Business: Better-Buy-Now Mentality

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Young adults, who are forming families and plunging into debt to pay for everything from cars to homes to appliances, are particularly heavy borrowers. Reports Albert Sindlinger, the public opinion pollster: "Before 1972, the practice was that if you wanted something you would build up your savings, usually for a down payment, then go into debt for the rest. But exploding inflation has changed all that. Whereas their parents took ten years to furnish their homes, today's young people do it in two weeks." Adds Stan Benson, a Los Angeles consumer credit counselor: "It is not unusual to see a 26-year-old come in here already $10,000 to $12,000 in debt, with an average take-home pay of $1,000 a month, and owing that amount to ten or 15 creditors."

The ingenuity of consumers and lenders has thwarted the Federal Reserve Board's efforts to tighten credit. Money is easily available, in large part because inflation has motivated people to discover new ways to lift borrowing and spending power. Anyone with a decent credit rating can get not just one Master Charge or Visa card but several of every kind—each from a competing bank, and each with credit lines that offer the opportunity to draw cash advances of up to several thousand dollars a month.

Some banks have become more cautious in shoveling out the plastic, but for many more it is simply business as usual. Says William Maulding, senior vice president of Atlanta's Citizens & Southern National Bank: "There has been no tightening of money at C & S. Any customer who meets our standards for a credit card will be issued one. We could make more loan money available this year than last if the demand were there." At New York's Citibank the average card customer in 1978 used about 38% of his available Visa credit line, but last year that figure rose to 44%.

By cashing in on more and more of the inflationary equity in their homes, people in an economic sense are actually "consuming" their dwellings. Before 1970, net increases in home mortgage debt rarely exceeded $15 billion annually, but since 1977 the borrowing has leaped to close to $100 billion a year. As Economist Alan Greenspan points out, much of the rise has been coming from people who sell their homes at bloated prices, then make the lowest possible down payment on a new and probably even more expensive dwelling, pocketing whatever is left over as profit. Still other borrowing is coming from "home equity loans," the bankers' euphemism for second mortgages, which at interest rates of as much as 18% or more have become among the trendiest and most profitable items in bank loan portfolios.