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

I recently finished reading a book that I highly recommend. The name of the book is The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means GeorgeSoros.com

George Soros is a noted and influential financier, chairman of Soros Fund Management Soros Fund Management and founder of a global network of foundations designed to support open societies. A Budapest native who lives in New York, Soros is very active politically.

Soros is known for "breaking the Bank of England" on Black Wednesday in 1992. With an estimated current net worth of around $9 billion, he is ranked by Forbes as the 97th-richest person in the world.

With the country in recession and a housing market that is suffering, Soros looks at it as "the worst crisis since the Great Depression." He sees a profound difference, though, between today's financial problems and those of the 1930s. "The periodic crises were part of a larger boom-bust process; the current crisis is the culmination of a super boom that has lasted for more than 25 years."

Soros believes there is a basic difference between thinking and reality. Soros learned that principle when he was a student at the London School of Economics and was heavily influenced by Karl Popper. Today, he thinks a new economic model is needed to understand the nature of the economic situation.

Although the economic crisis was "slow in coming," Soros believes it could have been "anticipated several years in advance. It had its origins in the bursting of the Internet bubble in late 2000." Soros also asserts that "cheap money engendered a housing bubble, an explosion of leveraged buyouts and other excesses. When money is free, the rational lender will keep on lending until there is no one else to lend to. Mortgage lenders relaxed their standards and invented new ways to stimulate business and generate fees.”

The result is the housing foreclosure mess that is sweeping the country, taking houses away from people who strapped themselves too tightly and ruining their credit for the foreseeable future. Economic distress, noted Soros, "spread from residential real estate to credit card debt, auto debt and commercial real estate."

EXCLUSIVE: Soros: Fannie, Freddie crisis not the last Reuters

Soros does write that he doesn't know what the economic future holds. He believes that "we have not learned how to govern ourselves. As a consequence, we live in great uncertainty and grave danger. We need to gain a better understanding of the situation in which we find ourselves."

I recommend that you get a copy of the book from your local library or local book store.