current financial crisis is explained concisely with eloquence. Understanding what is happening and what is to be done is reason enough to read Financial Turmoil. . . . Dr. Soros shows us once again in these essays that he is not only a competent trader. He is an admirable thinker, and an adept policy analyst. If we were all as good at political economy as he is there would be no financial bubblesand there would probably be less financial turmoil.”
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The articles are assembled into four sections, each written in the years 2008 through 2011 inclusively. The articles begin with the onset of the crash in 2008 and end addressing the Euro crisis as it unfolded through the end of 2011. Those in the first half of the book (roughly) cover the need to provide liquidity to the banking and finance sectors in the immediate aftermath of the 2008 crash. Soros was opposed to the form of Paulson's original TARP plan, which would have provided Paulson with a blank check to act as he pleased, and instead proposed an injection of liquidity in the form of equity into the banking and finance systems instead. Soros makes the case that this would have been more efficient than ridding the banks of "toxic assets".Read more ›
There are now plenty of books about the credit crisis but they mostly explain what happened without giving much of an indication of how to find a way out. As of this writing (Feb. 2012) we are still in the thick of it and Soros' articles are usefully light on apportioning blame (we already know who did it) with the majority of the text dedicated to finding realistic solutions.
He sees the root of the problem in assets that were previously seen as riskless, but which are now, on the contrary, perceived as full of risk or maybe even worthless (e.g. AAA Sub Prime or Greek government bonds) and he goes directly to the point in suggesting that banks should keep their non-performing assets (it was their mistake after all) and receive large equity injections to keep them afloat and in the business of lending.
He accepts that this would be costly and he also sees a very important role for government in a) stopping the inflation of bubbles by controlling leverage and insisting on transparency b) banning outright credit default swaps that he sees as only serving to allow the completely dangerous unlimited shorting of bonds.
The sovereign debt/ Euro crisis is presented as needing serious and effective central financial control in the form of a European Treasury with the right to tax and control spending, although he recognizes the many political hurdles that need to be crossed to reach the finishing line of a safe Euro and responsible government budgets.Read more ›
He cites construction flaws in EU governance including no common treasury and banking system weakness. He says the EU not political (Is the EU tending towards a political union?)
It needs an exit strategy for those not meeting requirements. It seems likely that there would be no members left. He shows that with Greece borrowing at 3%, they are not getting the purported benefits of the union. Germany has changed policy from promotion of the EU to reluctance to use deep pockets for rescue packages. He says that Germany must defend the euro. He proposes three steps to solve the current crisis:
1.a new treaty
3.lower discount rate
A long term solution is more complicated involving a new treaty, EFSF assumption of Greek debt and guarantee of the banking system, ECB control of banks, control of risk and discount rate. Soros advocates delaying bank recapitalization until the current debt crisis is over. However, he wants Germany to guarantee the recapitalization process.
My impression of his economic idea of reflexivity is that it is a good refutation of standard equilibrium theory of market supply and demand rather than a useful algorithm for anyone but Soros. He believes CDOs have destructive effect on markets, although he seems to be one of few who understand them well enough to profit. He derides TARP as an effort to inflate away debt. Suggestions for reform in the USA include liquidation of GSEs Fannie Mae and Freddy Mac. We need enhanced competition not QE. His Inconsistent politics shows well founded contempt for past actions combined with a surprising expectation of better governance in the future. He deplores peace meal social engineering and misalignment of risks.
Most Recent Customer Reviews
Boring. Did I even finish it? Little to be learned from this.Published 11 months ago by David the book lover.
While the book has a lot of the same (same as every other book on the subject matter), it does have a solid introductory explanation to the limitations of the Maastricht treaty and... Read morePublished 15 months ago by Derek Zweig
Not easy to understand one of the best traders in the world. Book may be wearisome for you if you read it with the hope to make money from itPublished 23 months ago by bmvdfunddotcom
George Soros is an excellent writer. Easy to understand and shares worthwhile information. Well worth the time and money invested in the book.Published on August 2, 2013 by Gladys Ota
Soros desire to change policy is evident and the book suffers as its uninterested in communicating to the lay personPublished on July 15, 2013 by EB
Great Essays and a play by play of the EU crisis. Being a market participant, when you read his views in summation after major events and even while it still is occurring. Read morePublished on May 25, 2013 by Precog1982
I must learn more about finances. This is one way, but the hard way. George Soros writes interestingly, but if you are not up to date on financial matters, you may not get too... Read morePublished on February 15, 2013 by Alfred F. Baroody
I haven't read this yet; I was a bit disappointed when it came. I have a lot of respect for George Soros, so will get around to it eventually.Published on January 4, 2013 by PaddyVA
This collection had some great ideas many of which were repeated over and over in this collection of essays. Read morePublished on December 16, 2012 by Amazon Customer