The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means : Book

Search ISBN:1586486837 offer from Abebooks or used books from Alibris. The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means Reference Book. Classifications : Money & Monetary Policy Economics Business & Investing Subjects Books Finance Banks & Banking Corporate Finance Foreign Exchange Inflation Interest Business & Investing Subjects Books General Business . Click the following link to view the cover of The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means.

1) Hardcover Book The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means by PublicAffairs. Book Review submitted by: Stephen J. Hage, SteveH9697@aol.com

Books about economics and finance, for most people, are as appealing as having a root canal done without anesthesia. This is not one of those books. The subtitle: The Credit Crisis of 2008 And What it Means succinctly explains what the book is about. And, surprisingly, it´s in small format and has only 162 pages including acknowledgements.

It´s impossible today to turn on the news without hearing something about the credit crisis and there´s no shortage of individuals willing to tell anyone who´ll listen what caused it and who´s responsible. The problem is, there are lots of conflicting opinions and it´s, at best, difficult to determine who actually knows.

To be sure, almost everyone has been touched in some way by the credit crisis and its impact will ripple through the global economy for years. In attempting to understand it, I believe it´s important to choose carefully among those willing to offer an explanation.

I chose George Soros because: The Quantum Fund he co founded with Jim Rogers in 1970 returned 42.6% per year for 10 years and, in 2007 returned almost 32% netting Soros $2.9 billion.

Soros is a spectacularly successful hedge fund manager with an estimated current net worth of around $9 billion and ranked by Forbes as the 99th richest person in the world. Additionally he´s an economist and philosopher. Nothing succeeds like success. Yowza!

There´s nothing dry or tweedy about what he has to say. Soros disagrees with economists who believe economics is or ever can be a scientific pursuit like physics, chemistry or mathematics. And even though there are courses in mathematical economics and entire industries devoted to it Soros believes the "Quants" are wrong. The central theme of his conceptual framework is, economics is a social science. If you really want to understand it, you must focus on what people do and why.

The prime driver of economic dynamics is not money, or mathematics, or science, or technology it is rather what he calls Reflexivity which, more than anything else, is driven by human nature.

Current economic theory holds that markets naturally tend toward equilibrium. Soros believes that conviction is not only wrong but one of the central reasons we find ourselves in such dire economic straits. On the housing bubble he offers this:

"Taken on its own the United States housing bubble faithfully followed the course prescribed for it by my boom-bust model. There was a prevailing trend--ever more aggressive relaxation of lending standards and expansion of loan-to-value ratios--and it was supported by a prevailing misconception that the value of the collateral was not affected by the willingness to lend. That is the most common misconception that has fueled bubbles in the past, particularly in the real estate area. What is amazing is that the lesson has still not been learned." (Italics mine)

Soros credits Karl Popper with the underpinnings of his economic philosophy and his argument is clean and satisfying from a philosophical perspective.

I am not an economist but I´m certainly interested in gaining some understanding of what happened to our economy, how we got to where we are, and what we ought to do about it.

Lots of people think they know. Unfortunately many of those same people are the ones who brought us to where we are.

When it comes to gaining deep understanding of what our economy does, how it does it and why, I´m inclined to pay attention to someone who, by manipulating it to his advantage, is the 99th richest person in the world. I think anyone else interested in the economy should have the same inclination. YOWZA!

I strongly recommend you read this book.
¤

2) Hardcover Book The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means by PublicAffairs. This book provides a cogent and prescient analysis of our current international financial mess in the credit markets. Even though the book was published in May 2008, parts of it read like current analyses in the WSJ and NYT. I only wish I had read this in May when it came out! Take the following as an example: "Whether we are in a recession now is questionable; that we shall slip into recession in the course of 2008 I consider a certainty." Or this: "The Bush administration and most economic forecasters do not understand that markets can be self-reinforcing on the downside as well as the upside."

So, why do I only give the book 3 stars? Because it´s really two books. One is the analysis mentioned above. The other is a bizarre bit of axe-grinding as he promotes a theory he developed decades ago that he keeps presenting to the world and that the world keeps ignoring. Well, the world ignores his theory with good reason.

He makes a valid point, from a philosophical point of view: modern science is built on traditional logic, which has an assumption of independence, ie, objects of thought must be independent of each other. This translates to the economic world, in which the classic model of supply and demand requires that supply be independent of demand. But (he doesn´t come right out and say this clearly) in the financial markets, this simply isn´t so. Supply and demand are not independent, simply because market participants can be either buyers or sellers. Which they are can change rapidly, causing the traditional theory of supply and demand to be a poor predictor of financial markets.

But, the model Soros proposes is, to be kind, quaint. Essentially, he argues that in the social sciences the scientific approaches used in the physical sciences simply can´t work. This is because humans not only study how the world works (cognitive function), but also participate in it (manipulative function), thus changing how it works. While it´s clear that humans influence how the world works, it´s not clear that his proposed model, his theory of reflexivity, is the best approach to understand it. For starters, he simply keeps repeating his theory, mantra-like, throughout the book. He provides no serious development of the model nor any data to back it up. In addition, his assertion time and again that the non-human, physical world is easy to model and to make predictions about, is naive, at best. The real world, physical and biological, is highly complex and dynamic, whether humans are involved or not. An example is climate change. Despite progress, we are nowhere near close to being able to predict changes to global climate.

More critically, there are other approaches that have been developed that offer insights that are more profound than his. First, from a philosophical/logical perspective, is fuzzy logic, developed by Lotfi Zadeh in the 70s. Fuzzy logic explicitly violates the independence assumption required in traditional logic, making clear that traditional logic (and science, by extension) are limited by the extent to which they rely on this assumption. More useful in the context of financial markets are dynamic simulation models, which can at least demonstrate systematically, and under specified conditions, how the markets are unstable. In particular, the concept of positive feedback in a system (good things get better, bad things get worse), which Soros understands (see quote about Bush administration above) is a much better way to understand what goes on in bubbles than Soros´ sketchy theory.

So, the book leaves me with mixed feelings--brilliant in some ways, pedestrian in others.¤

3) Hardcover Book The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means by PublicAffairs. As stated in the review title...if you have liberal political views then this book is for you! If not, skip it and go for something a little more middle of the road.¤

4) Hardcover Book The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means by PublicAffairs. Legendary investor George Soros explains a wide variety of market upheavals over several decades. Although this book was published in May, he identified the problems that would cause a liquidity crunch and capital shortfalls for Wall Street´s former investment banks, now part of the banking system. He identifies too much leverage contributing to the housing bubble and lack of regulation as key problems. I am a quant trader and also recommend Janet Tavakoli´s new book, Structured Finance and Collateralized Debt Obligations: New Developments in Cash and Synthetic Securitization (Wiley Finance)(for market professionals) which covers the flawed evolution and lack of regulation of leveraged products including asset backed (home equity) CDO´s, SIVs, and credit derivatives. Short hedge funds made billions. The securities were overvalued partly due to market euphoria, as Soros theorizes (reflexivity), but also due to some dealing from the bottom of the deck by investment banks putting together packages of assets, which led to lack of trust about the asset values. Soros could have made a stronger case for more effective regulation, but he makes his strongest case for government intervention. It has been done in the past, and it seems much more is needed this time due to the massive scale of the problem.¤

5) Hardcover Book The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means by PublicAffairs. I have lost patience for this kind of book. I recommend the other ten books instead (and the last two, which I wrote, are free online, so I am not pushing them for purchase)

1) Our economy went into the gutter when Senator Phil Gramm (R-TX), then Chair for Banking, slipped a 200+ page bill written by lobbyists into a must fund larger bill, with the result that no senators read it (as they did not read the Patriot Act), and it deregulated--completely--the financial marketplace, ending the walls between banking (which lends on tangibles) and investment (which speculates on intangibles).

2) DERIVATIVES is code for fantasy cash. I was not smart enough to see this myself, but Bogle, Soros, Buffet, Perot, Nader, they all saw it, they tried to brief it, and in the case of Nader, got laughed off the Hill. Sub-prime mortgages were the match that lit the fire, not the straw itself.

3) Goldman Sachs is forever, Washington´s two criminal parties have been bought and paid for. Rubin did not bail out Mexico. He bailed out Wall Street´s bad investments in Mexico. and Bill Clinton for sure understood this, and leveraged the whole thing the whole time with placement of his friends in Freddie Mac and Fannie Mae where they enriched themselves and contributed heavily to Clinton´s Library and other endeavors.

The market did not fail. Congress failed. BOTH parties are criminal parties, and I am personally outraged that Americans are not burning tires in the streets demanding that at a minimum three other parties be heard by the public in these debates. Most of America is utterly clueless about the FACT that the League of Women Voters was replaced by a Republican-Democratic Presidential Debate Commission precisely to exclude Independent, Green, Reform, Libertarian, and other candidates.

With all due respect for their accomplishments, the two candidates for President today are relative puppets being managed by *clowns* who are owned by Wall Street carpetbaggers and the crooked parties that have effectively killed democracy in this once-great Republic.

I am, to be utterly candid, sick and tired of Soros telling us how smart he is when he actually does not care at all about the public interest. This is the last book written by Soros that I will waste my time on.

Other much more relevant books to our situation:
The Battle for the Soul of Capitalism
Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It
Breach of Trust: How Washington Turns Outsiders Into Insiders
The Broken Branch: How Congress Is Failing America and How to Get It Back on Track (Institutions of American Democracy)
Conspiracy of Fools: A True Story
The Informant: A True Story
The Global Class War: How America´s Bipartisan Elite Lost Our Future - and What It Will Take to Win It Back
Deer Hunting with Jesus: Dispatches from America´s Class War
THE SMART NATION ACT: Public Intelligence in the Public Interest
Election 2008: Lipstick on the Pig (Substance of Governance; Legitimate Grievances; Candidates on the Issues; Balanced Budget 101; Call to Arms: Fund We Not Them; Annotated Bibliography)

I am ANGRY. Soros is part of the problem, not part of the solution. Simiarly, Buffet means well, but he is working this for himself, not us. It was idiocy to approve the bail-out. That should have been a freeze, a moratorium on all foreclosures (10,000 a day) as well as all evictions, a capping of interest at 10%, an emergency fund focusing on INDIVIDUALS, and a mandated public forum post-election with ALL relevant documents posted online for scrutiny ("put enough eyeballs on it, no bug is invisible").

This election is so fraught with fraud on so many levels, that the financial crisis, in my judgement is the third and least of our problems. Electoral fraud and the criminal misbehavior of BOTH Republicans and Democrats is problem #1. The two dozen plus secessionist movements being led by Kirkpatrick Sale are problem #2 because they have LEGITIMATE GRIEVANCES. I was reflecting on this today, and realized that an honest man today has three choices:

1. Refuse to support our dysfunctional government and support secession.

2. Join a crime family and drop out of the fraudulent "legal" economy.

3. Be a gerbil, a farm animal, and let Wall Street--including the author of this book--enjoy life on our backs for a few more years.

I did not read this book, nor buy it. I do not do this often, but this seems as good a place to denounce Soros, the horse that brought him (Wall Street), and the morons in Congress that let these thieves run wild.

I expect plenty of reflexive negative votes but for those of you with an open mind, take the time to read the varied reviews of the ten books I recommend instead of this one, and trust your own judgment.

Mark Lewis had it right: these folks think nothing of "exploding the client." That´s us. This author was right up there with them, step by step, and did nothing for We the People--his best shot was to support the "least evil" (in his mind) party and to be silent as Bush-Cheney destroyed our military, our economy, and most grieviously, our global moral standing.

It´s time we drop kick Wall Street into the ocean, introduce Open Money, and invest only in local tangible hard-money options. Ron Paul has it right--everyone else is a traitor to the Constitution and to the Republic--Paulson means well but he and all of these folks live in a "closed society" that is completely out of touch with OUR reality.¤

6) Hardcover Book The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means by PublicAffairs.

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.

Page Updated: Robert N. Goolsby, 4-Nov-2008, 15864868379781586486839, 140-420-960-700-661-361-371-8

The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means

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