Fed official sees minor Y2K problems

NASHVILLE, Tenn. (AP) - The Year 2000 computer bug shouldn't disrupt the U.S. economy enough to cause a national recession, Federal Reserve Board Governor Edward Kelley Jr. says.

But it could have the same effect as a severe snow storm or last year's United Parcel Service strike.

''In these instances, the shock to our economic infrastructure is transitory in nature, and, critically, the recovery process is under way before any adverse 'feedback' effects are produced,'' he said Thursday.

Kelley said he expects the millennium bug will cause isolated disruptions to commerce, as well as to some public services.

''In fairness, it must be said that if disruptions that occur are not isolated events as I have assumed, but rather spread across key sectors of the economy by interacting with each other, ... the decline in economic activity would prove to be longer lasting and a recession could conceivably ensue.''

The Y2K problem occurs when computers try to add or subtract dates using only the last two digits of the year -- 00 in the case of 2000 -- which may confuse them into reading the date as 1900. That could cause some to give faulty readings, corrupt the data or shut down completely.

Kelley is the most senior member of the Fed board, which is the governing body of the nation's central bank, which determines interest-rate policy, regulates banks and oversees the nation's payments system. It is the lender of last resort in financial crises.

He says a small percentage of banks overseen by the Fed are not progressing satisfactorily in their Y2K preparations. But he expects the industry as a whole to be prepared by Jan. 1, 2000.

Fixing the Year 2000 computer problem likely will cost private companies more than $50 billion, Kelley said. He's revised his estimate upward since testifying before Congress last spring, but he's not sure how much more it will be.

Kelly said the federal government is spending just under $7 billion on the problem, but he doesn't have a good handle on what state and local governments are doing to prepare for the Y2K bug.

Fed economists have identified $3.4 billion earmarked by states, ''but I'm quite confident that number is too low,'' Kelley told a group of business students at Vanderbilt University's Owen Graduate School of Management. And that may be where many of the Y2K problems occur, he said.

Critical, electronically-driven local systems that could be vulnerable include water, traffic, police, health and welfare services, Kelley said.

For example, he said, ''One or two malfunctioning traffic signals can cause serious congestion, confusion and delay, and the breakdown of traffic management systems could cause near total gridlock.''

-- Norm (nwo@hotmail.com), March 26, 1999

Answers

Norm,

Thanks for the post. It was already here...about 10 threads before yours. You can join the replies to the article about Kelley's comments at this link:

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=000ee3

"Edward Kelley - No Recession, Unless..."

-- Kevin (mixesmusic@worldnet.att.net), March 26, 1999.

I've tried to get Norm to at least read the first page of messages before he posts dup stuff Kevin. I think it's hopeless. <:)=

-- Sysman (y2kboard@yahoo.com), March 26, 1999.

Of course its hopeless, the NORM computer is programmed to simply scan for a pollyanna-like Y2K article, post it onto a new thread that it creates, and do it all over again, and again, until the machine is shutdown for the night. NORM cannot think, it cannot reason, it can only do what it has been programmed to do.

N.O.R.M. = Non-thinking Output Response Machine

-- King of Spain (madrid@aol.com), March 26, 1999.

NORM -

Please refer to this paragraph...in case you didn't know, it's referred to a "wiggle room".

''In fairness, it must be said that if disruptions that occur are not isolated events as I have assumed, but rather spread across key sectors of the economy by interacting with each other, ... the decline in economic activity would prove to be longer lasting and a recession could conceivably ensue.''

R.

-- Roland (nottelling@nowhere.com), March 26, 1999.

Kudos to King of Spain for recognizing artificial non-intelligence.

N.O.R.M can kiss my shiny metal butt.

-- d (d@dgi.old), March 26, 1999.