How Do People Battle Inflation? Living with constant double--digit inflation may be something new for Americans, but across the Atlantic many Europeans are used to it. How do people who are veterans at battling inflation cope? What tricks have they learned? For the answer, staff members of U.S. News & World Report in London, Paris, Rome and Geneva talked to people in many different occupations. This is what they learned: Everyone has a strategy for sheltering assets from inflation or for supplementing income. In Italy, to protect savings, people are rushing to invest in three-to-six-month government securities that bring from 12 to 15 percent in interest. The earnings are worth even more than this because they are exempt from taxes. Throughout Europe, investing in real estate, precious metals and a variety of other tangibles is a favored way to hedge. The French have an estimated 10 billion dollars’ worth of gold hidden away. Swiss bankers tell investors to keep 5 to 10 percent of their assets in gold. Working an extra job for cash and hiding the income from the tax collector is another increasingly popular method used to cope with high prices caused by inflation. Pensions in Italy only recently were linked to the cost of living. In France, generous family allowances help to protect those with children. But all the methods for beating inflation are of little use, insists one Swiss banker. In the end, inflation is bad for everybody. In Britain, unsold goods gathering dust on the shelves have reached an all-time high, totaling over 10 billion dollars worth. Expensive consumer goods such as autos, kitchen appliances, TV sets, clothing and furs top the list of avoided goods. Germans, who have one of the world’s best records for fighting inflation, are limiting their use of gasoline, now priced at nearly $2.50 a gallon. Surveys show that Italians are using their cars less, economizing more on heating, spending less on clothes and resorting more and more to “do it yourself” repairs. Even Italy’s famous night life shows the effects of inflation. Says a Milan businessman: “Restaurants, movies, and nightclubs are half empty much of the time.” Experienced as they are at fighting inflation, many Europeans are as worried as Americans. When asked how the Swiss were protecting their savings, a Zurich banker replied: “Most of them sit in the corner and cry because they don’t know what to do.” |