THE PRIME INTEREST rate has now reached 20 percent a year, a ringing round number that invites reflection. The present interest rates, unstable and exceedingly high, are changing the ways Americans think about money and the ways in which their financial institutions work. These changes are not, to put it mildly, for the better.

The blame lies, of course, with the inflation that is driving up the rates. The Federal Reserve Board is right in saying that any attempt to reduce interest rates, while the present demand for credit stays high, would only make the inflation worse. But the effects on the financial system are structural. They will not be reversed easily or quickly when the interest rates eventually come down again.

The most obvious strains are those on certain types of banking and lending institutions. Most of the big and well-run banks have presumably managed to balance their borrowings and lendings by maturity. But that's not possible for, say, a savings and loan society that takes in short-term deposits and issues long-term mortgages. The income from those mortgages, written in the past when rates were lower, is not enough to pay current rates of return. Deposits are safe, because the government insures them up to pretty high limits. But the institutions themselves are less well protected.

More important for the future, the whole idea of long-term lending now has a large question mark hanging over it. A person who bought a high-grade corporate bond three years ago, when the rate was around 8 percent, seemed to have made a very sound investment. But today that bond could be sold only at a horrendous discount. Similar bonds floated today yield more than 14 percent, and even the return is less than the inflation rate. If this inflation continues, lenders will become increasingly reluctant to commit themselves for long periods. The long-trem capital markets will be eroded and, eventually, will disappear. That has happened in other countries. In Great Britain, to make one prominent example, there is now a long-term market only for government securities.

That changes the character of business itself. An electric utility can survive only with long-term borrowing, and, if the private market fails, it must turn to the government. Prolonged inflation always tends to expand the public sector.

Other kinds of businesses, with more flexible requirements, turn to the banks if they cannot float bonds. The banks provide short-term loans that are routinely renewed -- but only at whatever interest rate may then be current. A fluctuating rate increases the risk to the borrower, and discourages business investment. Lower investment means fewer jobs.

This process of damage has already begun, and it is cumulative. The longer the prime rate stays at 20 percent, the higher its costs will go.