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By 1984, a person retiring in 1979 with a pension of ,$10,000 will see the buying power of that pension decrease to $6,000—if he is lucky. And if he is not so lucky, his pension will be worth only $5,000 in 1984, said Gerard A. Lareau, president of the Consumer Credit Counseling Service of New York City. Addressing those attending the National Financial Counseling Conference held at Virginia Tech, Lareau said the financial forecast for the United States is grim. He predicted social and financial dislocations because of rapidly continuing inflation.
“It’s a problem that is not going to go away,” he said. “WeYe not going to see it solved by projected—and according to some economist—already starting recession.”
"In the past,” he added, “at least in the forties and fifties, if we had a recession we could usually expect the inflation to be cured by that recession. It’s not going to be that way now.”
Inflation, he explained, raises people’s incomes, but also puts them into higher tax brackets.
Also, he said, the varieties and sources of credit are changing more rapidly than any other time in history. For example, he pointed out, credit unions are beginning to offer credit cards and Sears is planning to offer savings certificates.
All the rules of the game are changing, Lareau said, and changing fast.
While credit has expanded, the rate of savings by the American consumer has dropped drastically in the last two quarters to the lowest rates historically since World War II, Lareau explained.
“This is one of the reactions of the consumer to inflation,” he said. “It’s very destructive and very sad because we’re about to or already have entered a recession at a time when people need a savings cushion and they don’t have it to the degree they had it in prior periods in relative income terms.” People are not saving for several reasons, he explained. One reason is that they fear if they don’t buy a new car or washing machine this week, the price will only go up next week. Another reason is that people who have savings
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