A leading regional banker said that it was axiomatic that despite market intervention a countrys currency will eventually fall to an exchange rate which balances its international trade and payments accounts. John Medlin president and chief executive officer for the First Wachovia Corp said that substantial and rapid currency devaluations usually are followed in time by surging price inflation spiralling interest rates and painful economic austerity. Speaking to a banking trade group he also said the peak of debt writeoff has not yet been reached. Medlin told the Bankers Association for Foreign Trade that ultimately our nations budget and trade deficits will be balanced either through voluntary restraints in spending and consumption or through forced austerity imposed by a dispassionate and unmerciful international market place. He said the continuing weakness of the dollar and the recent increase in inflation and interest rates provide early warning that the classic laws of international economics still are in effect. He also told the association that trying to reduce the trade deficit by erecting protectionist barriers to imports would not give lasting relief. However the imposition and enforcement of fair trade rules could help improve imbalances with nations which practice protectionism and deception on us. Medlin noted that the U.S. economy was likely to continue at best being a sluggish mixture of depressed segments and growth areas. But he said that the business cycle was still alive and that the next downturn could be deeper and harder to reverse than the last one.
BANKER SEES CURRENCY FALLING TO BALANCE TRADE