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Friday, 28 June, 2002, 12:20 GMT 13:20 UK
Soros warns of dollar plunge
George Soros
George Soros: 'market fundamentalism' a danger
George Soros, the billionaire financier, has warned that the US dollar could lose one-third of its value over the next few years.

On the currency markets, meanwhile, allegations of yet another accounting scandal - this time at office equipment firm Xerox - made investors dump the US dollar and push it within a quarter of a cent of parity with the euro.

Mr Soros also warned stock markets could fall "much lower" if consumer confidence and growth faltered in the United States.

The financier made his fortune running a hedge fund which speculated against weak currencies, including the British pound, reportedly making a 1bn profit by forcing it to leave the European Exchange Rate Mechanism in 1992.

To watch the interview click here

Market fundamentalism

Speaking to BBC business correspondent Rory Cellan-Jones, Mr Soros warned the Bush administration against its "market fundamentalism", the belief that markets are self-correcting and best left alone.

Mr Soros said: "When markets are going down, then all the weaknesses come to the fore, and they need to be dealt with.

"There is basically an attitude of market fundamentalism: leave the markets alone and they will take care of themselves.

"That is a false idea. Markets do not tend to equilibrium, but tend to excesses, and you need intervention at the right time to stop these excesses going overboard."

In recent years, Mr Soros has been an increasingly vocal critic of global capitalism, calling for more regulation and warning that the greatest dangers now came from the United States.

"Cult of success"

In the last few weeks, the value of the dollar has weakened substantially on international currency markets, by around 10% against the euro, nearly reaching parity of one euro to one dollar.

The US Treasury Secretary, Paul O'Neill, is generally believed to think it would be impossible to try and stabilise the currency markets.

But Mr Soros says that further falls in the dollar could have "negative implications" for the whole world economy, making the recession deeper in Japan for example, or exacerbating a currency crisis in Brazil.

Accounting failures

Fears about further acounting scandals and further falls in American stock markets have made international investors wary of buying US shares or dollars.

Mr Soros said that the "cult of success at any price" was partly to blame for the accounting problems in the US "where anything goes as long as you can get away with it".

He said the UK system, which held the professionals liable for giving a "fair and accurate" picture of a firm's financial position, was better than the US approach, which allowed accounting firms leeway to bend the rules.

He welcomed moves by the US regulator, the SEC, to require directors to ensure that their accounts gave an accurate picture.

But he warned that markets were now exagerating the scale of the accounting problems at US firms.

"Clearly you had an excess of optimism and overstatement, and now you are plunging into an excess of doom and gloom," he told the BBC.

See also:

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