New Credit Dampers

When he first wet-blanketed installment sales last summer (TIME, Aug. 25), FRB Chairman Marriner Eccles warned that there would be "further dampening." Last week Mr. Eccles got out his wet blanket again and dropped it on the U.S. consumer. But, like most of Washington's anti-inflation gestures, this one really soaked nobody but the rich.

Main new dampers on retail credit:

> Open charge accounts cannot run over 70 days, or 40 days after the end of the month of purchase. If not paid by then, the retailer must change them to installment accounts, with regular monthly payments, before the customer can charge anything more. This ruling is expected to cut the overall national average payment time from 80-95 days to 55.

> Installment terms were tightened to a maximum payment period of twelve months (v. 15 months before), a minimum down payment of 33 1/3% (with a few exceptions), an absolute minimum of $5 in monthly payments.

Retailers, who had feared a sharper limit on charge accounts, were relieved. The main irony was that FRB's order will hit the luxury-goods buyer hardest. The new-rich poor are prompt payers anyway, and have more cash than ever before. But the new-poor rich are notoriously "slow pay." They make a practice of paying their big bills only once or twice a year, to save interest.

Whatever FRB's order does to the great U.S. institution of easy credit, it will have little effect on inflation. Though OPA last week estimated that the new restrictions would mop up $2 to $2.5 billions in potential credit, the inflationary gap between purchasing power and available consumers goods is already so huge that even a no-credit-at-all order would not solve the problem. The U.S. Department of Commerce has estimated that, even in normal times, 63 1/2% of all retail sales are made for cash, 23 1/2% on charge accounts, only 13% on the installment plan--and U.S. wage and salary payments this year are running $1,000,000,000 a month over last year's.

Until his cash, not his credit, is taken out of the consumer's pocket, inflation will not be controlled.

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