http://www.worldnetdaily.com/bluesky_bresnahan/19991014_xex_y2k_recessio.shtml

Y2K recession forecast for U.S. Depression in some parts of world, economist predicts

By David M. Bresnahan ) 1999 WorldNetDaily.com

The U.S. economy is headed for a Y2K recession, and much of the world could face a depression, according to one economic expert.

John F. Mauldin, investment analyst for ProFutures Fund Management and author of a book on Y2K investment strategies, is expecting a major recession in the U.S. and a depression in many other countries. He goes so far as to predict 20 percent unemployment in the U.S. after the first of the year and a drop of 50 percent in the stock market.

Companies in many foreign countries are building large inventories of parts and supplies in anticipation of Y2K computer bug-related shortages at the start of the new year. The impact of laying in those inventories may cause layoffs, a recession in the U.S. and a depression in other parts of the world. The economic prosperity bubble is very fragile and doesn't need much pressure to pop.

Not everyone agrees. Sen. Robert Bennett, R-Utah, and chairman of the Senate Special Committee on the Year 2000 Technology Problem, sees more hope for the economy.

"The Asian economy appears to be coming back. The Japanese economy appears to have bottomed out, maybe improving a little. But I can get as many opinions as I can get experts to tell me how stable and real that is. I think Asia is still very fragile. The Russian economy, of course, is still in freefall and showing no signs of recovery. While Russia's not a major trading partner with us, if there is a complete meltdown of the Russian economy, it will affect the rest of Eastern Europe and come back to haunt us," Bennett warned in an exclusive interview with WorldNetDaily.

But Bennett is concerned about other potential problems that could surface if the Y2K computer bug is not repaired. He cites a recent report by the Central Intelligence Agency on foreign readiness. The report stated that of 161 countries evaluated, at least half have done nothing to deal with Y2K-related problems. Of the half that have taken some Y2K repair steps, only 20 percent appear prepared for the computer date change.

When the date changes from 1999 to the year 2000, computers that have not been repaired could fail, causing a multitude of problems. The greatest impact will be in those smaller countries where repair work has been minimal.

"Most of the economic areas that impact the United States that are vulnerable to Y2K in these countries are not under the control of the national governments, but the multinational corporations that have chosen to locate there," said Bennett.

Mauldin says that making the right investments and business moves now will protect those who want to prepare for the recession he predicts in his book, "How to profit from the Y2K recession."

For example, he expects interest rates to drop two points because of Y2K economic problems, so next year will be a good time to refinance.

"The slippage of deadlines is not as good as I thought it would be. Sixteen percent of the Fortune 500 companies are now telling us they will be less than 75 percent ready with their mission critical stuff at the end of this year," Mauldin told WorldNetDaily.

"We're probably looking at about 25 to 30 percent, maybe more, of the country's Fortune 1000 companies being less than 80 percent done (with Y2K repairs).

"We're going to have a significant number of mid-size companies go belly (up). I think one of the most significant things in the research data is that 20 percent of the Fortune 500 companies are expecting to buy their failed competitors. So at least 20 percent think that it's not going to be just a bump in the road," explained Mauldin.

Companies are motivated by the need to survive and make a profit, so many of the larger companies have taken steps to solve Y2K-related problems when the country fails to take action.

"It's the pressure from these multinational U.S. firms in these countries saying, you get this fixed or we're taking our business someplace else. And if they can't take their business someplace else they say, 'we will move in and see that it's fixed,'" explained Bennett.

Even with the pressure being exerted by large companies to get problems resolved, there may be many Y2K failures around the world at the start of the new year. To protect themselves, and in an effort to stay in business, many companies are stockpiling supplies and inventory.

That action could spell economic disaster for many in January. Companies with large inventories would most likely lay off workers in large numbers. Businesses that have stockpiled supplies won't order more until they use what they have, which would cause a cash flow crunch for their suppliers.

The domino effect could cause a worldwide economic disaster, according to some financial experts. Bennett said he gets a different assessment from each economic expert he talks to. He advises businesses to be prepared to "do business in the environment you find yourself."

"The Venezuela government is way behind on Y2K," said Bennett as an example of how private business is helping governments in trouble. "The Venezuela oil company that provides oil to the international market is practically a separate country unto itself and they have all of their docking, loading, customs, infrastructure kinds of things under control. They said, 'We can't depend on the government and we're going to do it by ourselves,'" he explained.

Although the economy in many countries is already very precarious, Bennett said his worries have subsided since he learned that major multinational companies are going to step in and help. He expects trouble, but things will not be as bad as they could have been, he believes.

"The combination of multinational pressure from the United States, the recognition on the part of those companies in those countries that deal globally and the pressure to deal with suppliers has lowered the vulnerability that I was worried about as recently as a year ago," he said.

David M. Bresnahan is an investigative journalist for WorldNetDaily.com and the author of "Cover Up: The Art and Science of Political Deception."

-- Helium (Heliumavid@yahoo.com), October 14, 1999

Answers

See also... the international effect...

New Senate Y2K Hearings - "What in the World Will Happen?"

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

-- Diane J. Squire (sacredspaces@yahoo.com), October 14, 1999.

Fun fun fun. It's the stupid economy!

-- Ashton & Leska in Cascadia (allaha@earthlink.net), October 14, 1999.

Okay - well consider that the much-vaunted "we will be ready" predictions don't seem to be coming true either:

http://www.theage.com.au/bus/19991005/A40341-1999Oct4.html

This survey results confirm that the "rough guess" estimates predicted 18 months ago by Ed Yourdon are about right: 75-80% of LARGE companies in the US are going to finish - if they finish all mission critical systems at all - in the last months of 1999.

Funny - this isn't what's in their 10Q SEC reports. This isn't what's in the the administration's predictions.

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

Robert,

Even funnier, they all spread the everything is hunky dory story BUT over 50% of them are stockpiling extra food and cash....

Go figure...

-- STFrancis (STFrancis@heaven.com), October 14, 1999.