Financial Turmoil in Europe and the United States

February 15, 2012
The European economy seems to be sliding from bad to worse, and with it the planet's markets. Soros (The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, 2008, etc.), maven of the tickertape, ventures persuasive reasons why. First, the buried lede, which comes late in the book: The European economy is pegged to the euro, and "the euro is a patently flawed construct." It is flawed, writes the author, because its architects had not yet formed the perfect--or even an imperfect--financial union sufficient to back the unified currency, expecting its flaws to be corrected, "if and when they became acute, by the same process that brought the European Union into existence." That process was a frankensteining of different national agendas, a process that, in large part, was engineered by Germany so that Europe would sign off on its reunification. Gathering articles written for the Financial Times and New York Review of Books, among other journals, indulges in some interesting speculative exercises: What would happen, for instance, if Germany withdrew from the euro and went back to the mark? The answer might be an instant enrichment of Germans and immiseration of everyone else--so why haven't the Germans done so? Soros' explorations of the European (and, to a somewhat lesser extent, American) market ought to send readers running for their economics dictionaries, since some terms are not quite completely defined or spelled out: Why is government involvement in mortgage insurance a good thing? What is the Danish model? What is the difference between fiscal policy and monetary policy? Soros is someone who has made his billions knowing those things and anticipating the reaction of markets to ordinary realities, pleasant and otherwise--so it's well worth paying attention to his views on the world's financial systems. Not for the faint of heart or the innumerate. For policy and financial wonks, a bracing read.

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