[PEN-L:27411] Dollar to fall by 1/3

[Chris Burford <cburford@xxxxxxxxxx>]

This morning on the BBC George Soros stood by his view that the dollar
could lose 1/3 of its value.

As a man who has made a fortune on movements of exchange rates (1 billion
alone on Black Wednesday when the pound fell out of the European exchange
rate mechanism) his voicing of the increasingly conventional wisdom had a
certain authority.

He was not clear whether he includes in the 1/3, the fall that has taken
place so far. But he asserted that currencies do not move towards
equilibrium. They exhibit large waves and cycles. A pattern may last for 2
- 3 years. When it will break no one can tell, but once it breaks it breaks.

People in the world have now already lost confidence in the US dollar.



Earlier he was expanding on the loss of confidence in US accounting. The
irregularities are so widespread and so many that there is a deeper reason.
He attacked the US culture of success, the lack of sound principles behind
business activity, which forms a very unsound basis for a society (he
should know of course!)

America has a rules system of accounting. As a result a rules-avoidance
industry has grown up.

European accounting however is priniciples-based.

The SEC has already had to try to shift the US system towards this by
declaring that US directors will be held personally responsible for their
accounts to be a "fair and appropriate" representation of the actual
position. [ a horrific claim on the time of directors who might have to do
hundreds of hours of work per year  to be sure of this.]


Soros's comment will not of course exactly stabilise the dollar next week.
Even if the dollar falls only 1/4 rather than 1/3 of its value the economy
of the USA will be in an extremely bad vicious circle, in which lower
economic activity will further keep the value of the currency down.
Meanwhile blocs like Europe, while having to compete despite higher export
prices, will have relatively cheaper imports by courtesy of the rest of the
world.

Just when US hegemonism thought it could ignore all other opinions in the
world.

Chris Burford

London