Greenspan Discusses Y2k Impact

Updated 9:13 AM ET September 17, 1999

WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan said Friday there was a risk of bottlenecks in the U.S. economy resulting from the fear of end-of-century computer problems, but widespread disruption was unlikely.

Speaking before the President's Council on Year 2000 Conversion, the U.S. central banker said he was confident that the risk of any widespread breakdown to critical business infrastructure from the computer bug was "negligible."

"If only a small percentage of businesses choose to add to their inventories as a hedge, the effect on production will be insignificant," Greenspan said.

"However, should a large number of companies want to hold even a few extra days of inventories, the necessary, albeit temporary, increase in production (or imports) to accommodate such stock building could be quite large. Bottlenecks could develop, and market pressure could ensue," he said.

Economists are unsure how the public response to the computer bug, which prevents some computers from distinguishing 2000 from 1900 because of an old programming shortcut, will affect economic activity. Inventory building by businesses could add to economic growth and inflation risks or a widespread technical breakdown and public panic may undermine the economy.

Greenspan noted that the U.S. public was more sanguine about the coming event, which should ease fears of major disruption, though "we are not as yet home free."

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Ray

-- Ray (ray@totacc.com), September 17, 1999

Answers

more comments here...

Greenspan comments Friday????

Mike

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-- Michael Taylor (mtdesign3@aol.com), September 17, 1999.

Does anyone know where to find a transcript of the actual words spoken by Mr. Greenspan? I've now seen two or three news articles about his speech, but I'm not sure which parts are paraphrased, which parts are being quoted accurately, and which parts are perhaps being quoted out of context.

The reason I'm curious about this is that people tend to consider each word that Greenspan says, and also each word that he does NOT say, potentially significant when it comes to interest rates, etc. Give the sensitivity of Y2K, I suspect that each word of this speech was carefully chosen, too. A few people on the other Greenspan thread, a few threads below this one, have already jumped on a few of the phrases in his speech, pointing out that they represent interesting caveats and qualifiers that acknowledge the possibility of disruptions that the "official" part of his speech is attempting to deny.

I would like to critique and/or comment on his speech, but would prefer to do so with the actual transcript, rather than some hack reporter's potentially garbled version of it.

Linkmeister, wherefore art thou?

-- Ed Yourdon (HumptyDumptyY2K@yourdon.com), September 17, 1999.

Here's the speech:

http://www.bog.frb.fed.us/BoardDocs/speeches/1999/19990917.htm

Remarks by Chairman Alan Greenspan Before the President's Council on Year 2000 Conversion, Financial Sector Group, Year 2000 Summit, Washington, D.C.

September 17, 1999

Good morning, everyone. It's an honor to speak today to such an esteemed group. All of you are experts on the implications of the Century Date Change for our sector of the economy, and I suspect I will not have much to add beyond what already is well known. We face an exceptionally complex problem that has required and will continue to require the commitment of significant amounts of resources to fix. The good news is that evidence is becoming more persuasive that our electronic infrastructure will be ready for the Century Date Change. The public's understanding of the degree of our Y2K readiness also has grown, and fears of widespread disruptions around the CDC appear to be waning, though we are not as yet home free.

There is nothing exactly like the Century Date Change in our historical annals from which we can infer its potential consequences. Nonetheless, it is the beginning of wisdom in thinking about the Y2K problem to recognize that failures and breakdowns in mechanical and electronic systems are a normal part of our everyday life. Recall the most recent example of how an electric power failure shut down the Chicago Board of Trade. Thus, as a standard for monitoring developments, it is simply unrealistic to expect our advanced technology to function any better on January 1, 2000, than it has on any other day of the year. Automated teller machines are a prime example of this. On any given day, 1 to 2 percent of the nation's ATMs are out of service for some reason. Although the banking system and ATM providers are about as prepared for Y2K as they can be, we cannot realistically expect perfection over the New Year's holiday any more than at similar periods in years past.

Moreover, while systems may fail as they have in the past, these failures never have resulted in broader and persistent--that is, systemic--breakdowns in our economy. Notwithstanding, it is at least conceivable that, as a consequence of our current dependence on computers, some Y2K-related failures could have noticeable effects on the economy. But as a result of vast effort and an estimated $50 billion of expense by the private sector, enough of our critical infrastructure has been judged Y2K-compliant to view the probability of any systemic breakdown as negligible, even granting the uncertainties associated with our interconnections with less-prepared foreign countries.

In the event of breakdowns short of systemic, history teaches us that businesses are remarkably adaptive, whether the adversities were the failure of AT&T's frame relay network, defective routers in the MCI- WorldCom data transmission network, or the clogged arteries of the Union Pacific railroad. In our market-based economy, economic incentives ensure that resources quickly move to their most- productive activities: In a crisis situation, whether systemic or short of that, companies expeditiously redeploy their labor and capital resources to facilitate the restoration of their key operations. Corporate management is wholly aware that a slow response to a breakdown can bring revenue losses in the short run and an erosion of their customer base in the long run. Simply put, in our competitive economic environment, the ability to recover quickly from a serious technical problem can literally be a matter of survival for some firms.

Fortunately, our country has the skilled, well-educated workforce that is a precondition for such quick action. While ingenious solutions can sometimes originate from the executive suite, more often than not they grow out of the ability of engineers, technicians, and workers on the factory floor to improvise a temporary fix for a critical problem. Depth of experience and the ability of our workers to think "outside of the box" have prevented many a problem from turning into a disaster. Think back to the team of NASA engineers that developed a critical air filtration system for the Apollo 13 astronauts using only the limited materials available on that crippled spacecraft. While certainly less dramatic, similar problem solving is occurring every day in our economy, fostered by workers who can rise to a challenge and a market system that rewards extraordinary efforts. Thus, while no one knows exactly what will happen on January 1--the CDC is a truly idiosyncratic event--we do have a good idea of how our society will respond if problems develop.

This morning we will hear many progress reports on the Y2K readiness of the financial industry and other key sectors. As we listen, it is most important to keep in perspective just how far we have come in our Y2K preparations. Three years ago, only the largest and arguably the most forward-looking of organizations had mobilized for the Century Date Change. Today, many firms and government agencies have completed their testing, and those institutions that were late off the block are working very diligently to be ready by the end of the year. While it is easy to obsess about the few institutions in our society that may not be ready, let us not lose sight of the fact that the overwhelming majority of us are not only prepared but have contingency plans to deal with breakdowns. Much has been learned over the past few years about how to disinfect our computer systems from the Y2K bug and how to isolate any problems that may occur. This large and growing knowledge base will serve us well as we approach the millennium and for years thereafter.

While I have become increasingly persuaded that the technical breakdowns that might occur as a consequence of the CDC are readily containable, the response of businesses and households to unwarranted fears of serious disruptions does give me pause. It is the economic effects of their endeavoring to adjust to the CDC in the next few months that I see as replacing technical concerns as our major challenge.

I am not saying that we would have been better off if the existence of the Y2K problem had never been publicized. In that event, the remedial actions that have been expended over the past two years would surely have fallen short. Although the desirability of publicizing the existence of a pending significant technical breakdown was never in question--and never should have been--it always raised the potential hazard of an outsized, if only partly informed, disruptive reaction by the public. Given the potentially broad range of uncertain outcomes at the CDC, the cost of advance preventative preparations in most cases is probably correctly perceived by businesses and households to be low, or at least acceptable.

Thus, with their own remediation efforts either complete or nearing completion, many large businesses are currently evaluating the readiness of their suppliers and the local infrastructure on which they depend. Based on such assessments, these companies are deciding whether, for example, to hold inventory levels above their tight, just-in-time programs as a precaution against Y2K-related disruptions. Because businesses are effectively buying insurance against an uncertainty, the less uncertainty, the smaller the perceived insurance need. Thus, accurate, credible, and timely information on the general state of readiness will be essential to reducing uncertainties in the months ahead. Businesses then can make more-informed decisions as to the type and magnitude of the precautions they need to take.

If only a small percentage of businesses choose to add to their inventories as a hedge, the effect on production will be insignificant. However, should a large number of companies want to hold even a few extra days of inventories, the necessary, albeit temporary, increase in production (or imports) to accommodate such stock building could be quite large. Bottlenecks could develop, and market pressure could ensue. Thus, the more we share information, the more informed our decisions and, hence, the smaller the need for precautionary hedging.

While the evidence of precautionary inventory hedging to date is mixed, in the financial sphere, borrowers and lenders are clearly taking steps to build liquid assets and reduce their reliance on credit markets around the end of the year. This is reflected in a noticeable rise in deposit and commercial paper rates for funding that would be outstanding over year's end. Many corporate treasurers have moved forward their debt offerings to avoid any chance of a dearth of credit availability in the fourth quarter or difficulties funding short-term liabilities. The Century Date Change Special Liquidity Facility of the discount window that was approved by the Federal Reserve Board in July and the contingency actions of the Federal Open Market Committee announced by the Federal Reserve Bank of New York on September 8 should help to ensure an ample supply of liquidity and relieve funding pressures.

The potentially most important piece in the Y2K puzzle for the rest of the year is the uncertain response of the American consumer as the year-end approaches. A small number of households, driven by fear of the unknown, tell pollsters that they are planning to build large stockpiles of food, water, fuel, and cash as the millennium approaches. Most, however, profess much more limited plans.

Nonetheless, we at the Federal Reserve must be prepared for all contingencies and have made especial plans for currency availability in the remote possibility of heavy withdrawals from banks. I trust that such withdrawals will be modest since, as I have said before, the safest thing for consumers to do with their money around year-end is to leave it where it is. Consumers should prepare for the Century Date Change as they would for any long weekend. Those people who do cash out a significant part of their deposits only increase the risk that they will become victims of crime or fraud. Prudent consumers nonetheless should always have up-to-date copies of their financial records just in case of a "normal" computer glitch.

In summary, no one really knows what will happen when the century rolls over. The Century Date Change, to repeat, is a unique event, and the complexity of the problem suggests that something is likely to slip through the cracks. But as I mentioned earlier, the probability of a cascading of computer failures in mission-critical systems is now negligible, given the testing that has been done, the backup plans that are in place, and the great adaptability and ingenuity of the American worker. Moreover, the evidence of an increasingly compliant computer infrastructure appears to have assuaged at least some of the public's earlier Y2K concerns, according to several recent surveys. And the year-end interest rate premiums, which rose throughout the first half of this year, appear to have receded a bit since early September.

Nonetheless, we have not yet reached the period of extra heavy focus by the media on the CDC. It is too compelling a story for audiences that thrive on countdowns to the unknown. As attention heightens and rumors inevitably mushroom, it is important that what is known and what is not known be clearly articulated by those of us in both public and private leadership positions in Y2K management. In the final analysis, facts are the only antidote for rumors.

We at the Federal Reserve are optimistic that computer problems associated with the Century Date Change and the response to the CDC will not be a major event for our nation. This is a testament to the extraordinary efforts of thousands of far-sighted technicians and business planners who, confronted with an intangible and abstract problem, have been able to convince businesses and governments to marshal vast resources for remedial actions. This has been a truly impressive feat. If we avoid fear-induced, significant economic responses in the months ahead, the Century Date Change will hopefully replicate the saga of "the dog that did not bark."

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-- Linkmeister (link@librarian.edu), September 17, 1999.

Linkmeister,

I think it was three minutes from the time I posted my request until you had posted the link and the full transcript! If that's not a world record, I don't know what is...

Thanks, Linkmeister, I really appreciate your efforts -- you are an enormously valuable asset in our meager efforts to comprehend the full dimensions of the Y2K situation!! (Too bad that John Koskinen doesn't have someone like you on his staff)

Ed

-- Ed Yourdon (HumptyDumptyY2K@yourdon.com), September 17, 1999.

Y2K is a "Non-Issue", just a "Bump in the road", evryone is 99.7% ready. The only real problem is Y2K alarmists, do not stockpile anything. Y2K is just a ploy by programmers to get rich. There are no significant problems anywhere. There never were. All the money and attention has been wasted. All these people that are working on Y2K remediation are only doing it for the money. There is no problem. Don't take your money out of the bank, don't buy any more than a couple of days worth of extra supplies. No deadlines have been missed. There have been no significant computer problems as a result of Y2K. The federal govt systems are all fixed. No big deal. WE ARE THE REAL PROBLEM, THE COMPUTERS ALL WORK JUST FINE, ALWAYS HAVE AND ALWAYS WILL. As a matter of fact, the bump in the road is us, the fanatics and lunatics that are concerned, not the IT systems. Hmmmm...IT

-- Tim Castleman (aztc@earthlink.net), September 17, 1999.

Ed,

You're welcome.

-- Linkmeister (link@librarian.edu), September 17, 1999.

I read his words with interest (thanks Linkmeister!). They reinforced my belief that "stocking up" is an excellent idea. Even if Y2k ends up just a BITR, the possible media frenzy and subsequent panicking of JQP justifies my taking precautions ahead of time.

Common sense may fly out the window - an example was given below in the mention of heavy traffic during evacuations of eastern Florida: The opposing traffic lanes were all but empty but no officials thought to utilize them for thru-traffic, and everyone just sat there, bumper to bumper because that's what everyone else was doing.

I sure will be glad when (if?) this blows over!

-- Kristi (securxsys@cs.com), September 17, 1999.

Note the straw man at the start of the speech: G'span implies that we will somehow expect higher performance standards from our tech on this New Year's Day than we have in previous years. This gives him bluster room--'of course Jan. 1. will be like any other day; there are breakdowns on any other day; this will be no different.' But he's already named 'perfection' as the benchmark standard to which we will hold this particular day, so any reasonable person must of course conclude that Jan. 1 failures will be well w/in the range of normalcy. This approach allows him to skirt the problem of simultaneity altogether. G'span approves of companies' redeployment labour and capital resources in the event of disruptions (a fancy phrase for FOF), but this approach cannot succeed if failures are simultaneous or linked in domino fashion.

Most salient sentence of the speech: 'While it is easy to obsess about the few institutions in our society that may not be ready, let us not lose sight of the fact that the overwhelming majority of us are not only prepared but have contingency plans to deal with breakdowns.'

Best phrase: a tie between 1) 'The Century Date Change Special Liquidity Facility' AND 2) '"normal" computer glitch'.

Does someone out there know the saga of 'the dog that did not bark'?

Got Galbraith?

-- PH (ag3@interlog.com), September 17, 1999.

Yes, good pick-up, PH. 'Failures will occur. They occur every day. CDC will be like any other day.' Logical fallacy.

-- Spidey (in@jam.mud), September 17, 1999.

Worst Possible Advice Award: "Consumers should prepare for the Century Date Change as they would for any long weekend."

-- Dog Gone (layinglow@rollover.now), September 17, 1999.

Just caught the noon news on a Cincinnati TV station. "Good News about Y2k"; Allan Greenspan has announced that y2k disruptions will be almost non existant. I was dumbfounded!

Was this a translation by the local news? Cincinnati is so conservative as it is, with very few people preparing, I am afraid this announcement will be the final straw as far as encouraging any preparations more than for a 3 day "Holiday"!

Hanging in there but deeply upset and discouraged

-- FOX (ardrinc@aol.com), September 17, 1999.

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Alan Greenspan has crossed over his own Personal Rubicon.

The "Predictions Department" at U.S. Gov must have a bleak scenario that they're sharing with Mr. Greenspan. He is a very bright economist and a steady hand.

For him to change from the "100% compliant" requirement to where he is today, must have required an overwhelmingly compelling and dire view of the future.

I believe that the scenario they are using shows dire outcomes, but they are not sure of the exact path the elements of it will take. Numerous threats from within and without all accumulating at the same approximate time frame. But, they are still unsure of which combinations of threats or impacts will specifically cause the dire scenario.

In other words, it is like they have seen the end result of a race, who wins and who loses, but they don't know how the race was run. And they want to control the race, if they can, to prevent what they know will happen. Call it what you will. The English courts of old had their advisors and US.gov has theirs.

Several months ago, at the end of a committee hearing, Alan Greenspan was asked to comment on what he felt the typical American might experience at the point of the Century Date Rollover. And he responded this way (paraphrased):

"I think the typical American will be at home, and hear something on the radio, possibly the television, something very disturbing, I say he should try not to panic. He should try to remain calm."

He may have been referring to something besides systemic crashes.

///

-- no talking please (breadlines@soupkitchen.gov), September 17, 1999.

Last week one of my neighbors said "Y2k is a hoax, they said it on TV!".

Seems the translation about existing y2k-scams and hoaxes became "Y2k is a hoax" on some news show and this poor sap picked up on that message and now he, his whole family and his friends thinnk thats the case.

-- stasher (stasher@stashit.com), September 17, 1999.

Interesting, huh? Again, we are the problem because the public is only partially informed. And who, pray tell, is fully informed? Suppose, on our partial information, we decide that the risks are great enough to warrant radical action--like setting aside food, and withdrawing from the public financial markets. And suppose we are correct in our assumptions. Does this still make us wrong? (Yes.)

And why is everyone from the federal government delivering exactly the same message? Have they been outfitted with "talking points"? Or do they just naturally fall into the federal meme?

-- Mara Wayne (MaraWayne@aol.com), September 17, 1999.

It's his opinion, not mine. His audience is money, stock-brokers, and politicians. His sponsers and clients are the same people who set him in the front row, center, right next to Hillary at the Clintons' first State of the Union address.

I respectfully disagree, but aknowledge that this speech will stave off stock market disruptions for a while longer, but then again, what else would you expect? A market that moves 2% in 4 hours based on only rumors is not stable, and cannot be trusted to "respond" reasonably when faced with multiple, sudden, large first quarter losses and failures.

But the failures will, or will not, occur despite anybody's opinion. despite polls or despite proclamations.

Now, the response to the failures will determine the extent of the economic disruptions. That is less predictable. Also, he is very "aware" in his speech of business "stockpiling" - warning against even a small stockpile (a few days worth - not even a month's reserve hedge!)

Also, he completely discounts any operating failures in any system - though he referenced the recent failures in three companies, it's as if he claims no others will occur. It's as if he decided there would not be any multiple failures, nor would these failures occur inwidespread areas,, therefore there will be no effect due to disruptions in the infrastructure!

I believe he has listened too closely to the government's single view, and has either been deliberately shielded or has chosen not to listen or review any contrary information. Troubling......

-- Robert A. Cook, PE (Marietta, GA) (cook.r@csaatl.com), September 17, 1999.

The only subtlety in his speech is here:

"In the event of breakdowns SHORT of systemic, history teaches us that businesses are remarkably adaptive, whether the adversities were the failure of AT&T's frame relay network, defective routers in the MCI- WorldCom data transmission network, or the clogged arteries of the Union Pacific railroad."

And ..

"But as a result of vast effort and an estimated $50 billion of expense by the private sector, enough of our critical infrastructure has been judged Y2K-compliant to view the probability of any SYSTEMIC breakdown as NEGLIGIBLE, even granting the uncertainties associated with our interconnections with less-prepared foreign countries."

Negligible leaves very little wiggle room! He didn't say, "slight", "modest", "moderate" but "negligible".

His agenda with respect to minimizing preparation (market imbalances) is also obvious, of course, ie., not subtle or hidden.

I would tend to take Greenspan largely at face value here, that is, he believes the real "danger" is from business and consumer over- reaction. IOW, he is a polly, basically like Flint.

It also doesn't make him right, either, about Y2K impacts. One has to ask, "if he believed Y2K impacts had the potential to be dangerous, what would he be saying on Sept. 17, 1999?" "How different would it be from what he did say?"

I believe it WOULD be subtly different (that's why I don't see much wiggle room here) but only subtly different. He would still emphasize the danger of "over-reaction" and of "taking money out of banks".

On balance, this leads me to the view that ....

1. Either Greenspan knows more than we do (not certain, btw), and is justifiably optimistic (WONDERFUL!).

2. He doesn't know anything appreciably more than we do on the technical front (ie, the data he gets is as confusing and misdirected as that received by anyone else), but he is a polly and, like most pollies, believes the only thing we need to fear is American citizens.

3. He is lying through his teeth. I doubt this because I think he would give a cleverer speech with respect to impacts if that were the case.

Occam's razor suggeests 2.

-- BigDog (BigDog@duffer.com), September 17, 1999.

Wait a minute!

Therein lies a clue - if expenditures in the US are already estimated at over 850 billion, why did he use 50 billion in his speech - doesn't this indicate he is being fed massively wrong information?

And....from wrong information recieved from people with a deep interest in spreading wrong information, wrong conclusions come.

-- Robert A. Cook, PE (Marietta, GA) (cook.r@csaatl.com), September 17, 1999.

We'll take a stab at parsing the quadruple-speak. Par-snips, moving paragraph by paragraph down:

Ain't gonna step on no expert toes. Exceptionally complex (who knows what the hell we're doing or how it will turn out) and we can't stop busting buns yet, ain't fixed yet. Gotta make the Good News more persuasive. Ready. The public has bought into our spin so far. Fears seem to be waning, but we gotta keep up the bull$#!+ to ensure the anesthesia remains effective.

This problem has never happened before, so we don't know what the hell is going on. There have been no official academic studies or statistics regarding this unprecedented FUBAR, so we have nothing to go on. Common sense has never been examined or calculated to various government-funded doctrines, so we can't go there. However, we can flub our way to a new conventional wisdom by observing that nothing works too well anyway, so dammit lower your expectations. We ain't gonna have electric power so don't expect Trading. Whew, at least there's a precedent for that conclusion. The mechanical and electronic systems will break down. That will become a normal part of our everyday life. It is simply unrealistic to expect our advanced-beyond-comprehension/repair technology to function. ATMs and banks are history. We'll make sure the media does not report how wide-spread these outages are, thus leading the weeples to believe their locality is just the normal 1-2% out of service anyway, due to, uh, some reason. Any reason, uh, terrorism probably. Or squirrels. You know how squirrely they get in January. Perfection, which I said was necessary, is um, impossible. Bank Holidays.

OK, granted systems will fail. But be forewarned system failures at Rollover will be broad, catastrophic, long-lasting, persistently spectacular disasters. We were idiots to become so dependent on computers. We've been able to limp along and FOF so far, but this is too big. This collapse of infrastructure and carrying capacity will have a noticeable effect on the economy. Uh, in other words, the economy will be squashed and eliminated. Our interconnections with the clueless rest of the world will ensure global downfall. The over $50 billion of expense by the private sector has been enough to keep our current bubble afloat; gotta give me credit for that ledgerdemain.

History, and past stale studies, which address failures short of systemic, shows that previously we could be adaptable. However, now for sure telecoms and rails are toast. Before, the dollar was butt-kicking incentive to fix things. This time, our only hope will be reallocation of resources, martial law, and drafting of labor. No pay. Corporations will tank. We have biz models that show how. Firms will not survive due to inability to recover from these technical problems.

To recover quickly you need a skilled, well-educated workforce. Everybody knows that's been dumbed to slower than water, and rightsized into apathy and general piss-off. The morons in the executive suite won't be any help, and wouldn't recognize a solution to anything even if it gatored them deep in the ass. It's the grunts on the floor that actually save the day, but they're too boxed in to prevent this disaster. Houston, we have a serious problem. We'll have limited materials in a crippled environment. It's gonna go Challenger. CDC will be idiot.sinchronic.istic event. Our society will go ballistic as problems cascade out of control.

This morning we'll hear glossy-over BS from the all-important financial industry, blah blah blah. Listen with perspective: even tho some claim to be mobilized, too many were late off the chopping block and are useless carcasses. Let's not obsess about the Mother Of All Breakdowns; after all, some of us have contingency plans. We will be isolated in our bunkers. For years we will need disinfection, however.

While sometimes even I relax in the glow of our BS spin, the reaction of businesses and households to the reality scares the hell out of me. If they catch on and run the banks, our economy will tank majorly before Rollover.

If only we could have kept a lid on Y2K awareness from the very beginning! But we didn't GI. It was never any business of the populess that we were facing an unprecedented life-threatened technical collapse. They must not be allowed to take actions benefitting their life continuity. They are pawn serf slaves meant only to fuel the economic engine into my pockets and coffins, err, coffers. Given the mind-blowing all-encompassing reach of Rollover disastrous impacts, no whiff of this problem should ever have leaked to a reactionary public. We cannot let them think there is any reason to prepare.

Seeing how their remediation efforts are hopelessly late and unfixable, large businesses are aghast to discover their suppliers and local infrastructure are doing no better and won't be able to pull them out of the quicksand. The multiple dependencies will pull everybody down. JIT will sink the whole system. It's too late to stock up inventories. Besides, we no longer have the production capability to ramp up on such short notice. But we can avert panic by lying through our smiling gritted teeth and proclaiming everything is fixed and there is absolutely no reason for concern. No uncertainty can be allowed. Redouble your doublespeak lipflapping! Only inaccurate, noncredible, and untimely information on the general state of unreadiness will be permitted, so businesses can then make uninformed decisions that no type or magnitude of precuations are in any way necessary.

If even a few businesses get it into their heads to notice and take even small hedge preparations, the panic will spread and our system will (3 months) prematurely tank. Bottlenecks will be apparent and our necks will be on the chopping block. We must guillotine any possibility of this occurring. This pressure is disturbing my sleep so we absolutely cannot share any real information and at all costs must dissuade any preparation by any means.

There are alarming nascient indications that a scramble to liquidity is at the cusp. We're melting.

The most crucial unknown at this point is the behavior of JQP. The average citizen's latent wake-up would be the crux of our crucifixion. We must propagandate our fiction to prevent this.

We at the Federal Preserve have secretly prepared for this ultimate Contingency. We have special plans to make currency unavailable to JQP in the even he wakes up and wants it. The only safe place for money is out of reach of its owners. We will stonewall withdrawals by lying to JQP and telling him all he needs is up-to-date copies of his financial records. Of course there are several loopholes declaring these utterly worthless, but we can make JQP feel the hard copy of his bank statement is worth more than gold. We herewith declare computer glitches "normal" and to be expected.

Again, nobody knows what the hell is coming. We're going to slip thru the cracks into The Crevass Leading Straight To Hell. This much is certain, since mission-critical systems will fail, testing has not been done, back-up plans have not been ascertained, and the American worker has become an ossified rigid petulant puissant whose brain has been turned to mush (gotta give me credit for that too). Polls and surveys are useful sway tools to keep the herd contentedly chewing our pablum. If we keep repeating with great assurance that our computer infrastructure is compliant, we can massage and assuage at least some of the public's earlier Y2K concerns. We can manipulate confidence thru tweaking interest rates.

Fortunately we have managed to stave off media attention to the CountDown. Human nature may see this as an exciting entertainment event, however, so we must redouble quadruple our disinformation to counter any normal human interest in countdowns or rollovers. We must convince the herd that any such interest is the province of only the fringe, untouchables, undesireables, terrorists, maniacs, whackos, religious fanatics, and other dangerous persons. Contamination by association. Roach by ridicule. Persecute by preparation. Drive these concerns far underground.

We at the Federal Preserve will persevere. We have bunkers and stockpiles. We are the only ones that matter, so the Great Cull will, in the long run, not be a major event for our nation. We have practice at surpressing history. The great spin and Cull is testosteronement to the extraordinary stupidity of millions of short-sided, greedy, selfish, lazy, pointy-haired managers who, confronted with an intangible and abstract problem, have been able to laugh it off with snide sneers and convince their equally daft peers to marshall all their ridicule and scoffing to unremediated mismanagement. This has been a truly impressive feat (gotta give me credit for here too). If we avoid fear-induced, significant economic responses in the months ahead, the Century Date Change will hopefully replicate the saga of "the boy who cried wolf."

-- Ashton & Leska in Cascadia (allaha@earthlink.net), September 17, 1999.

And, we still don't know if even that amount (800 billion) is going to be enough: remember, every company, agency, or executive quoted to date who has finsihed remedation and testing has said they needed more money, spent more time, and found more problems than anticipated at the onset.

And,less than half of government agencies are actually "doing" anything, judging from their reporting rate.

-- Robert A. Cook, PE (Marietta, GA) (cook.r@csaatl.com), September 17, 1999.

If you compare paragraph for paragraph, that's what Greenspan *really* said ;^)

-- Ashton & Leska in Cascadia (allaha@earthlink.net), September 17, 1999.

You can read what Alan Greenspan had to say about Y2K on September 23, 1998 and February 24, 1998 at this link (.pdf format):

http://www.yardeni.com/public/y_19980929.pdf

-- Linkmeister (link@librarian.edu), September 17, 1999.

Big Dog:

I think he is lying, but not necessarily (don't jump yet) an immoral lie. I cannot fathom that someone with his resources could possibly look at something so unprecedented and ambiguous and then use the word "negligible" to describe the serious risks. I am back to what I've stated before: I believe that the Feds have decided that they must preserve the banking/financial system at all costs. This is an area where I think our collective wisdom may fall short (and really piss off the big-time libertarians on the forum). By preserving the banking system, even if it risks screwing with the constitution, sitting back watching the potential for a death toll mount, and even letting corporate America walk into an ambush, may be the only way to guarantee that a true collapse can be head off at the pass. The analogy is when Churchill chose not to evacuate that city (whatever it was) prior to a bombing raid, a decision that certainly cost many lives, to preserve the secret that they had cracked the German's code. I know I'm trying to give this administration alot of latitude here, but it's possible that they are currently facing some truly aweful decisions that the collective wisdom of the forum can't fully grasp.

Alternatively theories: (1) we're all nuts (2) they're all nuts (2) they might be lying dogs (no pun intended).

I'm not giving my supplies away based upon this speach.

Always with best regards...

-- Dave (aaa@aaa.com), September 17, 1999.

The power, the image, and the entire legacy of this President is based on the stock market remaining so high that nothing else can touch the Clintons. The stock market is high -> people are happy -> poll data is still high -> impeachment response is "vote no"...

This administration simply cannot let anything touch the perception of rosy horizons and rosy futures.

Again, only 50 billion was spent in the private sector? Where did Greenspun get his information?

-- Robert A. Cook, PE (Marietta, GA) (cook.r@csaatl.com), September 17, 1999.

Ashton and Leska. That recap above was spectacular.

-- Dave (aaa@aaa.com), September 17, 1999.

ASHTON & LESKA:

I'm in total awe of the way you guys think/write. What a brilliant piece. Proud to be a member of the same forum as you. (Of COURSE we could all be involved in the basic illness of schizophrenia -- inability to face up to Reality. Yeah.)

Bill

-- William J. Schenker, MD (wjs@linkfast.net), September 17, 1999.

Ashton & Leska -- How did you get the advance copy of his speech?

-- BigDog (BigDog@duffer.com), September 17, 1999.

My perspective comes from multiple software consulting gigs on Wall Street, including a recent y2k testing engagement across the street from the World Trade Center.

Please remember that Wall Street has a way of creating and enforcing 'group think' among the blue-suited phalanxes. It's amazing to see it in action. Rogue thinkers are dealt with, unless they are making a lot of money, in which case the rogue thinking becomes the new paradigm.

Secondly, recognize that the Fed perceives its responsibilities as global, not national. And the biggest threat globally, after a US market meltdown, is a cross-defaulting fiasco in the derivatives market. What the market regulators need is stability, now and in the future.

I think that the global markets are so shaky right now that Greenspan and a lot of others can convince themselves that lying is the responsible thing to do. The slightest pinprick will cause chaos in US equities, gold&silver (where lots of central banks and investment banks are very vulnerable), the dollar, fixed income (bonds & interest rates), all leading to or based on derivatives... in short, the whole shooting match.

I think he's jawboning for stability through October. But no amount of jawboning or optimism can make up for the fact that computers are stupid and they don't care.

Let's be careful out there.

-- Brady (brady@docuscribe.com), September 17, 1999.

See also...

What Greenspan *Really* Said (Ashton & Leska)

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id= 001QEL

-- Diane J. Squire (sacredspaces@yahoo.com), September 18, 1999.

Remarks by Chairman Alan Greenspan
Maintaining Economic Vitality
Millennium Lecture Series, sponsored by the Gerald R. Ford Foundation and Grand Valley State University, Grand Rapids, Michigan
September 8, 1999

http://www.federalreserve.gov/boarddocs/speeches/1999/ 19990908.htm

Love this Greenspan snippet...

... Trust is at the root of any economic system based on mutually beneficial exchange. In virtually all transactions, we rely on the word of those with whom we do business. Were this not the case, exchange of goods and services could not take place on any reasonable scale. Our commercial codes and contract law presume that only a tiny fraction of contracts, at most, need be adjudicated. If a significant number of businesspeople violated the trust upon which our interactions are based, our court system and our economy would be swamped into immobility. ...

[snip]

###

Question: Do we TRUST Alan Greenspan to tell the truth about Y2K and the banking industry?

Is his behavior... trust worthy?

Questions... questions.

Diane

-- Diane J. Squire (sacredspaces@yahoo.com), September 18, 1999.

So back when Greenspan was before Congress many moons ago, he said the problem was real and unless work was done it would be a problem.

You all held him up as an icon.

Now, he comes out and says the work is being done, things are shaping up and he does not expect many problems.

Oh yes, he MUST be lying! I mean, there is simply NO way the work has actually been done and he is working off real info he has in front of him. Nope, no chance at all.

-- whatever (youwanna@believe.com), September 19, 1999.

http://www.usa.capgemini.com/news/pr99.asp?id=104

[snip]

Fewer than half of America's largest companies (48 percent) expect all of their critical systems to be prepared for the Year 2000, according to a new survey by Cap Gemini America, Inc., an information technology and management consulting leader.

[snip]

-- Linkmeister (link@librarian.edu), September 19, 1999.

Y2k is already the dog that did not bark.

What remains to be seen, in a little over 100 days, is if the dog will *bite*-and how hard.

Got bandages????

-- LauraA (Laadedah@aol.com), September 19, 1999.

Laura,

Suggest you take a look at Ed's new letter to Greenspan. He has a good comment on "the dog that did not bark".

-- @ (@@@.@), September 19, 1999.

Ashton & Leska: Damn what you wrote at What Greenspan **Really** Said is funny, and scary. You've created a true work of art! But, get out of my head! That's about how I read it, too. Maybe this is the difference between DGIs and GI's. The DGIs read or hear Greenspan and say to themselves "Whew! We dodged that bullet." While the GI's read it and say, "We're screwed!" For those who would appreciate a paragraph by paragraph version of A&L's post, I'm putting it here. You can link to it directly as: http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001Q8K#as hton-and-leska

Good morning, everyone. It's an honor to speak today to such an esteemed group. All of you are experts on the implications of the Century Date for our sector of the economy, and I suspect I will not have much to add beyond what already is well known. We face an exceptionally complex problem that has required and will continue to require the commitment of significant amounts of resources to fix. The good news is that evidence becoming more persuasive that our electronic infrastructure will be ready for the Century Date Change. The public's understanding of the degree of our Y2K readiness also has grown, and fears of widespread disruptions around the CDC appear to be, though we are not as yet home free.

Ain't gonna step on no expert toes. Exceptionally complex (who knows what the hell we're doing or how it will turn out) and we can't stop busting buns yet, ain't fixed yet. Gotta make the Good News more persuasive. Ready. The public has bought into our spin so far. Fears seem to be waning, but we gotta keep up the bull$#!+ to ensure the anesthesia remains effective.

There is nothing exactly like the Century Date Change in our historical annals from which we can infer its potential consequences. Nonetheless, it is the beginning of wisdom in thinking about the Y2K problem to recognize that failures and breakdowns in mechanical and electronic systems are a normal part of our everyday life. Recall most recent example of how an electric power failure shut down the Chicago Board of Trade. Thus, as a for monitoring developments, it is simply unrealistic to expect our advanced technology to function any better on January 1, 2000, than it has on any other day of the year. Automated teller machines are a prime example of this. On any given day, 1 to 2 percent of the nation's ATMs are out of service for some reason. Although the system and ATM providers are about as prepared for Y2K as they can be, we cannot realistically expect perfection over the New Year's holiday any more than at similar periods in years past.

This problem has never happened before, so we don't know what the hell is going on. There have been no official academic studies or statistics regarding this unprecedented FUBAR, so we have nothing to go on. Common sense has never been examined or calculated to various government-funded doctrines, so we can't go there. However, we can flub our way to a new conventional wisdom by observing that nothing works too well anyway, so dammit lower your expectations. We ain't gonna have electric power so don't expect Trading. Whew, at least there's a precedent for that conclusion. The mechanical and electronic systems will break down. That will become a normal part of our everyday life. It is simply unrealistic to expect our advanced-beyond-comprehension/repair technology to function. ATMs and banks are history. We'll make sure the media does not report how wide-spread these outages are, thus leading the weeples to believe their locality is just the normal 1-2% out of service anyway, due to, uh, some reason. Any reason, uh, terrorism probably. Or squirrels. You know how squirrely they get in January. Perfection, which I said was necessary, is um, impossible. Bank Holidays.

Moreover, while systems may fail as they have in the past, these failures never have resulted in broader persistent--that is, systemic--breakdowns in our economy. Notwithstanding, it is at least conceivable that, as a consequence of our current dependence on computers, some Y2K-related failures could have noticeable effects on the economy. But as a result of vast effort and an estimated $50 billion of expense by the private sector, enough of our critical infrastructure has been judged Y2K-compliant to view the probability of any systemic breakdown as negligible, even granting the uncertainties associated with our interconnections with less-prepared foreign countries.

OK, granted systems will fail. But be forewarned system failures at Rollover will be broad, catastrophic, long-lasting, persistently spectacular disasters. We were idiots to become so dependent on computers. We've been able to limp along and FOF so far, but this is too big. This collapse of infrastructure and carrying capacity will have a noticeable effect on the economy. Uh, in other words, the economy will be squashed and eliminated. Our interconnections with the clueless rest of the world will ensure global downfall. The over $50 billion of expense by the private sector has been enough to keep our current bubble afloat; gotta give me credit for that ledgerdemain.

In the event of breakdowns short of systemic, history teaches us that businesses are remarkably adaptive, whether the adversities were the failure of AT&T's frame relay network, defective routers in the MCI- WorldCom data transmission network, or the clogged arteries of the Union Pacific railroad. In our market-based economy, economic incentives ensure that resources quickly move to their most- productive activities: In a crisis situation, whether systemic or short of that, companies expeditiously redeploy their labor and capital resources to facilitate the restoration of their key operations. Corporate management is wholly aware that a slow response to a breakdown can bring revenue losses in the short run and an erosion of their customer base in the long run. put, in our competitive economic environment, the ability to recover quickly from a serious technical problem can literally be a matter of survival for some firms.

History, and past stale studies, which address failures short of systemic, shows that previously we could be adaptable. However, now for sure telecoms and rails are toast. Before, the dollar was butt-kicking incentive to fix things. This time, our only hope will be reallocation of resources, martial law, and drafting of labor. No pay. Corporations will tank. We have biz models that show how. Firms will not survive due to inability to recover from these technical problems.

Fortunately, our country has the skilled, well-educated workforce that is a precondition for such quick action. While ingenious solutions can sometimes originate from the executive, more often than not they grow out of the ability of engineers, technicians, and workers on the factory floor to improvise a temporary fix for a critical problem. Depth of experience and the ability of our workers to think "outside of the box" have prevented many a problem from turning into a disaster. Think back to the team of NASA that developed a critical air filtration system for the Apollo 13 astronauts using only the limited materials available on that crippled spacecraf. While certainly less dramatic, similar problem solving is occurring every day in our economy, fostered by workers who can rise to a challenge and a market system that rewards extraordinary efforts. Thus, while no one knows exactly what will happen on January 1--the CDC is a truly idiosyncratic event--we do have a good idea of how our society will respond if problem.

To recover quickly you need a skilled, well-educated workforce. Everybody knows that's been dumbed to slower than water, and rightsized into apathy and general piss-off. The morons in the executive suite won't be any help, and wouldn't recognize a solution to anything even if it gatored them deep in the ass. It's the grunts on the floor that actually save the day, but they're too boxed in to prevent this disaster. Houston, we have a serious problem. We'll have limited materials in a crippled environment. It's gonna go Challenger. CDC will be idiot.sinchronic.istic. Our society will go ballistic as problems cascade out of control.

This morning we will hear many progress reports on the Y2K readiness of the financial industry and other key sectors. As we listen, it is most important to keep in perspective just how far we have come in our Y2K preparations. Three years ago, only the largest and arguably the most forward-looking of organizations mobilized for the Century Date Change. Today, many firms and government agencies have completed their testing, and those institutions that were late off the block are working very diligently to be ready by the end of the year. While it is easy to obsess about the few institutions in our society that may not be ready, let us not lose sight of the fact that the overwhelming majority of us are not only prepared but have contingency plans to deal with breakdowns. Much has been learned over the past few years about how to disinfect our computer systems from the Y2K bug and how to isolate any problems that may occur. This large and growing knowledge base will serve us well as we approach the millennium and for years thereafter.

This morning we'll hear glossy-over BS from the all-important financial industry, blah blah blah. Listen with perspective: even tho some claim to be mobilized, too many were late off the chopping block and are useless carcasses. Let's not obsess about the Mother Of All Breakdowns; after all, some of us have contingency plans. We will be isolated in our bunkers. For years we will need disinfection, however.

While I have become increasingly persuaded that the technical breakdowns that might occur as a consequence of the CDC are readily containable, the response of businesses and households to unwarranted fears of serious disruptions does give me pause. It is the economic effects of their endeavoring to adjust to the CDC in the next few months that I see as replacing technical concerns as our major challenge.

While sometimes even I relax in the glow of our BS spin, the reaction of businesses and households to the reality scares the hell out of me. If they catch on and run the banks, our economy will tank majorly before Rollover.

I am not saying that we would have been better off if the existence of the Y2K problem had never been publicized. In that event, the remedial actions that have been expended over the past two years would surely have fallen short. Although the desirability of publicizing the existence of a pending significant technical breakdown was never in question--and never should have been--it always raised the potential hazard of an outsized, if only partly informed, disruptive reaction by the public. Given the potentially broad range of uncertain outcomes at the CDC, the cost of advance preventative preparations in most cases is probably correctly perceived by businesses and households to be low, or at least acceptable.

If only we could have kept a lid on Y2K awareness from the very beginning! But we didn't GI. It was never any business of the populus that we were facing an unprecedented life-threatened technical collapse. They must not be allowed to take actions benefiting their life continuity. They are pawn serf slaves meant only to fuel the economic engine into my pockets and coffins, err, coffers. Given the mind-blowing all-encompassing reach of Rollover disastrous impacts, no whiff of this problem should ever have leaked to a reactionary public. We cannot let them think there is any reason to prepare.

Thus, with their own remediation efforts either complete or nearing completion, many large businesses are currently evaluating the readiness of their suppliers and the local infrastructure on which they depend. Based on such assessments, these companies are deciding whether, for example, to hold inventory levels above their tight, just-in-time programs as a precaution against Y2K-related disruptions. Because businesses are effectively buying insurance against an uncertainty, the less uncertainty, the smaller the perceived insurance need. Thus, accurate, credible, and timely information on the general state of readiness will be essential to reducing uncertainties in the months ahead. Businesses then can make more-informed decisions as to the type and magnitude of the precautions they need to take.

Seeing how their remediation efforts are hopelessly late and unfixable, large businesses are aghast to discover their suppliers and local infrastructure are doing no better and won't be able to pull them out of the quicksand. The multiple dependencies will pull everybody down. JIT will sink the whole system. It's too late to stock up inventories. Besides, we no longer have the production capability to ramp up on such short notice. But we can avert panic by lying through our smiling gritted teeth and proclaiming everything is fixed and there is absolutely no reason for concern. No uncertainty can be allowed. Redouble your doublespeak lipflapping! Only inaccurate, noncredible, and untimely information on the general state of unreadiness will be permitted, so businesses can then make uninformed decisions that no type or magnitude of precuations are in any way necessary.

If only a small percentage of businesses choose to add to their inventories as a hedge, the effect on production will be insignificant. However, should a large number of companies want to hold even a few extra days of inventories, the necessary, albeit temporary, increase in production (or imports) to accommodate such stock building could be quite large. Bottlenecks could develop, and market pressure could ensue. Thus, the more we share information, the more informed our decisions and, hence, the smaller the need for precautionary hedging.

If even a few businesses get it into their heads to notice and take even small hedge preparations, the panic will spread and our system will (3 months) prematurely tank. Bottlenecks will be apparent and our necks will be on the chopping block. We must guillotine any possibility of this occurring. This pressure is disturbing my sleep so we absolutely cannot share any real information and at all costs must dissuade any preparation by any means.

While the evidence of precautionary inventory hedging to date is mixed, in the financial sphere, borrowers and lenders are clearly taking steps to build liquid assets and reduce their reliance on credit markets around the end of the year. This is reflected in a noticeable rise in deposit and commercial paper rates for funding that would be outstanding over year's end. Many corporate treasurers have moved forward their debt offerings to avoid any chance of a dearth of credit availability in the fourth quarter or difficulties funding short-term liabilities. The Century Date Change Special Liquidity Facility of the discount window that was approved by the Federal Reserve Board in July and the contingency actions of the Federal Open Market Committee announced by the Federal Reserve Bank of New York on September 8 should help to ensure an ample supply of liquidity and relieve funding pressures.

There are alarming nascient indications that a scramble to liquidity is at the cusp. We're melting.

The potentially most important piece in the Y2K puzzle for the rest of the year is the uncertain response of the American consumer as the year-end approaches. A small number of households, driven by fear of the unknown, tell pollsters that they are planning to build large stockpiles of food, water, fuel, and cash as the millennium approaches. Most, however, profess much more limited plans.

The most crucial unknown at this point is the behavior of JQP. The average citizen's latent wake-up would be the crux of our crucifixion. We must propagandate our fiction to prevent this.

Nonetheless, we at the Federal Reserve must be prepared for all contingencies and have made especial plans for currency availability in the remote possibility of heavy withdrawals from banks. I trust that such withdrawals will be modest since, as I have said before, the safest thing for consumers to do with their money around year-end is to leave it where it is. Consumers should prepare for the Century Date Change as they would for any long weekend. Those people who do cash out a significant part of their deposits only increase the risk that they will become victims of crime or fraud. Prudent consumers nonetheless should always have up-to-date copies of their financial records just in case of a "normal" computer glitch.

We at the Federal Preserve have secretly prepared for this ultimate Contingency. We have special plans to make currency unavailable to JQP in the even he wakes up and wants it. The only safe place for money is out of reach of its owners. We will stonewall withdrawals by lying to JQP and telling him all he needs is up-to-date copies of his financial records. Of course there are several loopholes declaring these utterly worthless, but we can make JQP feel the hard copy of his bank statement is worth more than gold. We herewith declare computer glitches "normal" and to be expected.

In summary, no one really knows what will happen when the century rolls over. The Century Date Change, to repeat, is a unique event, and the complexity of the problem suggests that something is likely to slip through the cracks. But as I mentioned earlier, the probability of a cascading of computer failures in mission-critical systems is now negligible, given the testing that has been done, the backup plans that are in place, and the great adaptability and ingenuity of the American worker. Moreover, the evidence of an increasingly compliant computer infrastructure appears to have assuaged at least some of the public's earlier Y2K concerns, according to several recent surveys. And the year-end interest rate premiums, which rose throughout the first half of this year, appear to have receded a bit since early September.

Again, nobody knows what the hell is coming. We're going to slip thru the cracks into The Crevass Leading Straight To Hell. This much is certain, since mission-critical systems will fail, testing has not been done, back-up plans have not been ascertained, and the American worker has become an ossified rigid petulant puissant whose brain has been turned to mush (gotta give me credit for that too). Polls and surveys are useful sway tools to keep the herd contentedly chewing our pablum. If we keep repeating with great assurance that our computer infrastructure is compliant, we can massage and assuage at least some of the public's earlier Y2K concerns. We can manipulate confidence thru tweaking interest rates.

Nonetheless, we have not yet reached the period of extra heavy focus by the media on the CDC. It is too compelling a story for audiences that thrive on countdowns to the unknown. As attention heightens and rumors inevitably mushroom, it is important that what is known and what is not known be clearly articulated by those of us in both public and private leadership positions in Y2K management. In the final analysis, facts are the only antidote for rumors.

Fortunately we have managed to stave off media attention to the CountDown. Human nature may see this as an exciting entertainment event, however, so we must redouble quadruple our disinformation to counter any normal human interest in countdowns or rollovers. We must convince the herd that any such interest is the province of only the fringe, untouchables, undesireables, terrorists, maniacs, whackos, religious fanatics, and other dangerous persons. Contamination by association. Roach by ridicule. Persecute by preparation. Drive these concerns far underground.

We at the Federal Reserve are optimistic that computer problems associated with the Century Date Change and the response to the CDC will not be a major event for our nation. This is a testament to the extraordinary efforts of thousands of far-sighted technicians and business planners who, confronted with an intangible and abstract problem, have been able to convince businesses and governments to marshal vast resources for remedial actions. This has been a truly impressive feat. If we avoid fear-induced, significant economic responses in the months ahead, the Century Date Change will hopefully replicate the saga of "the dog that did not bark."

We at the Federal Preserve will persevere. We have bunkers and stockpiles. We are the only ones that matter, so the Great Cull will, in the long run, not be a major event for our nation. We have practice at surpressing history. The great spin and Cull is testosteronement to the extraordinary stupidity of millions of short-sided, greedy, selfish, lazy, pointy-haired managers who, confronted with an intangible and abstract problem, have been able to laugh it off with snide sneers and convince their equally daft peers to marshall all their ridicule and scoffing to unremediated mismanagement. This has been a truly impressive feat (gotta give me credit for here too). If we avoid fear-induced, significant economic responses in the months ahead, the Century Date Change will hopefully replicate the saga of "the boy who cried wolf."

===============================

From: Y2K, ` la Carte by Dancr near Monterey, California

I've come up with a few additional editorial comments of my own. Some of them are in the form of possible thoughts Greenspan had while speaking. Some of them are possible "reservations," i.e. words that are held back, but which make the statement true in the speaker's mind.

 The good news is that evidence [that we're spinning up] is becoming more persuasive that our electronic infrastructure will be ready for the Century Date Change. The public's understanding of the degree of our Y2K readiness also has grown [unfortunately], and fears of widespread disruptions around the CDC appear to be waning [because people have stopped being so open about their preparations], though we are not as yet home free.

 On any given day, 1 to 2 percent of the nation's ATMs are out of service for some reason. [Every bank, NOW, make up really official looking signs that say simply "Down for Routine Maintenance"]

as a result of vast effort and an estimated $50 billion of expense by the private sector [wasn't that how much was expended on PR?], enough of our critical infrastructure has been judged [by clueless JQP to be] Y2K-compliant [for them] to view the probability of any systemic breakdown as negligible, even granting the uncertainties associated with our interconnections with less-prepared foreign countries [since JQP doesn't factor that in anyway!].

our country has the skilled[specialized], well-educated [but not broadly experienced] workforce that is a precondition for such quick action. While ingenious solutions can sometimes originate from the executive suite [not that they ever have, and especially when it comes to IT], more often than not they grow out of the ability of engineers, technicians, and workers on the factory floor to improvise a temporary fix for a critical problem. [In the good ol' days,] depth of experience and the ability of our workers to think "outside of the box" [without the use of computers or calculators, even] have prevented many a problem from turning into a disaster [I'm still praying for a silver bullet]. Think back to the team of NASA engineers [this is a good image, except to that small percentage of readers who may realize that we would need millions or billions of such miracles] that developed a critical air filtration system for the Apollo 13 astronauts using only the limited materials available on that crippled spacecraft [because they couldn't just go down to the hardware store or some machine shop to get what they needed]. While certainly less dramatic, similar problem solving is occurring every day in our economy, fostered by workers who can rise to a challenge and a market system that rewards extraordinary efforts [I hope most people haven't tried lately to get a retail clerk to give them correct change]. Thus, while no one knows exactly what will happen on January 1--the CDC is a truly idiosyncratic event--we do have a good idea of how our society will respond if problems develop [LA riots come to mind].

Three years ago, only the largest and arguably the most forward-looking [those dealing in pensions and mortgage lending] of organizations mobilized for the Century Date Change. Today, many firms and government agencies have completed their testing, and those institutions that were late off the block [everybody] are working very diligently [i.e. with "due diligence"] to be ready by the end of the year [with documentation of how hard they "tried"]. While it is easy to obsess about the few institutions in our society that may not be ready, let us not lose sight of the fact that the overwhelming majority of us are not only prepared but have contingency plans to deal with breakdowns. Much has been learned over the past few years about how to disinfect our computer systems from the Y2K bug and how to isolate any problems that may occur. This large and growing knowledge base will serve us well as we approach the millennium [and try to actually do the remediation itself] and for years thereafter [yep, years and years].

While I have become increasingly persuaded, [I'm not persuaded] that the technical breakdowns that might occur as a consequence of the CDC are readily containable

I am not saying that we would have been better off if the existence of the Y2K problem had never been publicized. [Careful, don't go so far as to say it was a good that people sounded an alarm.] In that event, the remedial actions that have been expended over the past two years would surely have fallen short. [Never mind that they will anyway.] Although the [zero] desirability of publicizing the existence of a pending significant technical breakdown was never in question--and never should have been--it always raised the potential hazard of an outsized, if only partly informed [better uninformed than partly informed], disruptive reaction by the public. Given the potentially broad range of uncertain outcomes at the CDC, the cost of advance preventative preparations in most cases is probably correctly perceived by businesses and households to be low, or at least acceptable. [But, even though most people would be willing to bear the cost of their own preparation, they must not be allowed to realize that they should take urgent active steps to save themselves and their loved ones.]

-- Dancr (addy.available@my.webpage), September 19, 1999.

Correcting html error in last paragraph:

I am not saying that we would have been better off if the existence of the Y2K problem had never been publicized. [Careful, don't go so far as to say it was a good that people sounded an alarm.] In that event, the remedial actions that have been expended over the past two years would surely have fallen short. [Never mind that they will anyway.] Although the [zero] desirability of publicizing the existence of a pending significant technical breakdown was never in question--and never should have been--it always raised the potential hazard of an outsized, if only partly informed [better uninformed than partly informed], disruptive reaction by the public. Given the potentially broad range of uncertain outcomes at the CDC, the cost of advance preventative preparations in most cases is probably correctly perceived by businesses and households to be low, or at least acceptable. [But, even though most people would be willing to bear the cost of their own preparation, they must not be allowed to realize that they should take urgent active steps to save themselves and their loved ones.]

-- Dancr (addy.available@my.webpage), September 19, 1999.

http://www.bog.frb.fed.us/BoardDocs/speeches/1999/19990917.htm

The Century Date Change Special Liquidity Facility of the discount window that was approved by the Federal Reserve Board in July and the contingency actions of the Federal Open Market Committee announced by the Federal Reserve Bank of New York on September 8 should help to ensure an ample supply of liquidity and relieve funding pressures.

Just what actions were taken? See the following article:

http://biz.yahoo.com/rf/990831/7d.html

[Fair Use: For Educational/Research Purposes Only]

Tuesday August 31, 6:28 pm Eastern Time

NYFed raises Treasuries lending limits for dealers

By Isabelle Clary

NEW YORK, Aug 31 (Reuters) - The Federal Reserve Bank of New York said on Tuesday it will allow U.S. primary dealers to borrow a much bigger chunk of the central bank's portfolio of U.S. Treasuries, starting after the Labor Day weekend.

Although the Fed did not specifically cite concern over financial markets' potential funding problems related to the Year 2000, traders said the near-doubling of the amount of Treasuries dealers can borrow daily under the Fed's System Open-Market Account (SOMA) program was likely related to Y2K fears.

``The limit per Treasury issue will be raised to 45 percent of the total (Fed's $490-billion Treasury portfolio) holdings from 25 percent, effective September 7,'' a New York Fed spokesman said.

The New York Fed created the SOMA program in 1969 to allow U.S. primary dealers -- the brokerage firms that deal directly with the Fed and are market-makers in U.S. government securities -- to borrow U.S. Treasuries from the central bank's portfolio overnight through bidding at daily auctions with a noon deadline.

The SOMA program helps alleviate market disruptions such as the ones that may be related to scarce Treasury issues trading ``on special'' or at a premium in the repo market.

``The rationale for the decision remains the same, to provide a secondary and temporary source of securities to the Treasury financing market in order to promote smooth clearing of Treasury securities,'' the spokesman added.

But dealers said this was the latest effort by the Fed to ensure smooth financial markets ahead of the year-end when portfolio managers are expected to be exceptionally cautious with their counterparties.

``I think Y2K will have a very big effect over the year-end relative to the Treasury issues that are scarce,'' a repo trader said. ``It's a good move by the Fed.''

On April 26, the New York Fed had taken a first step to broaden its SOMA program by raising the amount of Treasuries any primary dealer can borrow from the Fed's portfolio to $100 million per issue and $500 million per firm.

``Since the program was revamped in late April, primary dealers borrowed $77 billion worth of Treasuries or an average of $900 million overnight,'' said the New York Fed spokesman. ``The new program went very well.''

The Fed has already beefed up its cash coffers to meet any unusual surge in demand for paper money ahead of the year-end and also opened a special ``don't-ask-don't-tell'' discount window operation where banks will be able to borrow large amounts of funds at 150 points above the 5.25 percent Federal funds rate.

The New York Fed had said it retained the right to reject bids if it felt a dealer was bidding for a specific issue in an attempt to squeeze that issue.

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-- Linkmeister (link@librarian.edu), September 19, 1999.