Bloomberg: Cash will be king, Y2K bank run scenario described. : LUSENET : TimeBomb 2000 (Y2000) : One Thread

This is on the main Bloomberg web site this morning:

Fair Use / Educational/Research purposes only

How Cash Will Be King By Mark Gilbert


Hands up everyone who plans to tuck a small pile of banknotes under the mattress before toasting the end of the century? Now ask those seated around you in your office whether they plan to make a couple of extra visits to the cash machine in December, ``just in case.''

Now type the following on your Bloomberg: US0003M US0004M HS2 . Note how the cost of money spikes up as the three- and four-month money market rates extend past the end of the year, reflecting expectations that concern about computers misreading the year 2000 as 1900 will make money about half a point more expensive at year-end.

Maybe the experts are right and worries about the millennium bug problem are exaggerated. The dry run for Y2K last month -- when some computers were supposed to get confused on Sept. 9 because four consecutive ``9'' digits were used by programmers to tell a program to stop running -- turned out to be a non-event.

But as economic experiments go, the end of the millennium is set to be a whopper. Partying like it's 1999 means a jump in spending on goods such as food, alcohol, posh clothes and all the other essentials to ushering in the new year.

Attending to those partygoers means higher wages at bars and restaurants, in turn giving waiters and waitresses more cash to spend in the January sales. And it seems unlikely that all of the cash squirreled away at home in December will be returned to people's bank accounts in January.

Millennially Adjusted

So reading the economic runes for retail sales and money supply in December and January will become increasingly difficult, for central bankers trying to set monetary policy as well as analysts and investors. How do you ``seasonally adjust'' an economic report to take account of an effect that only happens once every thousand years?

There's also the one-time boost the economy is currently getting from businesses making contingency plans for Y2K, and having to run checks on their existing systems. Even if the lights don't go out at the turn of the year, companies are buying a lot of insurance to cover themselves.

Nigel Hurley is production manager at Richard Lloyd Ltd., an engineering firm based near Wales that makes cutting equipment for the auto industry and has annual sales of about 4 million pounds ($6.7 million pounds). Hurley's company has spent about 25,000 pounds building a manual back-up system so it can keep producing even if its computer-aided design network breaks down at the beginning of January. That's 25,000 pounds the company wouldn't have spent otherwise, Hurley said.


Ed Yardeni, the chief economist at Deutsche Bank AG's New York office, is a pessimist about Y2K. He's told his clients he sees a 70 percent chance of a global recession next year, prompted by computer problems.

He'sone of the authors of a survey that polled 993 companies via the Internet between Sept. 15 and Sept. 22. The respondents were mostly accountants, auditors or technology managers at finance companies and manufacturers, 80 percent of which either said they were global organizations or based in the U.S., with 57 percent representing more than 1,000 employees.

In business terms, Y2K isn't a concern for these folks. Almost 74 percent said preparations for coping with any problems are 76 percent complete or better, with 19 percent fully finished. More than 90 percent saw 5 percent or less of what the survey called ``mission-critical systems'' at risk of failure or malfunction.

Confidence in power and telephone companies is also high, with 93 percent or better anticipating minor problems or no disruption in electricity supply or telecommunications coverage.

Asked what they plan to do personally about safeguarding themselves against Y2K problems, however, and the replies get more interesting. More than 68 percent of the company officials who replied to the survey said they plan to have extra cash at home, with more than 10 percent intending to stockpile cash to cover their needs for three weeks or more.

So, come December, listen for a giant sucking sound as queues form at the cash machines, bank accounts are plundered, and cash becomes king as consumers hoard billions of dollars, pounds, deutsche marks and yen.

Just in case.

-- ariZONEa (uh@oh.doh!), October 18, 1999


From another board:::Note the bank did not have the $ to pay him. This is not good.

we need to hold 1243 or 1236 and 1227 will appear. Still think today is the low for a close. Never know, if we don't make the 1227 area today, might get it tomorrow for interday low after CPI release. Next possible low is 10/26, however continue to believe 11/3 will be next selling opportunity. If S & P can't get back over 1316 on next rally the November low should be 1130-40 or worse. Y2K panic might get nasty in November. I tried to draw $25K cash last Thursday from the bank and was told they would have it on Monday, stop back. I'm in the early bird group for cash withdrawal and couldn't get it. Wait til November when the late comers hit them and find out they have to wait. A story like this hits the newspaper and panic withdrawals will send this market down hard. I also believe there is a large group of people who would not like their broker holding their money on 12/31/99, including me. This is going to cause a continued liquidation in the market all the way to 12/31. In case you haven't noticed, there giving away the December S & P calls. Premiums are well under normal vs the November calls. Options traders are not to concered about new highs by 12/31 when you can buy the 1350 November call and the 1400 December call for around 4.00 Hope you can live thru your longs for another day.

-- Helium (, October 18, 1999.

Went to my bank today to cash some checks. Next to the teller was a black binder with pages of names and account numbers written down with dollar amounts next to each name. As I was about to leave, she turned and was writing down my name. I went back quickly and asked for an account balance, and I could see that she wrote down the amount of money she gave me. If all transactions are on computer, what's that black binder and names written in it all about? Any guesses? I've never seen them do that before. The bank is Bank of the West.

-- ~~~~~ (, October 18, 1999.

You were being added to the list of those who have withdrawn cash in some amount over a threshold. Name, account number, amount. They do not have the capability to notate this in their present information system. This is profiling. I would suggest that you transfer your money to a different bank and begin to wothdraw at a place which is not doing this to you.

Time to become invisible.

-- ..- (dit@dot.dash), October 18, 1999.

Remeber last year they came out with "Know Your Customer?" and everyone started screaming invasion of privacy and they backed off, well it's BAAACKKK. My sister just emailed me that she cashed a $1,200 check and the teller wrote down her name, acct. #, they maybe in crafty in asking why you need such a large amount, so be fore warned, don't get nasty, you may find your name going on a different list for later review etc. Read between the above lines, better yet fasten your seat belts, it's going to be a scary ride.

-- Judy (, October 19, 1999.

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