A leading regional banker saidthat it was axiomatic that despite market intervention, a
country's 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 nation's 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."
 Reuter
