Malaysia's Mahathir Predicts Dollar's Fall
03.29.2005, 09:32 PM
Former Prime Minister Mahathir Mohamad, whose economic management during the 1997-98 financial crisis won worldwide accolades, says the U.S. dollar is heading for a collapse, and urged international businesses to trade in euro, news reports said Wednesday.
In a dialogue session with international CEOs on Tuesday, Mahathir said only the fear of a global economic catastrophe in the event of a dollar collapse is helping the greenback retain its value, the Star and the New Straits Times newspapers reported.
But the dollar has scant real backing, and is in fact being weighed down by the massive U.S. debts and deficit.
"The catastrophe will come one day because even the most powerful country in the world cannot repay loans amounting to US$ 7 trillion (euro5.3 trillion)," he was quoted as saying during the dialogue, held in Sabah state on Borneo island.
"The uncertainty is with the timing, not whether it will collapse," said Mahathir, whose dislike for U.S. economic and foreign policies are well known.
However, it was the pragmatic Mahathir - prime minister until 2003 - who had insisted on pegging Malaysia's ringgit currency to the U.S. dollar in 1998 to combat the financial crisis when the freely convertible currencies around the region fell dramatically.
Most governments took massive loans from the International Monetary Fund to prop up their currencies, but Mahathir refused the dole, earning widespread scorn at the time, and fixed the currency rate.
However, his policy was later acknowledged as sound and Malaysia came out of the crisis in a relative good shape. The ringgit remains pegged at 3.8 to a dollar but Mahathir has said in recent months it is time to re-float the currency because it is being hurt by the dollar's almost daily fall against all major currencies.
The weak dollar - and hence the weak ringgit - has made imports into Malaysia more expensive.
Also, when companies are paid in U.S. dollar, they are being paid less "because the currency has devalued by 50 percent," he was quoted as saying.
If businesses don't want to be shortchanged they should ask to be paid in other stronger currencies such as the euro, or in euro equivalent, he said.
"The time will come when you have to move away from the U.S. dollar" as the international currency of trade, he said, adding that he has suggested the use of gold as an alternative, stable currency.
He blamed Washington's massive deficit on President George W. Bush's economic policies.
"Unless they (Americans) change their president and have a more responsible president who will try to reduce the deficit, they will have serious trouble with the U.S. currency," Mahathir was quoted as saying.
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