When personal-finance columnist Sylvia Porter talks, 40 million people listen. And to them—her estimated audience in 450 newspapers around the world—it was less of a shock this month when the stock market went into a tailspin following the Federal Reserve Board's move to tighten credit. Though in her blunt style Porter calls Washington "the city of fiscal morons," and blames it for creating the current crisis of inflation, she endorses the new painful corrective. "It's a bitter medicine, but we've got to swallow it." Long Island-born Porter, 66, graduated magna cum laude from Hunter College at 19. Her physician father had died, and the family was hurt by the crash of '29. She worked for a bond dealer and wrote free-lance before beginning her column in the New York Post in 1935—for the first seven years under the by-line of S. F. Porter in order to conceal her gender. Divorced once and widowed once, she married public relations executive James Fox, 62, last January. She is the author of seven books (two with tax expert J.K. Lasser), including a 1975 best-seller, now updated in a five-pound, 65 percent-revised sequel—Sylvia Porter's New Money Book for the '80s (Doubleday, $24.95). A longtime reader, Lyndon Johnson once blurted "Why can't [my] economists talk straight like Sylvia?" And that's what she did in her elegant Fifth A venue apartment, discussing the present economic slump and some tips for surviving it with Christopher P. Andersen of PEOPLE.

Is this the Crash of '79?

Not a crash, perhaps, but the squeeze is on. I'm not really sure you can call the situation we're in a recession, either, since that implies a mild slowdown of short duration. We are in a severe slump—as bad as the one of 1974 and 1975—and there is no telling how long it will last. One thing is certain: We never should have let ourselves get in this bind.

Who's responsible?

Jimmy Carter. He had the nation in his hands, and he blew it. I did not anticipate an Administration so inept, so lacking in leadership and so geared to reacting instead of acting. Until now, we have had no economic policy whatsoever to defend the dollar, combat inflation and increase productivity. I hang my head in shame to think American productivity is declining. If we have to have corporate tax incentives to get things moving again, so be it. Put 'em in—but for God's sake do something.

What has gone wrong?

The dollar is collapsing and our monetary system deteriorating. The Carter Administration has stood idly by and watched as our currency was debased, and American business became the bargain counter of the world. It makes me very uncomfortable to watch foreigners snapping up our banks, real estate and corporations at discount prices. And whether or not the buyer calls himself Japanese or German or Dutch, you can believe there is an Arab behind practically every deal.

Will the credit tightening by the Fed help?

It's a necessary first step to recovery. At last we've faced the fact that we must slash the money supply by increasing the prime lending rate [to 14½ percent]. We as a nation are finally standing up to the rest of the world and saying, "We intend to defend the dollar." An awful lot depends on whether or not the man in the White House has the guts to pursue this policy.

But won't individual Americans suffer?

In the next few months, we will see an increase in unemployment and in personal bankruptcies, which are already on the upswing.

What about the level and impact of inflation?

Its intolerable. An individual can't make any plans on the basis of double-digit inflation—not for raising a family, not for sending kids to college, not for buying a home, not for retirement. Nothing!

Some say spend now, for tomorrow it will only cost more. Is this wise?

That is totally self-defeating—and extremely dangerous. Unfortunately, more and more people feel there is no way out of this vicious circle, so they spend to the hilt. This not only further fuels inflation, it saddles the economy with a tremendous overload of consumer debt. Many people think bankruptcy is an easy way out of debt, but they don't get away with it. No matter what you are told, a bankruptcy record dogs your footsteps for years.

But with double-digit inflation outpacing savings interest, why save?

It's a necessity. Certificates of deposit and Treasury bills now offer the average person a better deal on interest. But whatever the return, for emergencies you should always have savings you can get at fast, equal to at least two months income.

With mortgage money drying up, will home ownership become a forgotten dream in the coming decade?

A traditional rule of thumb has been that a family's gross income should be at least five times its mortgage payments. On this basis, only four out of 10 U.S. families could afford a home by 1978. Today, this standard test of affordability is being ignored. My rule of thumb for home buying in the '80s is you can afford to buy a house costing roughly two-and-one-half times your pretax yearly income. For example, if your family's gross is $20,000, you can afford a house costing $45,000 to $50,000.

Is now the time for the small investor to get into the stock market?

Absolutely. It's the only bargain left on the table. For the guy with, say, $10,000 to invest, putting the money into a portfolio of growth stocks with solid earnings backgrounds is a wise move.

How about gold?

No! This is the question everybody asks me, but the gold market is no place for the average person to be. Besides, the panicky rush to buy gold is stupid. Gold is a barbaric metal with limited uses, and there is no way to defend it at $400 or more an ounce. I wouldn't touch gold right now with a 10-foot pole.

Are collectibles a hedge?

The popularity of limited edition medallions, coins, records, ingots, plates, spoons, statuary, you-name-it, has rocketed to such peaks recently that the market has reached the saturation point. If you are an amateur collector, you must face the fact that you are at the mercy of sharpies. Don't forget you are usually buying retail and selling wholesale. Five years from today, chances are you will be lucky to salvage half your original investment.

Is there a way to combat higher costs?

There are always moves people can make to cushion the impact of inflation on the household budget. Shop around. Keep an eye on the ads. Watch for differences in quality. Hold periodic family councils on money matters. Buy generic products instead of the more expensive brand-name varieties; aspirin is aspirin. Keep control on those credit card purchases. These are hardly new ideas, but too many people have the mistaken idea that they no longer make a difference because prices have gotten so far out of hand. They're wrong.

Is the timing of purchases important?

The strategy of timing alone can offset any apparent annual rise in the cost of living. Buy furs, gardening equipment and men's coats in August—and save up to 30%. February is the month to buy air conditioners, rugs, lamps and used cars. Television sets are cheapest in May and June, books in January, home appliances in July. Fishing equipment, glassware and bicycles are cheaper in October, and November is the month for blankets, dresses and water heaters. Now is also harvest time, and vegetables are very inexpensive. Knowing when to buy can slash your spending by thousands of dollars.

What is the greatest threat to our economic system?

Ignorance. We are a nation of economic illiterates. I have been arguing for years that we must make pure economics and consumer economics required courses in high school, if not elementary school. The people who teach economics in college are so ignorant themselves it's ridiculous! A group of college-educated bankers was given a test, and the majority missed questions on the balance of payments problem, the functions of the Federal Reserve and the origin of commercial bank deposits. Enough!

What is your prognosis for the '80s?

It's simple—either we take action now or in five years the ball game is over. If the dollar does collapse completely—and with it the world monetary order—then what we face will make the Great Depression pale in comparison. But I'm pretty confident that won't happen. Americans have finally come to realize that staggering inflation and low productivity are not the norm, that we can act to turn the tide. I'm betting that by the end of the 1980s America can have the best of all worlds: low inflation, full employment and a strong dollar. But it'll take something we've had in short supply lately—the courage and the will to act.