Soros Foresees Further Erosion in Value of U.S. Dollar, Equities Thu Jun 27,10:53 PM ET By: James R. Hagerty, Staff Reporter of The Wall Street Journal LONDON -- George Soros said he wouldn't be surprised if the dollar loses a third of its value during the next several years. The billionaire philanthropist and financier said stock markets "could go much lower," too, if the U.S. quickly slips back into recession -- something he still hopes can be avoided. Citing his own books, lectures and articles, he also outlined steps that he said could prevent what he calls "the Bush bear market" from turning into a global economic crisis. After years of rising against other major currencies, "it seems that the trend in the dollar has been reversed," Mr. Soros said. Against the euro, the dollar has fallen about 10% so far this year. Trends in currency markets tend to last several years and involve major swings, he said, so a drop of around a third in the dollar's value from recent levels "would not be unprecedented." The 71-year-old Mr. Soros, whose speculation against feeble currencies once terrified governments, retired in the mid-1990s from active fund management but remains chairman of Soros Fund Management LLC, which advises the Quantum funds. Mr. Soros now spends much of his time preaching for more U.S. aid to poor countries, among other causes, but he also keeps a close watch on the markets. Investors outside of the U.S. have been rattled by news of corporate excesses and accounting scandals that led to the collapse of Enron Corp. and fraud charges against WorldCom Inc. (NasdaqNM: WCOM - News) , Mr. Soros noted. Making things worse, he argued, is "the apparent unconcern" of the Bush administration, which he said has shown "no particular desire to do too much about" those excesses. Partly as a result, he said, "the savers of the world have lost confidence" in the Bush administration's management of the global U.S. economy and are withdrawing their funds from the U.S. The dollar's fall, in turn, has "some very negative implications" for the world economy, Mr. Soros said. Among them, he said, is the danger that it will frighten U.S. consumers. In recent years, free spending by Americans has kept the world economy humming. If they take fright and slash their spending, the fragile U.S. economic recovery could reverse itself, sending the country into a "double-dip" recession, "and the stock market could go much lower," he said. So will the consumers stop spending? "I'm agnostic on that," Mr. Soros said over lunch in the formal, beige-walled salon of a central London row house. He added that the answer should become clear soon and advised keeping a close watch on such things as U.S. auto sales, the housing market and unemployment. If the economy continues to recover, he said, stock prices should stabilize or gain. "Right now we are at a level of excessive pessimism, and we are liable to have a rebound in the near term," he added. For the rest of the world, Mr. Soros warned, "the U.S. will not be the motor for the global economy that it has been." The European Union ( news - web sites), where member countries are constrained by pledges to hold down budget deficits, is unlikely to emerge as an alternative motor, he said. Unlike the U.S. Federal Reserve ( news - web sites), the European Central Bank has proved unable to move swiftly in cutting interest rates when needed to stimulate growth. "The ECB is much more conservative -- backward-looking -- than the Fed," he said. What is needed, Mr. Soros said, is for the U.S. to show leadership in boosting the global economy. One helpful step, he said, would be to provide Special Drawing Rights, a composite currency, to poor countries to help them build up their foreign-exchange reserves. Thus bolstered, the poor countries would have the flexibility to spend more money at home and stimulate their economies. He also favors more official aid to institutions that lend money to small businesses and home buyers in poor countries. To resolve the crisis of confidence in Brazil , he said, the Fed and other major central banks should intervene in the market to support Brazilian ( news - web sites) government debt, becoming the lenders of last resort. "Brazil has done all the right things according to the Washington consensus" on economic policy, he said. "If there is no relief for Brazil , then the whole system is basically bankrupt because it means that good behavior doesn't get you where you want to be." Mr. Soros berated the Bush administration for relying too heavily on market forces and rejecting calls for more intervention to help countries on the " periphery" of the global economy. Is he discouraged by President Bush ( news - web sites)'s refusal to listen to such advice? No, Mr. Soros said, because "whenever the situation becomes really dire, then miraculously there's a change of attitude." Still, Mr. Soros said, he doesn't want to see a dire turn in the global economy just to advance his causes. "It wouldn't help my financial situation," he said. He laughed briefly and then rushed off to prepare a speech on how to heal the global economy.