George Soros quits dollar

George Soros

Billionaire investor George Soros has said fallout from the U.S subprime crisis will bring about the end of the dollar's status as the world's reserve currency. Soros, during a debate in Davos, said the current crisis will be the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency. He said the rest of the world was now increasingly unwilling to accumulate dollars.Soros made US$1 billion in 1992 betting against the pound, forcing the British government to abandon a peg to a basket of European currencies. International Monetary Fund members say the dollar's share of global foreign-exchange reserves fell to a record low of 63.8 per cent in the third quarter as demand for U.S assets waned after the collapse of the U.S housing market.

The billionaire investor famous for "breaking" the Bank of England in the 1990s has warned that Britain is heading for a recession. George Soros said that a recession in both the United States and Britain "will be very difficult to avoid". He was speaking on the fringes of the World Economic Forum summit in Davos, Switzerland, where many of the world's top politicians and businessmen are meeting. The warning is significant, since although many of the major investment banks now agree that the US is set to suffer a recession, most economists have predicted that Britain's fortunes will be far better.

His warning came less than 24 hours after the US Federal Reserve used an emergency three-quarter percentage point cut in interest rates to try to prevent the world's biggest economy slumping dramatically. It will also fuel speculation that Mr Soros has been betting against the pound in recent months. Sterling has fallen dramatically since late last year, with the housing market slowing fast and the Bank of England being forced to cut interest rates.

Mr Soros also warned that the dollar's status as the world's reserve currency was drawing to an end, thanks in part to the financial crisis on Wall Street. He said the plight of US households, who are facing major slumps in nationwide house prices for the first time in living memory, was increasing the distaste among international investors for the greenback. He said: "The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency. Now the rest of the world is increasingly unwilling to accumulate dollars."