George Soros is one of the richest men in the world and has been involved in the financial markets for many years. Having witnessed the slow fall from grace of the global banking system, the crash of 08 was certainly no surprise. The boom / bust cycle is analysed against the backdrop of the globally networked situation that we find ourselves in today. Solutions and strategies are offered and policies suggested.

Keith reviewed George's latest book on radio 2GB tonight, a podcast of which will shortly be available by clicking through here.

For those that prefer to read the review, Keith's thought on the book follow here.

We are in the midst of the worst financial crisis since the 1930s. Indeed the entire global financial system almost crashed on September 15 2008 when Lehman Brothers folded. The collapse sent shock waves through the entire financial system and forced the US and other governments to introduce panic measures to try to stabilize the system. What had begun the previous year as a concern over a particular form of US bank landing ("subprime loans") had become a general lack of trust within the entire banking system.

George Soros is one of the world's richest people. He began as a refugee from Nazi Germany and he arrived in post-war London without any money. He then made his wealth from financial speculation. But even he now has his fears about where it is all headed.

This book is a very good introduction to the steps that led up to the Lehman crisis and it is a preliminary assessment of how well governments are going in response to it.

The book is also critical of how economic is taught. The "efficient market hypothesis" argues that market participants base their decisions on perfect knowledge. This suggests that in the long run all participants (eg stock brokers, fund managers) will make about the same money because they are all operating off the same supply of information. The participants base their decisions on the assumption that all the other participants will also perceive the world as they see it.

But that is not quite right in reality. Warren Buffet in US shares and George Soros in foreign exchange have both outperformed the market over the long-term. They have both defied the "efficient market hypothesis".

Soros therefore argues that there is also a process of "reflexivity" involved. This means that in fact there is a large amount of uncertainty in the market because the participants don't all share the same perception of the same event. It is the financial equivalent of the "Heisenberg uncertainty principle" where the act of measuring an atomic particle changes the particle.

In short economists are fooling themselves when they claim to be able to operate "scientifically" in assessing economic trends objectively. The world is a confused and confusing place.

The book therefore contains two strands. The first is an overview of the financial crisis - and we are still not yet out of the woods. The second is a plea for the economics professions to drop its fixation with pretending to be a "scientific" activity and accept that there is a large amount of uncertainty in economics.

Making money remains very much an art as well as a science.

Keith Suter

 In addition you may like to watch this interview sourced from PatriotBillMo's You Tube Channel where Bill Moyers discusses the book with George. George's predictions of a global financial crash came true only after two previous attempts to draw attention to lax financial regulation failed to gain traction. This edition was re-released following the market crash that happened a year ago tomorrow.