U.S. Economists See Few Problems From Y2K

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U.S. Economists See Few Problems From Y2K

11:20 a.m. May 13, 1999 Eastern

By Mark Weinraub

WASHINGTON (Reuters) - The year 2000 computer problem will not severely harm the booming U.S. economy and may boost growth as people spend in anticipation of difficulties caused by the millennium bug, economists said Thursday.

``This group of professional forecasters does not think that this is an event that will cause a recession,'' National Association for Business Economists (NABE) President and Chairman Joel Prakken told a news conference.

``It's too well anticipated and most business in the United States are well along the way to rectifying their mission critical problems that they might have had,'' he said. NABE said its survey of economists showed that real gross domestic product growth would be boosted by 0.2 percentage points in the third quarter of this year and 0.5 percentage points in the fourth quarter as people ratchet up their software investment, inventory stockpiling, and hoarding of household goods.

But this spike in spending would be offset in the first quarter of 2000, with the Y2K effect expected to shave 0.5 percentage points from growth as conditions created in preparation for the calendar change ``unwind,'' Prakken said.

The Y2K problem arises because many computers and their programs allocated just two digits for the year in dates. Unless repaired or replaced, these computers may misread the Year 2000 as 1900 or simply fail to work.

Overall, NABE expected growth in 1999 to hit 3.8 percent, slightly below the 3.9 percent growth in 1998 but well above the 2.5 percent growth rate forecast for 2000.

Prakken said he expects the U.S. bond market to benefit from Y2K late in 1999 as people take their money out of the stocks. ``What you see here is investors, nervous, anxious, uncertain, have heard a lot of stuff, some a little scary sounding, may run from stocks,'' he said. ``But when they think about where they want to park that money... The U.S. bond market, after all, is certainly better prepared for this...economic disruption than any other country in the world.''

The dollar should also benefit from Y2K as investors seek shelter from global uncertainty, Prakken said. After the new year, NABE predicted a rebound in the U.S. stock market but a continued slide in foreign equity markets as countries struggle with the computer disruptions.

-- Norm (nwo@hotmail.com), May 13, 1999


Damn, thanks Norm; I think, I'm not really sure, only time will tell.

-- KoFE (Your@townNorm.USA), May 13, 1999.

A report by the U.S. Department of Commerce:

http://y2k.ita.doc.gov/y2k/y2k.nsf/dd5cab6801f1723585256474005327c8/b3 cb5b3db231dd9b85256759004baaa5?OpenDocument

"The Year 2000 Problem And The Global Trading System"

-- Kevin (mixesmusic@worldnet.att.net), May 13, 1999.

"It's too well anticipated..."


-- Don (whytocay@hotmail.com), May 13, 1999.

These the same guys that predicted the Dow at 11,000 this time last year? This time three years ago?

Don't recall anybody correctly predicting today's conditions. yesterday's banking failures in Russia, Japan, and SouthEast Asia, nor the government's apparent "surplus" nor any other conditions.

Sorry, Norm - you think guys are independent observer with no axe to grind for their salaries? Or are only Y2K book-writers affected by the "evil" profits?

Sorry, Norm - they're guessing (politely put), lying (more strongly put), and just making wishful hopes that they believe will convince people to prevent them from a bank run. The ONLY thing this government fears, and the only thing it is preparing its citizens against.

Thirst, hunger, cold, and loss of freedoms are meaningless - let's keep the money in the banks!

-- Robert A. Cook, PE (Kennesaw, GA) (cook.r@csaatl.com), May 13, 1999.

Norm, you give me the creeps. You remind me of that clown doll in "Poltergeist" - smiling, always smiling, never saying a word...

-- Creeped Out (whoareyouanyway@creepy.com), May 13, 1999.

Most U.S. economists said things were just fine in early October 1929, also.

Actually, in one sense I might agree with these fellows: Y2K by itself might not cause severe economic problems. But we are adding it to a world that already has economic turmoil (35% of the world is in a recession or worse), with Asia, Latin America, and Russia reeling from terrible economic hits in the recent past and highly vulnerable to any new problems despite some stock market rallies of the past few months. Look at Japan, S. Korea, Thailand, Indonesia, Brazil, Argentina, etc.: not exactly on the "all's well" list yet. Plus, the geopolitical situation in many places is obviously destabilizing (the Balkans, Russia, China, etc.). Adding serious Y2K problems internationally, with all the attendant uncertainty, is akin to adding nitro to glycerine.

How much any resultant economic disaster abroad will hurt the U.S. is, of course, anyone's guess. My personal prediction is for at least a moderate recession, given our own underlying problems (detailed in previous posts; also see my post under "Few Y2K problems expected for developed markets"). Remember, the World Bank has raised red flags about the way our stock market is leading our economy (a phenomenon not witnessed since the late 1920s). I also don't think we're as invulnerable to terrible economic events overseas as we would like to believe.

Once more the history lesson, especially for those who think Greenspan is an infallible genius. On Dec. 5, 1996, with the DJIA at 6200, Greenspan warned against "irrational exuberance." Today, 29 months later, the DJIA stands at over 11,100, and Greenspan is tight lipped. Now, either Greenspan was dead wrong in Dec. 1996 and the market was, in fact, sorely undervalued, so undervalued as to justify a rise of 4900 in the DJIA in a mere 29 months; or he is wrong today in not warning against sheer insanity in the markets. You can't have it both ways. Well, of course it's always possible that Greenspan was right in 1996 and furthermore that he knows today we're in big trouble, but he won't say anything out of fear of precipitating a huge market crash. So, thanks to Americans' "get rich quick" fever and an ever-increasing influx of day traders, the market will go higher and higher and then . . . you complete this picture. And then send it to all those U.S. economists who think things are just fine, Y2K or not.

-- Don Florence (dflorence@zianet.com), May 13, 1999.

Hmmmmn. Losing just one week's production (5 days working days, on average) from any cause, or combination of causes, with only about 250 working days in a year - is more or less a 2% loss in GNP/profits/jobs/savings/growth or whatever. That certainly qualifies as a recession, right?

Certainly is more than the .5% they are predicting here right? Which would amount to 1-1/4 days of lost production.

-- Robert A. Cook, PE (Kennesaw, GA) (cook.r@csaatl.com), May 13, 1999.


My problem with this is only the dollars of the elite will be worth more, because the real producers are left holding their bag. Please note the last 3 lines of this column.

House Passes Y2K Lawsuit Limits Despite Veto Threat, Business Protections Win Out 236 to 190 By Stephen Barr Washington Post Staff Writer Thursday, May 13, 1999; Page A09

The House, in defiance of a White House veto threat, approved legislation yesterday that would limit class action lawsuits and restrict punitive damages in the event of Year 2000 computer failures. The vote was 236 to 190.

Supporters of the bill said companies, particularly high-tech firms, need legislative protections to avert financial catastrophe early next year. Opponents said it would create legal barriers that would keep consumers from recovering economic losses caused by the computer glitch, popularly known as Y2K.

Rep. Thomas M. Davis III (R-Va.), a chief sponsor of the bill, called the vote "a solid win," but opponents said they were pleased that Republicans did not attract more support. Twenty-eight Democrats voted for the bill, and nine Republicans voted against.

The bill has been pushed by a coalition of powerful lobbying groups, ranging from high-tech companies to the U.S. Chamber of Commerce. The National Association of Manufacturers, for example, said it would consider passage of the bill as a "key vote" used to rank lawmakers on their support of American companies.

The debate over the bill also has spilled into presidential campaign politics, with some Republicans and lobbyists trying to use Y2K to force Vice President Gore to choose between two important Democratic constituencies -- trial lawyers, who oppose liability limits, and Silicon Valley companies, which want to avoid costly lawsuits.

During debate yesterday, bill supporters argued that the prospect of widespread litigation has diverted many companies from efforts to fix the Y2K problem.

"We are fighting the clock. We should not be fighting a hostile legal environment," Rep. Robert W. Goodlatte (R-Va.) said. "The reality today is that unbridled Y2K litigation is jeopardizing coordination and teamwork" in the private sector, Rep. David Dreier (R-Calif.) said.

Opponents said the litigation fears were overblown and criticized the legislation as a sweeping measure that would rewrite state law in contract, commercial and injury cases and force state courts to follow new federal standards that would put consumers at a disadvantage.

"Overkill," Rep. Joe Moakley (D-Mass.) said. Rep. John Conyers Jr. (D- Mich.) called the bill "unprecedented, unjustified and going nowhere."

The House bill seems certain to undergo change if it gets to a conference with Senate negotiators. Sen. John McCain (R-Ariz.), a GOP presidential candidate, has worked to shape a bill acceptable to Democrats, but that effort has stalled and closed-door negotiations are underway to get the bill on the Senate floor next week.

Even as the White House took a hard line against the House bill, the administration signaled Tuesday that it might be open to compromise. "The administration is eager to work on a bipartisan basis," a White House policy statement said.

The Y2K problem stems from the use in many software programs of two- digit dates, leading computers and embedded chips to read "00" not as 2000 but as 1900. That can lead to unpredictable results, ranging from malfunctions to computer shutdowns.

Industry experts believe a substantial number of small and medium- sized businesses have either started late or underestimated the challenges they face in fixing computer software, raising the possibility that some will not be able to fulfill their contracts and provide required services or supplies.

The House bill would encourage parties to resolve their disputes outside the courtroom and would set up a new legal framework for resolving Y2K disputes in court. The bill's key provisions would:

Require pretrial notices. Companies or persons harmed by a Y2K- related defect would have to give computer companies up to 90 days to fix the problem before they could file a lawsuit.

Cap punitive damages at $250,000 or three times compensatory damages, whichever is greater.

Limit the extent of liability to each defendant's share of the blame.

Allow most class action suits to be tried in federal court, not state courts.

Limit the liability of corporate officers and directors.

-- R. Wright (blaklodg@aol.com), May 13, 1999.

Simple - the White House was bought off a long time by the trial lawyers associates (ATLA), and has previously vetoed several bills that would reduce lawyer's fees.

The trial lawyers are worried about nothing more than their fees (which would be limited to 1000.00/hour in several versions of this bill) - and the White House is lying about the issue - again.

They have (again) subjugated the country's welfare to the welfare of those who have paid for Clinton's re-election.

-- Robert A. Cook, PE (Kennesaw, GA) (cook.r@csaatl.com), May 14, 1999.


Are you reffering to the chinese? (couldn't help it)

-- R. Wright (blaklodg@aol.com), May 14, 1999.

I'm waiting until they have a real conflict of interest - so far the national media has been able to keep peace between the Chinese, trial lawyers/tobacco lawyers, national media, national labor, international communist parties, NOW gang/blacks/environmentalists/peacenicks, the anti-gun lobby, Riyadi family, and the professional-killers (abortionists).

I think though actually - all these are actually simply reveling in their mutual hatred of Christians and conservatives. So much so, that as each gets screwed by Clinton, they can focus their hypocrisy back on what's "right" with America - and with the national media selctively focusing attetnion only on what the White House wants - re-election, (actually, election of anybody-but-a-conservative - hence the re-modelling of McCain as a leader.)

The national media is ready to throw away Algore, if it means keeping the White House, FBI, ATF, and Supreme Court control via appointments.

-- Robert A. Cook, PE (Kennesaw, GA) (cook.r@csaatl.com), May 14, 1999.

Mr Cook,

"I think though actually - all these are actually simply reveling in their mutual hatred of Christians and conservatives."

I think you have hit the nail right on the head. It's a war right here in America (include the world) and not many people can even see it.

-- R. Wright (blaklodg@aol.com), May 14, 1999.

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