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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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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. And some of us other intelligent adults appreciate his thoughts and theories.
And some of us even come here to get info on the book itself. And now that I've vented a little of my own outrage....
It was quite a surprise to me actually to get a sense of economic theory and that the so-called experts for ages have not considered the human effect any more than they have. Astonishing. No surprise it would come from someone who has decades of very successful real world experience rather than academia/science labs.