The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means
by George Soros
List Price:
Our Price: $0.01
You Save: $22.94 (100%)
Availability: Usually ships in 1-2 business days
Category: Book
See more book details and other editions
Book Summary Information
Author: George SorosEdition: Hardcover
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2008-05-05
ISBN: 1586486837
Number of pages: 208
Publisher: PublicAffairs
Book Reviews of The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means
Book Review: Russell's paradox in the financial markets
Summary: 5 Stars
George Soros has forgotten more about finance, economics and trading than most of his critics will ever know. He has made more money than most of his critics put together will ever make. So when George Soros speaks on matters to do with money, I listen, and when he writes a new book, I read it.
When Soros speaks about politics, which he frequently does, I also like to listen. He is a sharp critic of the United States especially under the policies of the Bush administration, as well he should be since we'll be paying for the stupidities of the Bush administration both nationally and internationally for many years to come. But here in this book, he puts aside (for the most part) the political and concentrates on one of his pet ideas, which he calls "reflexivity."
This is the idea that human interactions and the "truth" of those interactions are shaped not only by fundamentals and events in the natural world but by our perception of those events. This might be called the Heisenberg uncertainty principle as applied to the social sciences, markets and interpersonal relationships. The value of a stock is influenced by a feedback loop that is in part based on the perceptions of buyers and sellers. This makes the value of a stock or commodity a moving target forever in flux. As in Russell's self-referential paradox, reflexivity makes it impossible to accurately predict where markets will go, or to predict in principle the direction of human activities. Simply put, there is a quality in economics, the financial markets and like phenomena that is self-referential leading to uncertainty. Soros concludes that markets do not tend toward equilibrium and they are not "efficient" and price fluctuations are not "random walks" away from a "true" value. Finally, he concludes that financial bubbles arise because the self-referential quality of markets is not understood by economists and others in the financial world.
Here's how he puts it more generally at the start of Chapter 1: "...our understanding of the world in which we live is inherently imperfect because we are part of the world we seek to understand." (p. 3)
Soros sees reflexivity as a "two-way feedback loop, between the participants' views and the actual state of affairs. People base their decisions not on the actual situation that confronts them but on their perception or interpretation of that situation." Our decisions, he contends, have dual functions. One is the "manipulative function," the other is the "cognitive function." As we try to understand the world, we also try to manipulate it to our advantage. He notes, "The two functions operate concurrently, not sequentially." This "creates an indeterminacy in both the participants' perceptions and the actual course of events." We are (of course) "obliged to form a view of the world, but that view cannot possibly correspond to the actual state of affairs." We are obliged "to act on the basis of beliefs which are not rooted in reality."(pp. 10-11)
Taking a clue from cognitive psychology, evolutionary psychology and neuroscience, it is clear that we construct (as the postmodernists are wont to remind us) a "reality" within our heads that only approximates the "real" world and is biased by our needs and desires and is limited by both our senses and our ability to make meaning of what we perceive. Soros's reflexivity is in essence putting a name on something that has generally been known (but mostly ignored) for a long time.
A consequence of Soros' view is "the postulate of radical fallibility" which, when applied to financial markets allows one to "assert that, instead of being always right, financial markets are always wrong." (p. 76) As for financial bubbles and what follows, he writes (all in italics for emphasis on page 78), "there has to be both some form of credit or leverage and some kind of misconception or misinterpretation involved for a boom-bust process to develop." Of course he is referring most directly to what he calls "The Current Crisis and Beyond" which is the title of Part II of the book.
In Chapter 7 Soros makes some predictions about what is to come. The last note in the book is dated March 23, 2008. I read through the "outlook," and from the perspective of today (February 13, 2009) it's easy to see that Soros is substantially right. He is not only an expert on international markets but a fine connoisseur of bubbles and the opportunities they present. "Nothing is quite as profitable as investing in an early-stage bubble," he writes. (p. 129)
Soros has a way of saying the obvious that some of his critics have disparaged, but sometimes the obvious is what we overlook. According to his "new paradigm" based on reflexivity, "events in the financial markets are best interpreted as a form of history. The past is uniquely determined, the future is uncertain. Consequently it is easier to explain how the present position has been reached than it is to predict where it will lead." (p. 104)
I would add that this is what economists are quite expert at: telling us what has happened. Guessing what is going to happen is what Soros is very good at.
More The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means reviews:
1 2 3 4 5 6 7 8 9
1 2 3 4 5 6 7 8 9
Summary of The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means
In the midst of the most serious financial upheaval since the Great Depression, legendary financier George Soros explores the origins of the crisis and its implications for the future. Soros, whose breadth of experience in financial markets is unrivaled, places the current crisis in the context of decades of study of how individuals and institutions handle the boom and bust cycles that now dominate global economic activity. ?This is the worst financial crisis since the 1930s,? writes Soros in characterizing the scale of financial distress spreading across Wall Street and other financial centers around the world. In a concise essay that combines practical insight with philosophical depth, Soros makes an invaluable contribution to our understanding of the great credit crisis and its implications for our nation and the world.
Economics Books
Book Subjects
- Arts & Photography
- Biographies & Memoirs
- Business & Investing
- Children's Books
- Comics & Graphic Novels
- Computers & Internet
- Cooking, Food & Wine
- Entertainment
- Gay & Lesbian
- Health, Mind & Body
- History
- Home & Garden
- Horror
- Law
- Literature & Fiction
- Mystery & Thrillers
- Nonfiction
- Outdoors & Nature
- Parenting & Families
- Professional & Technical
- Reference
- Religion & Spirituality
- Romance
- Science
- Science Fiction & Fantasy
- Sports
- Teens
- Travel
Similar Books and other products
Financial Turmoil in Europe and the United States: Essaysby George Soros
PublicAffairs; Published: 2012-02-07; Hardcover; Book
Best price: $12.42
Price in other shops:
The Soros Lectures: At the Central European Universityby George Soros
PublicAffairs; Published: 2011-03-29; Paperback; Book
Best price: $1.66
Price in other shops:
Hot Commodities: How Anyone Can Invest Profitably in the World's Best Marketby Jim Rogers
Random House Trade Paperbacks; Published: 2007-03-27; Paperback; Book
Best price: $6.00
Price in other shops:
Special Providence: American Foreign Policy and How It Changed the Worldby Walter Russell Mead
Routledge; Published: 2002-09; Paperback; Book
Best price: $43.63
Price in other shops:
George Soros On Globalizationby George Soros
PublicAffairs; Published: 2005-03-16; Paperback; Book
Best price: $4.10
Price in other shops:
Open Society: Reforming Global Capitalismby George Soros
PublicAffairs; Published: 2000-01-01; Hardcover; Book
Best price: $11.87
Price in other shops:
Soros on Soros: Staying Ahead of the Curveby George Soros
Wiley; Published: 1995-08-04; Paperback; Book
Best price: $4.98
Price in other shops:
The Soros Lectures: At the Central European Universityby George Soros
PublicAffairs; Published: 2010-02-09; Hardcover; Book
Best price: $0.96
Price in other shops:
The Alchemy of Finance (Wiley Investment Classics)by George Soros
Wiley; Published: 2003-07-29; Paperback; Book
Best price: $12.29
Price in other shops:
The Crash of 2008 and What it Means: The New Paradigm for Financial Marketsby George Soros
PublicAffairs; Published: 2009-03-31; Paperback; Book
Best price: $0.53
Price in other shops: