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The Crash of 2008 and What it Means: The New Paradigm for Financial Markets Paperback – March 30, 2009
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Top Customer Reviews
Most of what Soros added is beyond my level of comprehension, possibly explaining why he's rich and I'm not. One point, however, did come out quite clear. Soros points out that buying CDS contracts is the same as going short on those same bonds, while carrying limited risk and unlimited potential profit potential. (Shorting the bonds instead offers unlimited risk and limited profit potential.) This encourages speculating on the short side, and (per Soros) exerts a downward pressure on the underlying bonds.
Soros goes on to claim that Lehman Brothers, AIG, etc. were destroyed by bear raids via shorting stocks and buying CDS. (I see a simpler explanation for AIG's fall - selling too many CDS on different bonds, thinking they would disperse risk and forgetting that they were all highly positively correlated.)
Unlimited shorting of stocks was made possible by abolition of the uptick rule (allowed short sales only when prices were rising), and facilitated by the CDS market.
Soros' bottom line is that the 2008 market crash proves that the efficient-market hypothesis (seeks and finds equilibrium) is now officially dead, giving Soros another opportunity to push his theory of reflexivity (better explained in Wikipedia). He then goes on to offer predictions on where Russia, China, India, etc. are headed in the near future.
Finally, Soros also claims that Obama is facing problems 2X those faced by FDR. The total outstanding credit was 160% GDP in 1929, 260% in 1932 (decline in GDP, accumulation of debt). By comparison, we entered the 2008 crash at 365%, and Soros believes this will rise to about 500% of GDP.
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.Read more ›
Soros' central claim is that traditional economic theory holds that competitive markets tend toward equilibrium, and this is false. "The belief that markets tend toward equilibrium," he writes, "...is no better than Marxist dogma. Both ideologies cloak themselves in scientific guise in order to make themselves more acceptable, but the theories they invoke do not stand up to the test of reality." (p. 75) Soros calls this faulty approach "market fundamentalism."
I learned economic theory when I was a graduate student at Harvard. The central model I learned was called "general equilibrium (GE) theory," initiated by Walras in the late nineteenth century, and perfected in the mid-twentieth century by Debreu, Arrow, Hurwicz, Hahn, McKenzie and others. GE theory is the basic, underlying model in all of contemporary economic theory. It is highly abstract, but by carefully specifying the conditions under which market equilibrium obtains, it provides an analytical basis for understanding not only markets, but also market failures (cases where competitive markets cannot exist, or lead to socially inefficient outcomes).Read more ›
Most Recent Customer Reviews
Soros is a fascinating man and this book is more than worth the money if you would like to understand the financial crisis of 2008. I learned a great deal.Published 21 months ago by John William Davis
This book was incredibly interesting and gives you a new viewpoint beyond supply and demand. He states well how perfect information makes it difficult for markets to function and... Read morePublished on September 15, 2013 by Drew
Can we observe the market objectively, being participants as well? What is reflexivity, and why is it a must to understand it? Read morePublished on January 12, 2013 by investingbythebooks
Soros rehashes his theory of reflexivity, but in a more comprehensible manner in trying to explain what went on in the lead-up to 2008. Read morePublished on January 12, 2013 by Michael L. Sternad
If you never read a book from Soros, you should! The idea of reflexivity is very fascinating and seeing how this great mind thinks is also.Published on November 7, 2012 by G.P.
I came to this book with no animus toward George Soros. His status as bête noire of the Right, blamed for pushing America toward socialism, is mostly lost on me. Read morePublished on August 28, 2012 by Jean E. Pouliot
I had to read this book for school and it was painful. The second half got better but unless you're an economist I would avoid at all costs!Published on July 16, 2012 by Kristin M Shaffer
Written from the viewpoint of someone who makes money from distressed markets. In my opinion, not anywhere near the insight provided by Thomas Sowell in the Housing Boom and... Read morePublished on March 11, 2012 by John Whitten
As my title suggests, this review is much more about George Soros's view of the world, and specifically financial markets, than anything else. Read morePublished on August 1, 2011 by Ashish Singal