Soros & the perilous price of oil

Here is a link to a New York Times book review of George Soros’ new book ” The New Paradigm for Financial Markets” . (Click here to skip the intro and read the book)

Article Introduction (via NYTs):

In January 2007, the price of oil was less than $60 per barrel. By the spring of 2008, the price had crossed $100 for the first time, and by mid-July, it rose further to a record $147. At the end of August it remains over $115, a 90 percent increase in just eighteen months. The price of gasoline at the pump has risen commensurately from an average of $2.50 to around $4 a gallon during this period. Transportation and manufacturing costs have risen sharply as well. All this has occurred at the same time as a world credit crisis that started with the collapse of the US housing bubble. The rising cost of oil, coming on top of the credit crisis, has slowed the world economy and reinforced the prospect of a recession in the US.

Article Excerpts:

“This sequence contradicts the conventional view, which holds that markets tend toward equilibrium and deviations from the equilibrium occur in a random manner.”

“In fact, financial institutions, rating agencies, and regulatory authorities failed to take into account the possibility of initially self-reinforcing but eventually self-defeating sequences of boom and bust.”

“We are currently experiencing the bursting of a credit bubble that has involved the entire financial system and, at the same time, a rise and eventual fall in the price of oil and other commodities that have had some of the characteristics of a bubble.”

Click here to read the book review.