(MONEY Magazine) – Like a videotape of President Nixon defending America's final days in Vietnam, recent economic reports evoke the early 1970s, when a weak economy and rising costs combined to produce a condition economists named stagflation. That dismal word -- a combination of stagnation and inflation -- is again being uttered by forecasters who fear an economic rerun of the Nixon years. ''With the Federal Reserve trying to fight inflation while not crushing the economy, we could be headed for stagflation, which would last at least through next year,'' says chief economist David Hale of Kemper Financial Services, the Chicago brokerage and mutual fund firm. Surging wholesale prices earlier this year set off alarms among inflation watchers (see the chart on page 63). And economic malaise -- growth of 2% or less a year -- seems reflected in recent slowdowns in retail sales, housing construction and auto sales. The puzzle is whether the Federal Reserve Board's cure for inflation -- higher interest rates -- will discourage consumer and business spending to a point where the economy plunges into a full-fledged recession by early 1990. No matter whether there's a soft landing or hard times ahead, some of the rise in wholesale prices so far this year will be passed along to you at your local shopping mall and filling station; clothes and gasoline are just two candidates for higher prices. In spite of those underlying increases in the producer price index, which is climbing at a 12%-plus annual rate, few if any economists anticipate a return to the double-digit inflation of 1979 and 1980. Herbert Stein, President Nixon's chief economic adviser, offers a typical forecast: ''I think inflation is moving up from the 4% we have been seeing to 5% or possibly 6% during the next two to three years.'' Inflation at the retail level is likely to remain in single digits partly because the Fed has been pushing up interest rates for a year already. The resulting higher cost of borrowing is cutting consumer demand and therefore businesses' ability to raise prices. Surveys show that consumers are balking at higher prices and waiting for discounts. In this special report, MONEY advises you on how to deal with this economic climate. The story on page 60 describes nine investments that are right for the coming 12 months; the box on page 62 spotlights traditional inflation- hedge investments. For advice on how to cope with rising adjustable interest rates on mortgages and credit cards, see page 70. And the box on page 81 details the consumer items that are most likely to rise in price. Both as an investor and consumer, you will have to adjust to the new realities of higher inflation. Economist Alexander Paris of Barrington Research Associates, an investment advisory firm in Barrington, Ill., warns that the economy is reaching the Murphy's Law stage as far as the inflation outlook is concerned. Cautions Paris: ''From now on, almost all the surprises are likely to be negative ones.''