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The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means Hardcover – May 5, 2008
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Top Customer Reviews
Theories abound on why this turmoil is occurring, one of these being discussed in this book, which is written by one of most well-known financial speculators of all time. The tone of the book is general and philosophical, and the author refrains from indulging in mathematical considerations, but there are many concepts in the book that are interesting and merit further investigation. The author's intellectual honesty is refreshing, in that he admits the job he has taken on is a formidable one. Describing the workings of the financial markets is challenging, and has occupied the time of countless researchers and financial analysts.
The author wants to get rid of the "market equilibrium" paradigm in traditional economics and replace it with one that he has called "reflexivity". This concept is similar to a few that have been discussed in recent months, one holding that investor analysis and modeling activities actually serve to change the markets, rather than just "mirror" them. The author's idea is that humans have both a cognitive function and a "manipulative" one when they approach the financial markets.Read more ›
I won't bash the book, exactly, but it was pretty rambling, pretty repetitive, and spent a considerably longer time trying to defend/explain his theory of "reflectivity" and bashing Republican politics than discussing the credit crisis. Still it offered some useful points and observations. It's personal account of worlwide historical financial events that Mr. Soros himself not only lived through but participated in as well as a concise account of the events that comprise the subprime mortgage meltdown were themselves worth, in my view, the price of admission.
In the end, though, the central theme of the book, it's overarching structure, is Mr. Soro's longstanding theorem about "reflectivity" in financial markets. He maintains that both the factual "reality" and the participants' resort to emotional facilities as a result of imperfect informational access interact with each other in a kind of feedback loop. As a result of this "reflectivity" serious degrees of uncertainty are injected into the marketplace that are not predicted by "classical" economic theories of "rationality" or "equilibrium". This, he says, invalidates market models based on those classic concepts. What to do about that, of course, he's not quite so clear about, except, perhaps, you should vote Democratic (his advice, not mine).Read more ›
The existing paradigm, often referred to as free-market fundamentalism, holds that markets are self-correcting, that they naturally tend toward equilibrium. Economists as far back as Adam Smith have argued against regulation or government intervention of any kind since it would interfere with the natural forces of the market.
Soros correctly argues the contrary. In fact government intervention has repeatedly saved the market. A few examples are the bankruptcy of Continental Illinois in 1984, or the failure of Long Term Capital Management in 1998, or the current bolstering of Fannie Mae and Freddie Mac (my example). The notion that the market deviates from an orderly path is the rule rather than the exception.
The new paradigm that is needed, according to Soros, must incorporate the theory of reflexity. Developed in previous works by himself and his mentor Karl Popper, reflexivity examines the relationship between thinking and reality, between the cognitive function and the manipulative function. In the investment world, this means that when investors are bullish on, say, housing or mortgage backed securities their values go up, not because they become intrinsically more valuable, but because everyone else is thinking they are more valuable. This is basically old-fashioned market psychology dressed-up in theory. The mechanism that allows the market to go up is self-reinforcing but ultimately self-defeating.Read more ›
Most Recent Customer Reviews
The title is misleading. There is no new paradigm truly suggested here. Despite the claim at the outset, the majority of the book focuses on reflexivity explanation again. Read morePublished 15 months ago by NJ
This book is a mixture of Soros’ observations of the recent financial crisis starting in August 2007 and running well into 2008. Read morePublished on December 20, 2013 by C. Collins
Soros is a hardcore investor, the man broke uk's central bank (or so they say) and his words & advices are always good to read. His problem? Read morePublished on January 29, 2013 by emmh
Soros attempts to explain what he calls 'reflexivity', loosely based on the philosophy of Karl Popper. Read morePublished on October 10, 2012 by Gderf
The theory of reflexivity is intesresting but the explnation is too short. I'd also like some sort of mathematical work to back it up, so far there's none. Read morePublished on September 19, 2012 by Anthony H. Bastiand
Let me start my review of George Soros's "The New Paradigm for Financial Markets" by stating that there is much I like in this book, however there is also much that I don't like. Read morePublished on April 2, 2012 by Bruce Caithness
I wanted to find out something about how Soros thought after reading one of the chain emails my father-in-law loves to send me that could have been written by Glenn Beck describing... Read morePublished on February 14, 2011 by Kurt Larkin
George Soros has been fined by the Hungarian and French governments for stock market manipulation.
Yet, he bought his way into the U.S. and is now a U.S. citizen. Read more