Customer Reviews: Financial Turmoil in Europe and the United States: Essays
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on February 4, 2012
Any review of this book would have to start with what this book is and what its intended audience is. This book is not an original text but instead consists of a compilation of articles written for the Financial Times, New York Review of Books and the Wall Street Journal as well as testimony in front of the U.S. Senates' Commerce Committee. The bulk of these articles, about 80% of the total text, come from the articles written for the Financial Times. As such, they are written, obviously, for the audience that reads this paper - those very knowledgeable regarding macroeconomics and international finance. The articles assume that readers already have a good knowledge regarding those fields (i.e., at least equal to an upper level undergraduate economics major's education but more like that akin to an MA or MBA in the field). Readers without such a background would not obtain much from these articles.

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". Firstly, because it would have been quicker to engage in and secondly it would have avoided the issue of attempting to value the toxic assets which were very difficult to value anyway. What he overlooks, however, is the fact that this would have probably required the U.S. to nationalize many banks (much like Sweden did during its banking crisis of the 1990s). In these essays, like those throughout most in the book, he very unfortunately ignores the political feasibility of what he proposed albeit his strategies are excellent solutions, at least from a purely academic perspective.

In the essays covering 2009 and 2010 he mostly concentrates on reforms needed to bring bubbles under control or, at least, to mitigate their size. Examples of reforms he proposes in these sections of the book include passing legislature to make CDOs more transparent and reducing the degree of financial leverage. Again, these are good ideas and can work towards the goal of reducing bubbles but in terms of political feasibility they do not seem very likely, unfortunately, to pass the legislatures in either the U.S. or most of the major industrial nations. Considering how important political feasibility is, it is an issue that should have been addressed.

In the last section of the book, covering 2011, he looks at the topical issue (at least topical as of the beginning of 2012) of the Euro and how to solve (or at least mitigate) the problem of the Euro's liquidity. His recommendation is the creation of a Treasury to back the Euro (primarily through bond issuance and bond guarantees) along with providing the European Central Bank with more authority to control monetary supply. He makes the argument well that these steps are the only ones that can prevent a depression in Europe (and possibly the rest of the world being transmitted through Europe). Very unfortunately, again, his essays ignore the political reality. Particularly German opposition to the creation of such institutional changes. In addition, he ignores to address the issue of how much monetary reserves can be made available through such institutions and whether or not they will be sufficient for the purpose. These are two issues that should have been addressed, both in terms of how to overcome them and what the probability would be of overcoming them.

In short, Soros' "solutions" are intellectually sound, at least in the modern (and mainstream) framework of current lines of macroeconomic and international financial thought. His "solutions" are, pretty much, the same as those coming out of most central bankers and academic economists mouth. Very unfortunately, his articles do not address the very important issues of political (in all cases) and economic feasibility (in terms of what he proposes for the Euro). How feasible are his proposals in terms of probability of actually being implemented due to political or economic restraints? What can be done for their successful enactment (i.e., how can the political economic constraints inherent in his proposals be overcome)? These essays needed to include serious and in-depth discussions of these issues. The absence of such discussions prevents this reviewer from granting this collection of essays a five star rating.
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on February 25, 2012
This excellent book is a collection of newspaper and magazine articles written by George Soros between 2008 and 2011 in which he covers the stock market crash of 2008, financial reform, the worldwide credit crisis and the Eurozone crisis of 2011.

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.

Soros bases his analysis throughout on a "reflexive" view of economic affairs in which positive or negative feedback cycles frequently distort supposedly "efficient " markets. He notes that investment/ speculation in new technology often shows reflexive distortions in the use of capital but he doesn't consider that reflexivity itself could be a natural mechanism that has evolved to ensure that every new niche is fully exploited. For example, in the relatively recent computing/internet boom, a great deal of capital was wasted but no one would dispute that it aided the eventual winners (e.g. Intel, Microsoft, Amazon or Google) to raise capital when they needed it.

Highly recommended.
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on May 17, 2013
The brilliant George Soros is right on the mark a couple years ahead of the events. Europe is collapsing and the one percent really want that collapse. Soros is the guy with the sign walking the streets saying the "End of the World" Repent austerity sinners and look to Saint Keynes.
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on May 25, 2013
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. You must respect him and his ability to chart the environment, before it exist.
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on February 21, 2012
This is the fourth book I have read by George Soros. I won't delve into his faulty logic. But if you have already read books by him, pass on this. This is more of the same. There isn't anything marginally new here.

If you haven't, give this a try. His theory of financial reflexivity is very interesting. But when every book revolves around it, you are wasting your time. And he isn't a fan of the free market system, which is contradictory because he used the free market system to short the Pound and almost break the Bank of England.
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on December 15, 2012
Soros shares his expertise on currency speculation as well as politics. This series of short articles ( 2008-11) by George Soros is very informative on a number of economic topics, especially regarding the euro and Eurozone politics.

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
2.isolate contagion
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.
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on October 24, 2014
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 the faulty logic behind having a monetary union without a fiscal union. It will allow the reader to better understand exactly why Greece and the PIIGS countries were in such a difficult situation. It was also the first time I've read about the concept of reflexivity, but there was really no expansion on this topic.
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on June 25, 2012
Soros proposes other time his vision related the misconceptions those often occur in the economic context.
But the interesting idea is that just those variations from the rules generate the feed-back what is able to resolve similar situations.
This theory talks about the fact that the errors, if they don't be too big, produce the limits for the knowledge itself.
But if we want research other types of solution to the crisis of 2008, we find many data and many interpretations, but we find also a big confusion about the methods those we should follow for exit from this crisis.
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on February 15, 2013
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 much out of this.
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on March 15, 2014
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 it
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