What would actually happen to the American economy if the four main Latin American debtors - Brazil, Mexico, Argentina, and Venezuela - were to declare jointly a moratorium on making payments?
''There would be some damage,'' replies David Wyss of Data Resources Inc. (DRI). ''But it is by no means a disaster.''
Undoubtedly many envisage a nationwide banking crisis, as in 1933, with long lines of people trying to withdraw their money from failing banks, accompanied by deep depression.
According to calculations made by Mr. Wyss and Ron Napier for the Lexington, Mass., economic consulting firm, however, if this debtors' strike were declared next Jan. 1, the United States' output of goods and services (gross national product - GNP) in constant dollars would grow only 1.9 percent during all of next year, rather than the 2.7 percent DRI now predicts. (Such calculations, Wyss admits, are rough, giving only an ''order of the magnitude'' of the damage.) By the end of the year, GNP would be running at an annual rate about one percentage point below what would otherwise occur. But by 1986, according to the simulation, recovery sets in and the economy grows at almost the same rate as it would without a debt crisis.
Shareholders in the eight main money-center banks with massive loans to the four nations would be hit hard if not wiped out. These large banks have the equivalent of more than 100 percent of their equity lent to governments or private business in these countries.
''In theory,'' Mr. Wyss and Mr. Napier note, ''a default would make most of these banks insolvent; in practice, however, measures would be taken to allow an extended write-off to keep the banks in operation.''
But the solvency of the nation's regional banks, with fewer loans out to the Latin American nations, should not be threatened, the two figure.
The calculations involved in such a hypothetical study require important assumptions. A pessimistic one is that all four debtors would default or declare a moratorium at the same time. Wyss and Napier do not expect that.
''The welfare of both the LDCs (less-developed countries) and the United States would be better served by renegotiation, which would allow the LDCs to retain access to the credit markets,'' they note.
Another more hopeful assumption is that the Federal Reserve System and the Federal Deposit Insurance Corporation would come to the rescue of the money-center banks to prevent panic from developing among the public.
Mr. Wyss, in a telephone interview, expressed his confidence that these regulatory agencies have both the power and the will to isolate the crisis to the major banks. Their officials have pledged such support. Moreover, they have acted in the case of previous, lesser crises - Continental Illinois, Penn Square , Penn Central, and Franklin National, for instance.
The danger in a debtor moratorium is that major depositors would lose confidence in the big-eight banks and take their money elsewhere. Smaller depositors, up to $100,000, are automatically insured by the FDIC.
In the case of Continental, the FDIC guaranteed the safety of all depositors, including those above $100,000. Many depositors were not prevented from fleeing, however. So the Fed has made multibillion-dollar loans to Continental to make up temporarily for lost deposits.
The Fed could do the same for the big eight. It cannot run out of money, as it's the nation's basic provider of money. Fed officials would just sign the necessary checks to provide the banks with the money necessary to continue in business. This might temporarily expand the money supply more than is desirable, risking more inflation. But that could be gradually remedied by the Fed's selling government bonds from its massive portfolio, taking money out of the economy elsewhere.
Wyss and Napier also note that the authorities could guarantee interbank deposits. The money fleeing from the big eight would have to go somewhere, much of it presumably ending up with the more secure regional banks - e.g., Security Pacific in California. But these banks might have a hard time investing it profitably in such a short time. So, given the guarantee, they could safely return it to the big eight - e.g., Citibank or Manufacturers Hanover.
In other words, the money would just go in a circle. The big eight would gradually write off their massive losses over a number of years. Probably the terms of the write-offs would be negotiated with the regulators. Thus, in a way, it would be up to the regulators to determine how much and how fast the bank shareholders would be harmed. And these banking institutions would probably have to shrink in size because some depositors lost confidence in them.
The damage to the US economy would come in three ways, Wyss and Napier note:
First, the banks would lose more than $12 billion a year in interest alone. That money would not be available for relending.
Second, with the credibility of the banks damaged, interest rates on certificates of deposit and commercial paper would likely rise sharply, at least in the short run. Loan rates would follow upward. Fed intervention, however, would probably bring rates back down shortly, the two reckon.
Third, the suspension of payments would hurt trade with the developing countries. Trade credit would be disrupted and thus US exports cut substantially. But the creditor nations, no longer servicing their debts, would perhaps by 1986 be able to buy more imports.
Wyss and Napier also simulated the impact of a debt moratorium by the largest debtor nation, Brazil, alone. The results would be much less serious to the American economy, with GNP growing only 0.3 percent less than otherwise. And the shareholders of the big eight would suffer far less and the Fed would soothe any panic in the US banking system.
But even if the worst happened - all four major debtors stopped payments - the simulation shows no catastrophe. The two economists conclude: ''... such a strike looks quite survivable; indeed, the extent of the impact outside the banking area seems quite limited.''
Consumer prices rose 0.3 percent in July, putting inflation at a moderate 3.5 percent annual rate, the Labor Department reported Wednesday.
Americans paid more for electricity and natural gas, which accounted for most of July's price increase. They also paid more for potatoes, strongly contributing to the 0.3 percent increase in food prices. But they got a break on gasoline and used cars -- prices fell.