The Y2K problem: It's not fixed yetgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Very interesting article IMO!
The Y2K problem: It's not fixed yet
Having fail-safe computers won't save the global financial system
Saturday, July 24, 1999
The Y2K problem has been reviewed on several occasions in this space. Since the last discussion, hundreds of billions of dollars have been spent by corporations and governments worldwide to deal with the dreaded double zeros.
Investors' attitudes to the millennium bug have swung from apocalyptic visions to complacency. Among Americans, the current conviction is that all that money, U.S. savvy and Bill Gates have reduced the risks to mere inconvenience. There are some eccentrics who say they'll head for the hills with a gun and a goat, but they're making few converts.
This week, there was a brief frisson of fear in the market, when Microsoft and IBM told analysts that customers' concerns about Y2K could cause earnings problems later in the year. The Nasdaq Stock Market had one of its biggest one-day drops before euphoria returned. The warnings weren't that the world's computers would fail, but that buyers would delay installing new systems until 2000.
If the Y2K problem were simply a question of delayed technology purchases, investors could ignore it.
Despite some of the scare stories you may have heard, the serious problems don't lie within the North American financial system. Your bank, brokerage and mutual fund accounts are safe. Under strict regulatory scrutiny, banks and other financial intermediaries have spent massive sums to ensure their systems will function effectively.
The worry is that the rest of the wired world of finance isn't going to be ready. European financial institutions spent precious time and money converting for the advent of the euro. The new megacurrency has been a flop, but its worst effect could be the wasted resources in preparing for it.
In particular, one must worry about the situation in tax havens such as Luxembourg and Liechtenstein. These ministates prosper by their success in attracting deposits from those who seek to avoid prying regulators and tax collectors. Do they have the regulatory heft to manage the arrival of both the euro and Y2K within a year?
This is part of a much bigger problem. U.S. consumers are spending more than 100 per cent of their after-tax incomes. Much of that exuberance is lavished on imported goods, resulting in record trade deficits. Yet the U.S. dollar has been strong. Why? Because foreign banks and investors use the dollars American consumers send abroad to buy U.S. securities and to make eurodollar deposits in the global banking system.
Without that inflow of eurodollars, the U.S. economy would be hamstrung. Problem: An unknown but huge percentage of eurodollars come from low-tax or no-tax regions of the world where banking regulation is slight or nonexistent. If those trillions in deposits cannot be rolled over because of computer failures offshore, the results could be worrisome.
Most experts who have assessed the preparations for Y2K reach the same conclusions: The United States and Canada are in good shape, most parts of Europe are in lesser, but largely adequate shape, Japan has problems, and most of the Third World is in poor shape. The shrewd folks at TAL Global Asset Management Inc., part of the CIBC group, have downgraded emerging market investments for this year because of the likelihood of large-scale breakdowns in those new economies.
When a careless workman at Bell dropped a tool in the company's Toronto switching facility, phone lines as far as Vancouver were down for most of a day. The optimists about Y2K may be counting on perfection that humans don't possess.
Because we live in an interlinked world, computer failures abroad will surely cause troubles in North America. Fail-safe computers won't save the global financial system from grief if the lenders to the world's most-heavily-indebted nation can't roll over deposits because of their own computer problems.
Every financial crisis on record has come because of debtors' problems. Wouldn't it be fascinating if the once-in-a-millennium crisis came because creditors were unready for Y2K?
There is a precedent: England's king at the time of Y1K was Ethelred the Unready.
Donald Coxe is chairman of Harris Investment Management Inc. of Chicago and chairman of Jones Heward Investments Inc.
-- Gayla (firstname.lastname@example.org), July 24, 1999
If this guy thinks that everything in the usa is safe, then he is not only nuts, but he is evil if this is what he is passing on to his clients.
-- dave (email@example.com), July 24, 1999.
I get the oddest feeling reading this article... and its not just this one. Its sort of like the authors are on a time machine cliche merry-go-round.. grabbing Y2K cliches from various time periods and jumbling them all together to make an article. We swing from something that happened this week in the market to a prediction for the future, to a everything is okay in the US (a statement that belonged perhaps in articles from '97, but we should be past that now).... back to the present with a tool dropped in Canada... to troubles in North America (wait.. I thought we were safe)... and then a swing to the year 1000.
Makes me dizzy. [I guess that was the effect on the author too... dizzy.. ditzy.. whatever.]
-- Linda (firstname.lastname@example.org), July 24, 1999.
The way I read it... (but remember, it's LATE)
Everything *looks* like - everything is going to be fine. BUT.. remember what happens when ONE guy drops the ball....
But then... maybe I read way to much between the lines....
-- STFrancis (STFrancis@heaven.com), July 25, 1999.
STFrancis, that is the way I read it, too. I thought the author was basically saying "everything may look OK, but that doesn't mean it will be." I think he is trying to make the point that even if our computers are OK, the global financial difficulties may bring down our economy. ????
-- Gayla (email@example.com), July 25, 1999.