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Price hikes of the '70s and '80s color how different generations view the economy now


Americans under 40 are witnessing the highest inflation of their lifetimes. Not since the early 1980s have prices risen as fast as they have over the last 12 months. But young adults who are rattled by their first inflation rodeo may be able to draw on the experience of some older hands. Many of their parents lived through much larger price increases four decades ago. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Jeanette Vecchio is feeling the pinch of inflation everywhere, from rising rent in Chicago to costly gasoline to a new charge on the bill at her local bistro.

JEANETTE VECCHIO: I just went to my favorite corner restaurant that has great bread and butter. They're now charging for bread and butter, and I was so devastated by it, but it's just another example of an increase across the board.

HORSLEY: Vecchio recently got married, and she'd like to buy a house one day, but she's worried about rising real estate prices and the threat of higher interest rates. Inflation is also affecting Vecchio's work. She's a project manager at a Chicago metal-works company that's been in her family for four generations. Over the last year, there have been times she's had to tell customers a price quote is only good through the end of the day.

J VECCHIO: We were holding our price for 24 hours - or less than 24 hours, because steel prices were increasing that rapidly.

HORSLEY: This is all new territory for Vecchio, who's 30 years old and has never seen prices this volatile at home or at work. Luckily, she can get some counsel from an older colleague at the company, who also happens to be her mom.

GINNY WENDT VECCHIO: Oh, yes (laughing).

HORSLEY: Ginny Wendt Vecchio is 66, and she has painful memories of inflation in the 1970s, when oil shocks made gasoline not only expensive but scarce.

G VECCHIO: I remember we had big cars then. You know, they were gas guzzlers. And you would be around the block waiting to fill up your car, and you couldn't fill it up all the way. That concerned me a lot.

HORSLEY: By 1980, the inflation rate topped 14%, double what it is today, and the Federal Reserve cracked down hard. The following year, mortgage rates soared above 18%. That's five times the cost of a home loan today.

G VECCHIO: We purchased a house in '86, and the interest rate was in the teens. My parents probably were scared to death. Could we make the mortgage? But it really didn't matter because I was probably young, and ignorance is bliss.

HORSLEY: Eventually, rates came down. And three and a half decades later, Ginny Vecchio still lives in that house, which is paid for. At home and in business, she's taught her children to be careful with their money.

G VECCHIO: Think before you spend - which is, I think it's hard, too, because everybody's online all the time and shopping. So it's just the press of a button.

HORSLEY: Ashley Gulke, who's 39 years old, has never known inflation this high before. Gulke lives in Minot, N.D., where the high temperature on Friday is expected to be 9 degrees.

ASHLEY GULKE: I don't even look at those heat bills. I mean, they're over 600 bucks a month for sure, but I don't even look at them. I just let my husband deal with that grief.

HORSLEY: Gulke's husband is a farmer, so he also has to deal with the rising cost of fertilizer and equipment. They have three kids who go through a lot of shampoo, so to avoid sending money down the drain, Gulke shops at the dollar store. But even dollar store shampoo now costs a dollar and a quarter.

A GULKE: I mean, it sounds so silly, but I remember my dad talking about the dime store, and I thought, were things really actually ever a dime? And now things aren't even actually a dollar.

HORSLEY: Ashley's dad is Jerry Gulke. At 77, he remembers not only dime stores, but the double-digit inflation of 40 years ago.

JERRY GULKE: The baggage that I bring to the party is that I've been there before, so each generation has to probably find their own way.

HORSLEY: Ultimately, the Federal Reserve did bring inflation under control in the '80s with those sky-high interest rates, but not before a deep recession. Jerry Gulke hopes the medicine this time around is less painful.

J GULKE: I'm just hoping that we're a lot smarter in the government and the Federal Reserve that we were back then, but economics 101 hasn't been repealed.

HORSLEY: To be sure, inflation is less entrenched now than it was four decades ago, and the rate hikes the Fed is contemplating are much less Draconian. Still, Ashley Gulke has internalized some of her father's caution.

A GULKE: He's kind of pounded into my head about the dangers of inflation. You know, you don't want to get stuck in a position where you can't make a payment because all of a sudden, interest rates go through the roof and then you lose everything you've been working for.

HORSLEY: It's hard to know whether today's high inflation is more nerve wracking for those going through it the first time or those for whom it's an echo of a painful past. Jeanette Vecchio does take some comfort from her mom's experience. My parents figured it out, she says, and we can, too.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.