"We're in a recession."

"No, we're not."

"Inflation is the greatest enemy."

"The weakness in the economy during the first half of the year was due to special factors, mainly the sharp increase in energy prices and disruptions in oil supplies."

Ah, you say to yourself, merely an assortment of confusing statements that have graced the columns of the nation's newspapers for the past several months.

You would be right if you made that assessment today, or five years ago.

For in the summer of 1974 -- as the nation focused on the final gasps of a disgraced administration and the natal twitches of a new one -- economists and analysts debated whether the United States was in a recession.

It was a debate that in retrospect looked uninformed, for by mid-October the bottom had fallen out of the economy.

But during that summer, with inflation blowing at 12 percent or more, the Federal Reserve Board had little taste for the debate. It raised interest rates sharply to stem what it felt to be excessive borrowing, excessive money growth and excessive inflation.

In fact, the Fed didn't ease up until layoffs were mounting sharply.

The Dow Jones industrial average also reflected uncertainty in 1974, wallowing in the 800s and 700s for most of the year, and finally dipping below 600 in October as the recession became evident.

As similarities with 1974 begin to emerge, investors must keep a careful watch on the Federal Reserve. As in 1974, it could become the final villain.

A late entry in the inflation fight then because of political pressures, the Fed tightened monetary policy with the tenacity of a mongoose once it got there. The Fed's policies turned what might have been merely a bad recession into the worst economic slide since World War II.

History may be repeating itself.

To the investor who is waiting to plunge into the stock market after stock prices in general are at or near the bottom, the future course of the economy is critical.

The Dow average has been in the 800s all year, rallying briefly, then reversing itself. If a severe recession is in the offing, then stock prices have some more ground to lose before there is a general, sustained rally in the equity market.

Stock prices usually begin to climb some months after the economy begins to falter, but some months before the economy begins to recover.

The economy has dipsy-doodled all year, prompting a new surge of debate about the existence of a recession. Except to the nation's auto workers -- about 100,000 of whom have been laid off -- and a few other isolated pockets of employees, the existence of a recession has been a theoretical concern.

But although the next few weeks may show a slight upswing in economic activity, the course for the rest of the year will be down. Just how far down probably will be determined by the Federal Reserve.

And the Fed -- which makes monetary policy in Washington and executes it here in New York -- has adopted an aggressive tight-money policy under its new chairman, Paul A. Volcker, that would be the envy of Arthur Burns at his rhetorical best.

For just as the signs of an ebb in inflation are on the horizon and weakness seems to be spreading beyond the automotive sector of the economy, the Fed has boosted short-term interest rates sharply and sent both the bank prime interest rate and its own discount rate to record levels.

Personal incomes have been battered by inflation. For a while, consumers could supplement their buying power by borrowing, especially on the inflation-boosted equity in their homes.

But mortgage rates are through the roof and, with a shortage of funds for new-home buyers, current homeowners are not remortgaging. In fact, the backlog of unsold new homes is beginning to grow.

So, with little left to buffer their paychecks -- and with the prospect of higher home heating costs this winter -- consumers can be expected to slow their purchases in coming months.

Businesses don't appear to have as many unsold goods in their warehouses as they did in 1974. That should mean they won't have to cut their orders as sharply as they did five years ago.

Unfortunately, as economists discovered in 1974, inventory statistics are shaky. And, because many businesses have switched accounting methods in these inflationary times, there may be more goods on the back shelves than is apparent by their dollar value.

Furthermore, the traditional offset to weakened consumer spending, increased business investment in capital goods, may be hindered by the high level of interest, rates.

Although inflation remains a persistent problem in the economy, there are signs that the rate may taper off in the coming month.

Food prices have begun to decline. Most of the sharp increases in oil prices put into effect by the oil-exporting nations in the first half of the year will show up in retail prices within a month, and import prices should rise more slowly.

Those who advocate tighter monetary policy (read higher interest rates) argue that loan demand remains high and that the money supply continues to expand too quickly.

But the high level of loan demand itself may be a symptom of inflation and not a sign of robust, shortage-creating economic overheating. If a widget cost $2 in 1970 and $3 today, a business has to borrow 50 percent more to finance the same item.

At a 12 1/4 percent prime rate, a businessman doesn't borrow willy-nilly.

At some point, maybe 12 1/2 percent, maybe 13 percent, the businessman stops borrowing altogether. That's when economic activity comes to a precipitous halt, as it did in 1974. Monetary policy has a history of biting all of a sudden.

And, as Santayana warned, those who ignore history are doomed to repeat it.