I read the following today:

YEAR 2000 BUG A $50 BILLION PROBLEM April 29, 1998 Federal Reserve officials on Tuesday predicted that the reprogramming, updating, and fixing computers to deal with the year 2000 will cost U.S. businesses roughly $50 billion. Fortune 500 companies anticipate spending $11 billion on their own to deal with this problem.

Meanwhile, Fed Gov. Edward Kelly does not feel that the Y2K problem will be as disruptive as others have said. He has stated that the predictions that the glitch will produce a deep recession are probably a stretch but that we will not be totally unaffected by it. He likened the expected disruptions on December 31, 1999 to those that happened from the blizzard in 1996 and the UPS strike from last summer. Although commerce ground to a halt for up to a week as a result of the blizzard and some business were hurt by the UPS strike, companies bounced back within weeks and the over-all effect on the economy was minimal. Kelly said Hopefully, any Year 2000 shock to our information infrastructure would also be transitory and would share the characteristics of the shocks to our physical infrastructure.

NOW MY QUESTION...Kelly talks about "bouncing back within weeks", what does he mean? If you can "bounce back within weeks" then why can't you fix the problem right now. I don't understand this comment...though I've heard something similar severl times. Can anyone explain this to me?

Susan

-- Susan (jclont@mastnet.net), April 30, 1998

Answers

I see it possible in two ways:

First, Mr. Kelly actually thinks ALL the work will get done everyplace, and all that will be left are some minor glitches that were missed, and he firures that's no big deal.

Or....

Second, he is in serious denial and/or getting REAL bad advice.

Either way he is off in left field. Way off.

On a Y2K list a person notes Mr. Kelly's comment during an undocumented question and answer period with the cogresscritters. When asked what was the banking industries biggest problem he was noted to say the total lack of disclosure by the tellecommunications industry. Apparently the lawyers have told the phone boys to shut up for fear of lawsuits and they listened.

Also noted in this first hand account was that the seriousness of this revelation was lost to all concerned.

It does not look good. I would LIKE to think that we as a nation can pull this rabbit out of the hat but the news just keeps getting worse. I am sure that some rays of light will eventually shine thru, but will enough?

-- Art Welling (artw@lancnews.infi.net), April 30, 1998.

The Y2K schizophrenia being exhibited by the media and the major players is really interesting. Take a look at these two Reuters reports about Kelley's comments to the Senate committee, filed just 7 hours apart. Does anyone else out there see a little double-mindedness at work here?

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Tuesday April 28, 11:39 am Eastern Time

FED'S KELLEY SAYS U.S. ECONOMY STRONG AND DYNAMIC

WASHINGTON, April 28 (Reuters) - The U.S. economy is very strong but the Year 2000 computer problem could have severe effects on its performance unless they are corrected, Federal Reserve Governor Edward Kelley said Tuesday.

"We have a very, very strong and dynamic economy," Kelley told a Senate panel hearing on the Year 2000 problem.

He added that there was a "great deal of concern" that the booming U.S. economy could enter a recession should the computer problem turn out to be more severe than widely anticipated.

"We do not anticipate that happening, although it could happen,'' he said in response to questions from lawmakers. ``I can't say it's an impossibility."

In his testimony to the panel, Kelley said that real GDP would be reduced by about 0.1 percentage point a year over the next two years because of lost production due to the millennium bug. Potential computer problems may occur at the turn of the millennium because many systems record dates using only two digits for the year and could thus treat 2000 as 1900. That could cause errors or even system crashes.

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Tuesday April 28, 6:45 pm Eastern Time

FED'S KELLEY SAYS YEAR 2000 COMPUTER FIX COSTLY

WASHINGTON, April 28 (Reuters) - Federal Reserve Governor Edward Kelley estimated on Tuesday that U.S. businesses must spend about $50 billion to prevent massive computer crashes in 2000.

"The Year 2000 (Y2K) problem will touch much more than just our financial system and could temporarily have adverse effects on the performance of the overall U.S. economy as well as the economies of many, or all, other nations if it is not corrected," Kelley said in prepared testimony before the Senate Commerce Committee.

The so-called millennium bug arises because some computer programs use only two digits to represent the year, which could lead them to mistake 2000 for 1900.

Kelley said companies were being forced to spend massive amounts of money to deal with the issue. The Fed recently surveyed reports filed by the Securities and Exchange Commission by nearly all the top Fortune 500 U.S. corporations to come up with its $50-billion cost estimate to remedy the problem.

All the extra hours needed for reprogramming and testing will cost companies lost production while real gross domestic product -- the broadest measure of total economic activity -- will be reduced by about a tenth of a percentage point a year over the next two years, Kelley said.

The Fed can do little to offset any negative impact from the Year 2000 problem, Kelley said, though it will be prepared to help where it can.

"We will, of course, be ready if people want to hold more cash on New Year's Eve 1999, and we will be prepared to lend to financial institutions through the discount window under appropriate circumstances or to provide needed reserves to the banking system," Kelley said.

"But there is nothing monetary policy can do to offset the direct effects of a severe Y2K disruption," he added.

-- Nabi Davidson (nabi7@yahoo.com), April 30, 1998.