http://www.federalreserve.gov/boarddocs/SRLETTERS/1999/SR9909.HTM

A Y2K Checklist for Customers

* Make Prudent Preparations - Remember all your payment options (checks, credit cards, debit cards, ATMs and tellers) in the event that one does not work as planned. The Federal Reserve has plans to ensure that there will be sufficient cash for consumers. If you withdraw money, make reasonable decisions based on solid information; don't put yourself at risk of being robbed or losing valuable interest payments.

* Be on Guard Against Y2K Scams - Be skeptical if someone asks for your account information or tries to sell you a product, service or investment that's supposedly Y2K "safe." Protect your personal information, including your bank account, credit card and Social Security numbers.

Sounds like common sense to me.

This was in a PDF file and I didn't want to re-type the whole thing. Check the link above for the whole story.

Yours in COBOL... Dino!

-- COBOL Dinosaur (COBOL_Dinosaur@yahoo.com), May 21, 1999

Answers

 That does sound like rather reasonable advice

One thing that I have noticed it the fed is worried about "dollarization" The fact that many folk in many countries are going to see holding greenbacks as more secure than their own currency. What kind of effect that will have on the dollars availability overseas (currency not electronic) will be interesting. And of course there is still the matter of hedge funds looming over the worlds economy. The Fed is looking at full transparency or loans will be at a higher price. Something like that anyway.

Read up on this little development

Testimony of Patrick M. Parkinson
 Associate Director, Division of Research and Statistics
 Hedge funds, leverage, and the lessons of Long-Term Capital Management
 Before the Committee on Banking and Financial Services, U.S. House of Representatives
 May 6, 1999
 

FRB: Federal Reserve Board Testimony from 05/06/1999
http://www.bog.frb.fed.us/boarddocs/testimony/1999/19990506.htm

-- Brian (imager@home.com), May 21, 1999.

It's a hell of a commentary when many people all over the world value the U.S. government's pieces of intrinsically worthless paper over their own government's.

The foreign currencies crash and burn with regularity; the U.S.'s is preferred only because it has managed to dodge the bullet so far.

It could become worthless overnight by decree, crash, war...

There is no honest government money in the world, including the U.S.

Baa-aaa-aaa. Moo-ooo-ooo.

-- A (A@AisA.com), May 21, 1999.

I'll tell you why the US greenback is respected. Comming from a non-US person. Money is the biggest chicken in the world, and the US has the biggest guns to protect it. Money always runs to where its protected. justthinkin

-- justthinkin com (y2kaok@justthinkin.com), May 21, 1999.

My cousin works for the FED. She says they have been stockpilling currency for months. If there is a problem with the electronic money and that cash has to be doled out to the consumer, you can bet one thing... The value of the dollar will drop. Simple arithmetic on this one. The FED allows so many dollars in currency to be out on the economy at any given time... this is the VALUE of the dollar. If they must put more currency out for emergency situations (y2k) then the VALUE drops. Given time they can correct this by collecting currency and destroying it, but if they are dumping currency on the system, then the likelyhood of them collecting older bills and destroying them is nil. Value of the dollar goes down, consumers quit spending, and recession starts. Hmmmm

-- DJ (reality@check.com), May 21, 1999.

Let's walk through that one again.

Cash accounts = 3.8 TRILLION dollars

Physical cash in the USA = 140 BILLION dollars, 45 BILLION of which is sitting in commercial bank vaults as reserves (total 140).

The FED has another 150 BILLION in ready reserves and says they will have another 50 BILLION to boot = 200 BILLION.

Total FRN's available in USA = 340 BILLION Vs. the 3.7 TRILLION in eletronic accounts (which does not include longer maturity bonds, treasuries, municipal or corporate bonds, etc).

That's a ratio of 1 physical dollar to every 11 cyber dollars.

Let's say that the FED and banks exchange every last physical dollar for equal cyber dollars, then the system freezes..no more availability of cyber accounts.

You just had a 91% decrease in the availability of dollars. (Not considering the TREMENDOUS psychological damage to people's sense of security, etc.)

This is not an inflation of available dollars in the pool of circulating dollars. It is a deflation of the available transactional currency and so is deflationary (increase in value of the dollar) not inflationary (decease in the value of the dollar).

If this scenario were to play out I would guess that people would hoard cash (further reducing the available money supply) as well as completely alter their spending patterns (adding to the deflation by losses of jobs and income). The 'consumer' economy would perish outright. The 'service sector' would suffer a similar fate. In the USA this accounts for 66% of the economic engine.

The debt and credit markets would be vaporized due to a lack of qualified borrowers and inability of debtors to repay. Real Estate would collapse.

I can not imagine a worse scenario for our nation than this other than a nuclear attack.

And I can tell you that the government knows this scenario and is preparing to deal with it in many ways. Some of which may be ..

1) Freeze or limit cash withdrawls and any other 'destructive' account activities.

2) Withold the 200 BILLION to use as cash on hand for the Federal government

3) Convert all bonds and treasuries to 30 year bonds and suspend their trading.

4) Make it illegal to hold more than 500 dollars cash per household.

5) Force the use of new government script in place of traditional FRNs. Including making the cash we have in our pockets worthless.

-- David (C.D@I.N), May 21, 1999.

Besides which, it doesn't matter about the dollars being "hoarded" by the Fed. they are ALREADY COUNTED in the money supply figures, and any issuing of "hoarded" dollars would be in replacement of money already available for spending in an account. Fed could issue ALL the "hoarded" dollars tomorrow and it would be transparent to the country.

Chuck

-- Chuck, a night driver (rienzoo@en.com), May 22, 1999.

PS unless, of course they're giving it away on street corners........

-- Chuck, a night driver (rienzoo@en.com), May 22, 1999.

David: A good portion of that cash is/will be out of the country if I'm not mistaken.

Chuck/DJ: If the cash is distributed, and the banking system holds, inflation sounds plausible. But if it fails, and "cash is king", big time deflation.

Note of course that if y2k is bad enough to cause a depression, luxury items will be deflated, basic necessities like gas will be inflated.

-- a (a@a.a), May 22, 1999.