George Soros has written another book, “The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means.” He uses the current credit crisis as an example to help crystallize his ideas of “reflexivity,” the notion that markets influence the events that they supposedly predict. Or more precisely, that the manipulation of markets is intimately connected to the manipulation of fundamentals, so that the principles of mainstream economics, like supply and demand equilibrium, cannot be relied upon to keep markets in check. He argues that regulation is needed to avoid runaway markets, although he admits that the regulators have no better idea of the underlying realities than any other market participants. He is strongly influenced by the works of Karl Popper, as I am too, and is strongly aware of the limits of what we can know. He then moves from epistemology to the current markets and provides some general views, as well as a log of his trading activity earlier this year.

He believes that government intervention to save the banking system will prevent the recession, although deep and long, from becoming a depression. [I disagree - I think he does not give sufficient weight to the shutdown and failure of the "alternate" banking system - securitized credit].

It is an interesting and quick read, somewhat of a “cri de coeur” from a man who wants to be seen as just not another lucky rich guy, but as someone who has a real intellectual contribution to make. Which he does, as he helps to expose the deeply flawed nature of academic economics.