“The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means”
There are many news articles and books written about global financier, George Soros, his beliefs, practices, wrongdoings, etc. but the book that I found most interesting was one which was actually written by him called “The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means.” This book gave me an insight and most definitely a better understanding of the current global economic crises that our entire world is facing and more importantly what can be done to get us and the global economy out of such a mess from the perspective of one of the world’s greatest financial minds.
In brief, as Soros explains, the current financial crises been caused by the growing of property values and on the basis that they would keep rising. On such basis, banks started lending very easily and extending credit freely to new homeowner’s, even those people the banks knew would most probably not be able to pay in the future. The extent of leverage used to finance new homes was tremendous and the creation of new unregulated financial instruments such as, CDO’s, credit default swaps, and a slew of other financial products was all great if home prices continued to rise as everyone anticipated. Then home price began to fall and the parameters put into such financial modeling systems were no longer accurate and we saw a collapse in housing prices, stock market valuations, currency devaluation, a credit market freeze, failing banks, large global financial institutions filing bankruptcy, and pretty much about any other financial problem anyone can think of.
Mostly, I enjoyed reading what George Soros believes should be done to further protect the global economy from future bubbles and to get us out of this one. While he states, that bubbles can’t be prevented, they can be held to a certain level which is mainly up to the regulators such as, the Fed, the SEC, and the Treasury Department to take responsibility, unlike they have been doing. He believes, as well as myself, that it is up to such regulators to take into account credit conditions and also that markets have moods and biases which should be balanced by the regulators. Soros believes that one way to help prevent further crashes and crises is by the tightening of margin and minimum capital requirements, thus reducing the leverage banks take on and reducing risk. He also believes that many sophisticated financial products, such as, CDO’s and CDS’s need to be regulated and any other new financial instruments must be first approved by the authorities. A close eye should also be kept on the regulators because he states that they are not only human but they are also bureaucratic and susceptible to corruption at times.
While many of the proposed adjustments and insights made by George Soros in his book will result in fewer profits by large global financial institutions, both I and Soros believe that it is a necessary step in order to prevent a further deterioration in our financial system and any other future “super bubbles” from forming and bursting. Over all, this was one of the most interesting books I have read and it did help me better understand our current situation and what can be done to prevent future ones. I find George Soros an extremely interesting and intelligent financial mind and his success in the financial world have proved him to be one of the most influential financiers out there today.
George Soros is a global financier who was born in Budapest, Hungary in 1930 and is the founder and chairman of many...