Billionaire investor George Soros is paddling against the torrential river of mainstream economists who expect the American economy to stop contracting in the third quarter and resume growth in the fourth quarter of this year.

The renowned currency speculator recently likened the U.S. economic recovery to an inverted square root sign, saying, "You hit bottom and you automatically rebound some, but then you don't come out of it in a V-shape recovery or anything like that."

As a result, Soros believes the U.S. dollar is headed for turbulent waters.

George Soros Shorts the U.S. Dollar

Soros, the 29th-richest person in the United States, says the U.S. dollar is under selling pressure and may eventually be replaced as the main world reserve currency, an event we here at Gold World have discussed with you many times over the past several months.

Mr. Soros agrees the greenback may be replaced by the International Monetary Fund's Special Drawing Rights, a synthetic currency basket comprised of the U.S. dollar, euro, Japanese yen, and British pound sterling.

"I think the dollar is now under question and I think the system will need to be reformed, so that the United States will be subject to the same discipline as is imposed on other countries," recently claimed Soros, whose famous bet against the British pound yielded his Quantum Fund over a billion dollars in one day in 1992. "Being the main issuer of international currency, we have been exempt and we have abused that because we have effectively consumed 6.5 percent more than we have produced. That is now coming to an end."

Soros isn't the first to suggest the U.S. dollar may be replaced as the world's most widely held reserve currency.

$555 Billion by 2020

There's a new leader in the global green energy market.

This underestimated nation already dominates the solar, wind, and hydro power industries. Now they're raising the stakes even higher... All told, their clean-tech market will be worth $555 billion by 2020.

G.E., DuPont, and even T. Boone Pickens have already staked a claim. Now it's your turn.

You can't afford to let these profits pass you by. Read the full report today.

Back in September 2007, former Federal Reserve Chairman Alan Greenspan claimed the euro could supplant the greenback as the main reserve currency, saying it is "absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency."

The euro has already claimed a noticeable stake in the world's reserve currency supply.

Total claims of allocated world foreign exchange reserves denominated in euros have increased 352% since the Eurozone currency was introduced in 1999. Today, there is over $1.1 trillion worth of euros in the world's total allocated foreign exchange holdings.

As a result, the percentage of U.S. dollars held in foreign exchange reserves has dropped noticeably in the past decade.

In 1999, over 71% of the world's allocated foreign exchange reserves were denominated in U.S. dollars. Today, however, only about 64% of these foreign exchange reserves are denominated in U.S. dollars.

Why Is George Soros Shorting the U.S. dollar?

Soros, along with Gold World and many other widely followed speculators, maintain that poorly managed U.S. macroeconomic policies — like those that have lead to a current and growing $70 trillion debt obligation — will continue to undermine the confidence in the value of the U.S. dollar, ultimately leading to lower demand for the greenback as a reserve currency and to lower market value.

These macroeconomic policies are the reason the value of the U.S. dollar (as measured by the U.S. Dollar Index) has fallen 42% since 2001.

An actual changeover in reserve currency dominance would send the value of the U.S. dollar plummeting, quite likely to all-time lows, and would negatively affect most governments, central banks, and investors worldwide, ultimately.

However, there are several ways to avoid the sting of a continuing, significant drop in the value of the U.S. dollar.

How to Hedge Against a Devaluing U.S. Dollar

One of the best ways to hedge against a falling U.S. dollar is, of course, owning gold and silver. Precious metals have thousands of years of history preserving value against fiat currency, like the greenback.

Other commodities, such as energies, grains, and meats also do well during times of a falling U.S. dollar and inflation. There are plenty of ways to invest in these commodities, including ETFs, stocks, futures, and options.

Having exposure to other foreign currencies will also provide a hedge against a devaluing dollar. A simple option for investing in foreign currencies is currency ETFs. You can buy and sell them as easily as stock without special transaction fees. Another option would be to open a FOREX trading account.

As the current financial crisis only continues to deepen the debts and financial obligations of the United States, demand for the U.S. dollar in foreign exchange reserves may continue to shrink, ultimately leading to a lower market value.

This may be the catalyst that would force a change in reserve currency dominance, as suggested by Soros, the analysts here at Gold World, and many other economic analysts.

We strongly urge you to act now and then relax, knowing your investment strategy is working hard for you whether or not your dollar is.

Good Investing,

Luke Burgess
Editor, Gold World
Investment Director, Secret Stock Files