Mahathir warns of a dollar catastrophe

SHARP-tongued Mahathir Mohamad, scourge of currency traders worldwide, has said the US dollar is headed for a 'catastrophe' and will never regain its old strength.

The former Malaysian leader said Washington's bulging deficits would ultimately sink the greenback. 'The catastrophe will come one day because even the most powerful country in the world cannot repay loans amounting to $7 trillion (£3.7 trillion),' he reportedly told an Asian business conference.

The 79-year-old - who pegged his country's sinking currency firmly to the dollar when Prime Minister in 1998 - said: 'It is certainly on the way to collapse.'

Mahathir advised the audience of executives to steer clear of accepting the dollar as it was unstable, and likely to drop further.

Since leaving political office in 2003, Mahathir has acted as an adviser to national carmaker Proton, owner of Britain's Lotus Cars, and sponsor of Premiership battlers Norwich City.

Mahathir's fiery broadsides typically challenge mainstream economic and political views. But his gloomy view of the dollar's prospects echoes the prevailing sentiment among many analysts, who are bearish about the currency despite recent gains.

Mahathir said the only factor now holding back a collapse in the dollar's value was a worldwide fear of the consequences should the world's reserve currency go into a nosedive.