Chronic inflation has once again merged with temporary recession, giving Americans the worst of times. The cost of living continues up, while more people will be losing their jobs as the summer wears on. Herewith, a status report on coping with inflation/recession, othewise known as "inflession":
On consumer credit. Mortgage rates are coming down, business-loan rates are coming down, but don't look for a drop in consumer-loan rates. Banks, stores and other lenders are saying that, for the time being, they are going to keep the higher fees, higher interest rates and higher monthly payments they have been imposing all spring.
Since the first of this year, 30 states have raised the interest rate that lenders are allowed to charge on consumer loans, according to the Consumer Finance Newsletter. And lenders are continuing to press for higher rates in states like Arkansas and Texas that now have rates below the national average.
What is loosening up a little is the standard lenders use in deciding who can, and who cannot, borrow money. Last month, many borrowers were turned away; this month, more people are being accepted for credit. Over the summer, those of you who can afford it will discover that today's expensive charge cards are easier to get.
Two kinds of consumer loans have become cheaper. Federally insured home improvement loans are down to 16 1/2 percent from 18 percent last month. And the National Consumer Finance Assocation reports that auto loans are generally around 13 percent, with some dealers going lower in order to sell cars.
On layoffs. Any family facing a layoff should take immediate steps to protect its savings and property, so as to lose as little as possible while waiting for the economy to turn around. Apply immediately for any benefits due you, from unemployment pay to food stamps. This keeps you from havng to dip more deeply than necessary into your savings.
Make a layoff budget, cutting out all unnecessary expenses for the duration.
If you can't pay for basic living expenses and the mortgage, visit your bank or savings and loan association and ask for a break on house payments. The bank won't be surprised -- loan officers see this sort of thing all the time, and they understand it. You should be able to negotiate lower monthly payments for a few months while you look for another job.
If you have a child going to college this fall, write to the school's financial-aid office. Say that you're unemployed and ask for additional tuition help.
On house prices. Doomsayers warn that house prices face a 1929-style collapse, but that view is hard to support. Houses are different from stocks and silver futures. Homeowners don't dump real estate in a recession the way investors dump stocks. At worst, average house prices slow their rise or level off for a while -- but recession has never driven them into a general collapse.
The trends that fueled the rise in house prices through the 1970s are still intact. The baby-boom generation continues to swarm into the housing market, growing numbers of single people are buying homes, and the rising divorce rate splits one-house families into two.
It does appear that in 1980, for the first time in the postwar period, house prices will rise less than the inflation rate. The forecast increase: 6 percent for newly built homes and 8 percent for existing homes. Mortgage rates are expected to bottom out this year at 11 to 12 percent, which should start luring home buyers back into the market. In 1981, house prices are expected to rise more rapidly.
On inflation. Winter's 18 percent inflation is now only a bad dream. But the sharp decline in the consumer price index has probably not made as much difference in your life as the statistics suggest.
The principal thrust behind the consumer price index this winter was interest rates, expecially mortgage rates. If you didn't buy a house during inflation's peak, that portion of the index didn't affect you at all.
So your personal inflation rate probably isn't changing as much as the published index might imply. Certain food prices have moderated, and gasoline prices are rising more slowly. But on balance, the underlying cost of living will continue to ascent at a rate not very much different from what we faced last year.