The US dollar is facing an imminent collapse and the global economy will suffer a "catastrophe" when it is rejected as the currency for trade, former Malaysian prime minister Mahathir Mohamad said in remarks published yesterday.
Mahathir, who famously ignored International Monetary Fund (IMF) advice and instead chose to peg his country's ringgit to the US dollar during the Asian financial crisis, said a standard gold currency was now the best alternative for world trade. The dollar was retaining some value because of fears of a global economic catastrophe if it was rejected, he told a conference of some 650 chief executives from 30 countries at a conference in Kota Kinabalu on Borneo island on Tuesday, The Star newspaper reported.
"But the catastrophe will come one day because even the most powerful country in the world cannot repay loans amounting to US$7 trillion," Mahathir said.
The former premier said he believed central banks worldwide were reducing their US dollar reserves and he suspected that Malaysia was also switching to other currencies.
Telling reporters that he was giving his personal views, he warned that "unless [the Americans] change their president and have a more responsible president who will try to reduce the deficit, they will have serious trouble with the US currency."
Mahathir told the CEOs it was doubtful that the sliding dollar could regain its old strength as the administration of US President George W. Bush did not consider deficits worth reducing.
The huge deficit meant that the dollar had no backing but it continued to be used internationally because some people still accepted payments in dollars.
"But there will come a time when we will switch away from the dollar and we have suggested the use of gold for international trade," he said.
Meanwhile, if companies did not want to be "short-changed" they should insist on payments in alternative currencies such as the euro or be paid in US dollars but at euro-equivalent value, he said.
Mahathir, who was widely condemned internationally for imposing capital controls and pegging the ringgit to the dollar during the Asian financial collapse 1998, has since won plaudits for his handling of the crisis. He created a stir in January when he joined a chorus of calls for Malaysia to review the currency peg of 3.8 to the dollar given the US unit's decline in value.
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