IT FINALLY DAWNED ON ME! All that dough everybody is lavishly spending for Y2K fixxes- the banks, the government, businesses, agriculture, transportation, communications and industry ALL OF IT, THEY EXPECT ME TO PAY FOR IT!! (WELL YOU AND ME, ACTUALLY) They intend to pass it on. Anybody care to speculate what changes just that might make in life as we know it?

-- Ann Fisher (zyax55b@prodigy.com), December 06, 1998

Answers

Ann,

Since "all costs get passed on to consumer or taxpayer" is already a basic economic principle, not something new, it won't make any difference, in general.

As has always been true, well before Y2K became an issue, the businesses with the higher costs have either lower profit or higher prices than the businesses with lower costs. Companies which prepare well for Y2K will stay in business; those which don't, won't.

-- No Spam Please (anon@ymous.com), December 06, 1998.

Ann Fisher,

CONGRATULATIONS!!! You just graduated from a "Don't Get It" (DGI)to a "Just Got It." (JGI) Consider yourself to be more intelligent than 95% of the Human Race! You will need to learn a lot more to become a Professor of the Truth, but you have the aptitude.

OF COURSE we will end up paying for this - where else do you think all of this money is going to come from. Isn't it a coincidence that Boeing just laid off another 20,000 people? Let's see - 20,000 x Average yearly salary of, say $40,000 = $800 million. Wow - what a coincidence! That's just about how much Boeing anticipates spending to fix Y2K! Isn't it convenient that we can now blame the Asian Crisis for everything that happens in the business world? How Nice.

This is what most people don't even see - Y2K is ALREADY happening. It is gradually and unnoticably seeping into our lives. Have you noticed prices of groceries creeping substantially upward recently, even though economists say inflation isn't increasing? Inflation isn't increasing relative to the value of a dollar. Y2K expenses are simply being passed directly on to the consumer.

One last thought to ponder - Y2K will EASILY be the most expensive event in the history of the World. And who's going to pay for it? Tell your friends that Bill Gates is not going to rescue us from this one. In fact, he has so much confidence in his own company that he is quietly selling about $100 million of his stock per week.

You understand the Money part of the picture, and that's the one people are going to be very angry about. But other issues are even more critical for your very survival. Stay tuned to this forum and research the facts on the net.

Again, congratulations!

-- infoman (infoman@web.com), December 06, 1998.

We can't be outa money... I still got checks left

Seriously, if you think the Y2K bill is expensive now, stay tuned and pay very close attention the next six months. You're about to see program management's finest hour.

-Arnie

If only throwing money at it would fix it, I'd donate ALL the checks I have left

-- Arnie Rimmer (Arnie_Rimmer@usa.net), December 06, 1998.

No Spam,

I beleive you've been on this forum for a while. No offense, but when you start talking about economic principles, and then say that this really won't make any difference, you are being incredibly naive. Businesses do not simply "accept" lower profits. If the profit margins are not at LEAST what the CEO's are used to seeing, they file BANKRUPTCY. Or if they are really gutless, they take their parachute clause in their contract and use it to bail out, leaving the disgrace of bankruptcy to the next in command, like a Captain that deserts a sinking ship. But Ann is essentially correct - when you follow these extraordinary expenses through the channels, whether it be bankruptcy, cost of an airline flight, unemployment, or the cost of your power, phone, or cable bill, they all eventually come out of the Taxpayers wallets. You don't get something for nothing - now THERE is a basic economic principle. If a large part of the World's financial resources are being spent to rebuild the technological infrastructure of society, then the rest of society deteriorates. It is that simple - like taking eggs fom one basket and putting them into another.

-- infoman (infoman@web.com), December 06, 1998.

Well, here's just one tiny example.The First Union Banks in northern Florida were just bought out and according to the new book they sent me , most of the rates have gone up !

-- sue (deco100@aol.com), December 06, 1998.

Fixing y2k is a big, expensive project. Of course consumers and taxpayers will pay for it -- we are *all* consumers and taxpayers. If we decided to shoot every CEO in this country and confiscate every penny they were collectively worth to apply to the fix, that wouldn't make much of a dent - Bill Gates himself isn't worth enough to fund even fixing the DoD alone.

I've seen myopic lawyers arguing that software companies should foot the entire bill for all fixes to the software they wrote. In theory, this sounds fair. In practice, this would instantly bankrupt all the software companies, and make the entire problem much worse for everyone -- a true lose-lose proposition.

I suspect a good deal of remediation is being postponed or seriously slowed by dogfights over who should pay for the effort. This is really backwards. If they don't fix the problem now, there may be nothing left to fight over later.

Almost every economist who has looked at the cost of y2k has considered *only* the impact on the economy of spending so much for remediation, money that won't be spent in more typical ways. Only Ed Yardeni has made any attempt to factor in the cost of *not* spending this money. To be honest, I'd much rather face higher prices for what I buy, than face empty shelves and starving people because there's nothing to be bought.

One way or another, we will all pay for y2k.

-- Flint (flintc@mindspring.com), December 06, 1998.

Yes, we wil have to pay, just like everything else. Original cost estimates from Gartner put it at $600 Billion and now it's $800 billion and continuing to grow. And that doesn't include litigation which is forecast to be over a Trillion $.

On a realted topic, we've recently talked about the 'how' part and the government - that is - how is the gov't going to be able to collect the taxes from us. Flat tax has been mentioned, national sales tax, other methods. It's a great question. Consider the following:

Gov't money in: for every one of our dollars: 39 cents comes from personal income taxes, 32 cents from other payroll taxes, and 11 from corporate taxes - thats 82% of the money we give Uncle! (Sam not Deedah). Multiple computers are used for each and every step along the money trail. Given the state of the Y2K project at the IRS, including past projects they failed at, I think that this becomes a recipe for extreme disruptions. In other words, yes we will have to pay, but the how is up in the air.

-- Rob Michaels (sonofdust@net.com), December 06, 1998.

Ann,

Yes well pay, but we can also vote with our dollars in both spending and tax.

If consumers and communities switch their purchasing over to preparation goods, foods, basics, etc. Theyll soon get the message. In fact they could cash in and encourage a booming industry for 1999.

I can just see ads from General Motors touting the Y2K reliability of their sports utility vehicles, in the event a quick getaway is required. Think of the advertising potential alone Madison Avenue! Wow. They could even make enough money to pay for all the Y2K fixes, and get the country prepared at the same time. A real win-win strategy for everyone!

Do you suppose it will occur to them, in time?

Diane

-- Diane J. Squire (sacredspaces@yahoo.com), December 06, 1998.

Diane, your comments above brought up a question I have. I read a while back on GN's site that Jeep Eagle SUVs are non-compliant and won't run come 2000. Anybody know the truth about this? or about other brands? Imagine paying big bucks for a new-fangled car and then it doesn't go ... gas or no gas.

We still have our ancient '69 VW bus, rusting away, but it runs, can haul quite a bit, and Ashton can fix it himself! One of the benefits of years of poverty is, we've learned how to survive on practically nothing. :) And endure the scorn of others whose sight's are straight-jacketed by looking only at the material.

Ashton & Leska in Cascadia
xxxxxxx xxx

-- Leska (allaha@earthlink.net), December 06, 1998.

I've been making comments to family and friends for some time now about the fact that the billions of dollars being spent for repairs will certainly be passed on to the public...and through the generousity of our government, we will probably pick up the tab for several other countries as well with our tax dollars if the IMF is still around.

Another good reason to be as self sufficient as possible. Elliminate as much of the need for future spending as possible, because even if the goods are there to be had in the future...who knows what the increases in prices will be like and the sky rocketing cost of living. The large corporations are not going to absorb the expences and take a profit loss.

Texas Terri

-- Texas Terri (TYSYM@AOL.com), December 06, 1998.

infoman,

>Y2K will EASILY be the most expensive event in the history of the World.

I disagree. Let's compare Y2K to WW2, using percentages of contemporary GNP.

The most common *global* (Note: more about this later) Y2K cost I've seen tossed around is $600 billion for fixing things and $1 trillion in litigation afterwards. That's spread over a few years. The current U.S. federal budget annual outlays are roughly the same as the Y2K sum, $1.6 trillion, and the current U.S. GNP is roughly five times as much.

So _global_ Y2K cost estimate is about 20% of 1 year's U.S. GNP.

According to _The World Almanac and Book of Facts, 1997_, U.S. (*not* global) costs for World War 2 were 188% of one year's GNP.

So even with an uneven comparison of global Y2K cost to U.S.-only WW2 cost, Y2K projected cost is barely over one-tenth as costly as WW2.

Double the Y2K cost estimate and keep the global-to-US uneven comparison -- it's still less than one-fourth of WW2 cost, measured in U.S. GNP fraction.

-- No Spam Please (anon@ymous.com), December 06, 1998.

infoman,

Amendment to preceding post:

Just read Rob's posting. I had forgotten the update to $800 billion.

So, let's revise the percentages of GNP.

Y2K global: $800 billion for fixing things and $1 trillion in litigation afterwards = less than 25% (rather than about 20%) of current U.S. GNP

World War 2 U.S. cost = 188% of one year's GNP.

Y2K/WW2 ratio = less than 25/188 = less than one-seventh. Doubled Y2K = less than 50/188 = less than two-sevenths.

So even with an uneven comparison of global Y2K cost to U.S.-only WW2 cost, Y2K projected cost is less than one-seventh as costly as WW2, or if you double Y2K, two-sevenths.

-- No Spam Please (anon@ymous.com), December 06, 1998.

Here's where I disagree with you, NSP.

It is my belief that we are currently seeing but a tiny fraction of the eventual cost of Y2K. We know that a substancial portion of large businesses are NOT going to be ready. We know that a larger portion of small and medium-sized businesses are going into this woefully unprepared. The cost of 'fix on failure' will be substancially higher than the current published estimates of fixing the problem (plus the projected litagation costs.

Ignoring lawyers for a moment (or maybe longer), the published projected costs are based solely on what companies have told us they have/will be spending. First, these estimates in themselves are wildly optimistic as we are now seeing. Second, a large portion of business haven't got a clue as to what it is going to cost them. There are many hidden costs. For example, I've recently found a local small business owner that has 'got it' and decided that it makes sense to add a propane generator ($14,000). Multiply that times the thousand of small businesses who will prepare. Then add in the cost of the many more small/med business who didn't prepare but should have.

Oh yeah, then add in the cost of personal/family preperation and the cost to those individuals and families who didn't prepare but should have.

That $600 billion figure is chump change.

To quote a well known Y2K prognosticator: I could be wrong...it might be worse. Frankly, if money is all it costs us, I will be dancing a jig.

-Arnie

-- Arnie Rimmer (Arnie_Rimmer@usa.net), December 06, 1998.

infoman,

In response to your posting addressed to me:

>when you start talking about economic principles, and then say that this really won't make any difference, you are being incredibly naive.

Oh? Just which economic principle will be different as a result of Y2K? Please explain where I was naive.

Ann wrote, "They intend to pass it on. Anybody care to speculate what changes just that might make in life as we know it?" I pointed out that since businesses already passed on costs to consumers and taxpayers, that was not a new principle for Y2K, so there wouldn't be any difference. Where is the flaw in that?

When automakers started being required to install pollution-control equipment on cars, they passed on the costs to consumers. I.e., the prices of new cars rose. That didn't change life as we knew it then -- it just made cars more expensive (which was balanced by the benefit of lower air pollution). No economic principles changed.

>Businesses do not simply "accept" lower profits.

Where did this come from? I didn't use the term "accept".

-- No Spam Please (anon@ymous.com), December 06, 1998.

Arnie,

The cited WW2 cost was only the official U.S. government spending allocated to war (incl. veteran benefits and such ...) expenses. It didn't include the cost of business preparation or failures and personal/family preparation, either.

Furthermore, the US-only WW2 cost excludes (a) all other countries' war spending and (b) the enormous cost of rebuilding war-torn countries (except it might include Marshall Plan -- but that would be a small fraction). Want to quantify the cost of WW2 to Germany, Russia, France, Britain, Japan, Italy, Poland, China, and so on?

If you're going to argue that the eventual cost of Y2K will be higher than the figures I've used, then in order to argue that it's going to surpass a fraction of WW2 cost, you'll have to add an awful lot of non-US costs to the WW2 total.

Compared to the total costs of WW2 for the rest of the world, US governmental expenditures of less than 2 years' domestic GNP was chump change.

-- No Spam Please (anon@ymous.com), December 06, 1998.

NSP,

You're being naive again. Arnie is correct in that the price tag in dollar figures are not the ONLY cost. The big difference between WWII and Y2K is that WWII CREATED jobs and Y2K is ELIMINATING jobs. You do not beleive that Unemployment Insurance is a COST to the taxpayer?

I did not say that there was any flaw in your economic principle. Your misconception is that you fail to effectively APPLY that principle to the Y2K predicament. Your statement to Ann the newcomer that it "won't make any difference" is dangerously misleading. Corporations, when faced with these kinds of expenses either eliminate them or die. How do they eliminate them? Layoffs, perhaps? (COST) Price increases? (COST) They can only raise prices as high as competition allows. So they go Bankrupt. (COST) If you don't think Bankruptcies are a COST to our society, then you need to take a class in Socio-Economics.

-- infoman (infoman@web.com), December 06, 1998.

There are a few other considerations... WWII was also a capital expansion scenario with the investment transferred to the public and private sectors. The manufacturing investment created products and markets. The y2k scenario is contraction. Lost opportunities and declining sales with no investment must be factored to reduce the GNP used as the benchmark. It's all negatives, with no positives. The historical, cyclical momentum of economics may mean that the initial "shock" will be just that - initial shock.

Cycles. We've been on the upper half of the graph for a very long time. The trend will change some day. 100% probability. The catalyist for the timing of this change in momentum may be y2k and the current Asian banking and currency instabilty. Bank problems are particularly dangerous because they are like the "arteries" of the "financial body." Y2k is all about supply - half of the supply/ demand driving force of all economies.

These two ideas, y2k and banking, are the only forces on the horizon to look to as potential catalyists. The problem is that they are both catalyists. In unison, they are are formidable catayists. Of course, I could be wrong...

-- PNG (png@gol.com), December 06, 1998.

I think you are all missing the point . The ultimate price of Y2K may be you LIFE !! Wake up !!

-- Mickey (MICKLE2@aol.com), December 07, 1998.

infoman,

>the price tag in dollar figures are not the ONLY cost.

That was true of WW2 also.

My contention is that Y2K will be only a modest fraction as expensive (in either dollars or non-dollar aspects) as WW2.

E.g., I expect Y2K to cause fewer deaths than WW2.

>You do not beleive that Unemployment Insurance is a COST to the taxpayer?

Where in the world are you getting the idea that I did not believe that? I wrote nothing of the kind. Please stop projecting ideas into my writing that aren't there. Note that my initial posting contends that business _would_ pass along costs to consumers and taxpayers!!

>Your misconception is that you fail to effectively APPLY that principle to the Y2K predicament.

I was writing in answer to Ann's initial question. My contention was that the economic principle of _all costs get passed on to consumer or taxpayer_ (Ann, I should have underlined this phrase instead of quoting, which may have given the mistaken impression that I was quoting you. Sorry.) is already a basic economic principle, not something new, so Y2K would not change that aspect of life as we know it.

How did I fail to apply an economic principle to the Y2K predicament? What economic principle did I fail to apply?

>Your statement to Ann the newcomer that it "won't make any difference" is dangerously misleading.

I can see that I could have written my thought more clearly. Let me try it this way:

I think that having businesses and government pass on costs of Y2K spending to consumers and taxpayers is not a new economic principle -- it has been going on all the time in regard to other types of costs -- so therefore passing on costs of Y2K fixes to consumers and government will make no changes in life as we know it (other than to change the costs of living, which has been going on all the time anyway, so I don't consider that a change in life as we know it).

Do you consider a change in the cost of living to be a change in life as we know it, whereas I do not? Is that the basis for your disagreement with me?

>Corporations, when faced with these kinds of expenses either eliminate them or die. How do they eliminate them? Layoffs, perhaps? (COST) Price increases? (COST) They can only raise prices as high as competition allows. So they go Bankrupt. (COST)

So, apparently you agree with me that this has already been going on before Y2K, that the basic economic principle of inclusion of costs in prices charged to consumers or taxes charged to taxpayers has already been in effect for a significant period of time before Y2K was ever thought about, and thus passing Y2K costs along to consumers and taxpayers will be in accordance with already-well-established economic principles and will therefore not make any of the changes in life as we know it that some _new_ economic principle might make. (Unless you consider a change in cost of living to be a change in life as we know it?)

>If you don't think Bankruptcies are a COST to our society,

Of course I think bankruptcies are a cost to our society and have never written otherwise, so why are you including this sort of sentence in your response to my postings?

-- No Spam Please (anon@ymous.com), December 07, 1998.