Since “The Alchemy of Finance” was getting poorly reviewed on SeekingAlpha, I’ve decided to weigh in on one of my favorite books ever. The short review is simply: Go Read It. It’s even available in Chinese: 索罗斯《金融炼金术》.
I didn’t read the Alchemy of Finance for the first time until sometime during 2003, and since it’s been one of my favorite books – perhaps my favorite in the entire finance/economics/inve… category.
The corollary of reflexivity that stuck with me the most was that:
Credit expansion leads to a contraction in value of the underlying collateral.
Sorros also made some interesting philosophical points – somewhat dialectic:
– Progressive society longs for the stability and relationships
– Conservative society long for the freedom and individualism
– Western society measures everything, and will therefore overvalue measurement itself
– The magic of the market can’t be separated from the madness of the market
– The very success of the Bretton Woods agreement sowed the seeds of it’s own disaster
– Freely floating exchange rates based on fiat currencies are not sustainable
Sorros isn’t god, but he’s smart and wise. As an investor, he’s been both more accurate and more brave then most of us. His recent work has much evidence of self-aggrandizement, but so did StarWars 1-3…
Whether or not “reflexivity” is an idea that has merit, good to remember that Howard Aiken said: “If your ideas are any good, you’ll have to ram them down people’s throats”