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

• Author: Klein, Lauren D.
• Position: Further Reading - Book review

THE NEW PARADIGM FOR FINANCIAL MARKETS: THE CREDIT CRISIS OF 2008 AND WHAT IT MEANS

George Soros

(New York: Public Affairs, 2008), 162 pages.

An economic storm big enough to drive public discourse towards George Soros's philosophy may have landed on Wall Street late this summer. In Soros's latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means he rearticulates his anti-classical economic theory. Soros argues that we all operate under misconceptions and that the market's scientific approach does not guarantee we will maize good decisions and move towards equilibrium. We must live with uncertainty, as no formula can solve human interaction and the regulators should stay involved.

Soros says that the 2008 credit crisis resulted from the burst of a superbubble. The bubble formed over the last twenty-five years when a series of prevailing trends led to credit expansion with minimal regulations. Since the interaction between a trend and misconception is reflexive, the current crisis is the result of unsustainable trends and misconceptions, Soros says.

Soros started discussing reflexivity publicly when he published The Alchemy of Finance in 1987. To Soros's dismay economists pushed off the work, as a rich financier espousing his...