Info gridlock, economic meltdown (Ed Yardeni)greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Info gridlock, economic meltdown Times running out on a solution to Year 2K dilemma
By Ed Yardeni SPECIAL TO MSNBC
The millennial clock is relentlessly ticking. And while some are preparing to welcome the turn of a momentous century in human history, there are plenty of others in the public and private sectors computer scientists, economists, bankers and policy makers who are preparing for trouble. I am one of them.
Where the bug will bite Full coverage: The millennium bug Year 2000 Issues E-mail the Opinions Editor
The Year 2K bug is more than just a computer problem. It is a serious threat not only to the U.S. economy, but to the global economy.
SOME OF us in this ad hoc association of problem-solvers are feverishly working to fix the millennium bug, which could cripple many of our computer systems. Others are working to alert the public to the likelihood that not all systems will be fixed in time to recognize that 00 in the commonly used two-digit year field is 2000, not 1900. We are promoting contingency planning to deal with the expected disruptions in government, business, and international activities. The Year 2K bug is more than just a computer problem. It is a serious threat to the U.S. economy. Indeed, it is bound to disrupt the entire global economy. I believe that the dawning of the year 2000 may spark a worldwide recession that could last at least 12 months. This event could be at least as severe as the 1973-74 global recession, which was caused by the OPEC oil crisis. If the supply of information is disrupted, many economic activities will be impaired, if not entirely halted. In the United States, the consequences of the Year 2K bug could begin to be evident in late 1999, causing the real GDP to fall 5 percent from peak to trough over a 12-month to 24-month period. I also expect a 30 percent drop in stock prices. This is not a doomsday scenario, though. Indeed, signs of an economic recovery and a bull market could start to emerge in the year 2001. INADEQUATE RESPONSE The response to the Year 2000 problem from global leaders has been pathetic. There is little or no leadership coming from the United States or any other of the leading industrialized nations. They are doing too little to increase global awareness; to accelerate the pace of remediation and to prepare for the potential failure of vital systems. The U.S. government continues to make progress, but the pace is too slow. Our government needs to set national priorities and prepare national contingency plans. Key government regulators including the Federal Communications Commission, the Securities & Exchange Commission, the Federal Energy Regulatory Commission, and the Nuclear Regulatory Commission all admit that even they dont have the necessary information to assess the gravity of the situation.
Do you believe that problems associated with the Year 2K bug will result in a global economic crisis? * 15565 responses Yes 55% No 33% Don't know 12%
Survey results tallied every 60 seconds. Live Votes reflect respondents' views and are not scientifically valid surveys.
In the private sector, it is widely assumed that companies will be ready for the century date change. However, given the lack of adequate disclosure, this may be a naively optimistic assumption. Recent guidance bulletins from the Securities and Exchange Commission may accelerate the disclosure issues, yet even that may not prevent the type of disruption through the supply chains inherent in most major corporations today. HOW SEVERE A RECESSION? If the public becomes alarmed, stock prices could fall sharply in 1999, in anticipation of a recession in 2000. The resulting loss in confidence could cause consumers to retrench in 1999. If bankers cause a credit crunch by refusing to lend to companies that are most at risk of failing in 2000, many businesses, large and small, could be at substantial risk. Companies are likely to start fortressing in 1999: theyll only do business with vendors and customers that are expected to be ready with their respective Y2K- compatible systems. My basic premise is that most computer systems will be fixed in time, but some important ones wont be ready. If information is harder to obtain, due to Y2K incompatibilities among information systems, the amount of commercial and financial transactions we can support will necessarily be reduced. In the United States, real GDP dropped 3.7 percent from peak to trough during 1973-74. I estimate that an identical drop, starting in 2000, would reduce real GDP by $300 billion, back to where it was in early 1998. Is this too pessimistic or realistic? Actually, in my opinion, it might be too optimistic to believe that the information gridlock wont be even more damaging, sending us further back in time, when the level of GDP that our information systems supported was even lower. ACTION ON THE INTERNET Most computer systems will be fixed in time, but some important ones wont be ready.
Starting on today Global Y2K Action Day I am hosting and moderating a series of global Y2K action conferences, which are being made available on the Internet, on the important milestone dates representing 500, 400, 300, 200, and 100 days left in the countdown to the millennium. Finally, on December 31, 1999, a global millennium countdown conference will be held, with Y2K status reports from New Zealand, Australia and Japan. India, Israel and Turkey will weigh in with their reports, followed by Europe, the United States and Latin America. We will monitor Y2K issues on a real-time basis as the worlds time zones move into the Year 2000. These conferences will seek to answer the big questions: How much progress have governments and businesses been making so far? Which ones are at greatest risk of either experiencing significant disruptions or failing? What are the issues related to energy, health care, telecommunications, and embedded systems in manufacturing? What are corporations disclosing and what is the significance to the economy? How should we prepare for disruptions individually and collectively? As judgment day for our computers approaches, we will spend more time on contingency planning and community action issues. The worst-case scenario is that we all become concerned about Y2K late in 1999, without having the information we must have to assess the situation. The potential for panic reactions must be minimized by a collective educational effort delivered in a timely, articulate, and balanced approach, now and at least every 100 days until the dawning of the Year 2000.
Ed Yardeni is the Chief Economist and a Managing Director of Deutsche Bank Securities Working from the firms headquarters in New York City, he writes the Global Economic Analysis, Global Portfolio Strategy, Global Economic Briefing, and Y2K Reporter, as well as a variety of topical studies.
-- Homer Beanfang (Bats@inbellfry.com), October 29, 1999
-- curtis schalek (firstname.lastname@example.org), October 29, 1999.
...Starting on today Global Y2K Action Day I am hosting and moderating a series of global Y2K action conferences, which are being made available on the Internet, on the important milestone dates representing 500, 400, 300, 200, and 100 days left in the countdown to the millennium...
Click here for the RealAudio of the first Y2K action conference (Global Year 2000 Problem), held on "T-Minus 500 Days", 08/19/1998.
For more current discussions, click here for RealAudio of the last conference (The End Game), held on "T-Minus 100 Days", 09/23/1999.
Back in August, 1998, Dr. Yardeni thought things might start going south by now. They haven't, but he hasn't changed his estimates of the chances of recession/depression.
Hang on to your hats, kids!
-- Mac (email@example.com), October 29, 1999.
When did Mr. Yardeni author the above column - from one of his statements ( "I am hosting and moderating a series of global Y2K action conferences, which are being made available on the Internet, on the important milestone dates representing 500, 400, 300, 200, and 100...") one might assume that it was written at least 1 1/2 yrs ago.
-- joe thomas (firstname.lastname@example.org), October 29, 1999.