Hell, with 27 days to go, why not try to quantify the possible economic damage that Y2K may inflict in the short run (Jan - Jun 2000).

Fast Facts, a nice place for US statistics, has these numbers that I'm going to try to crunch.

We hear that about 66% of US GDP is consumer spending, so let's see... 8.5 tril in 1998 x 66% = say 5.5 trill.

When you go to get a mortgage, the rule of how much debt you can carry and still qualify is 42% or so. Thus, we'll we'll pull out, say, 2.5 tril for debt service (mortgage, car, loans, credit cards, etc) leaving us 3 tril to fritter away.

Of that, we'll say 1/3, or 1 tril, goes for food, gasoline, clothing, utilities, etc., leaving 2 tril to blow on entertainment, toys, healthcare, travel, what have you.

What combination of events might cause the spending of that 2 tril (~25% of GDP) to be sharply curtailed due to a consumer confidence crunch? Major US .gov failures (DOD, Justice, Treasury, Human Services) combined with 20% of the US population experiencing one or more types of infrastructure failure? A 30% reduction in capacity for both business and pleasure air travel? A few spectacular plant explosions?

News that the big three (automakers) have plants idled not only because of line stoppages but lowered demand?

Gasoline shooting to $2.95/gallon?

Here's some figures on US imports and exports for July 1999. The category Toys/Games/Sporting Goods shows exports of $266 million leaving, $1,793 million entering.

Petroleum, for the same July 1999 period, shows $263 million exported and $1,318 million imported. That would seem to be a typo, that America spends considerably more on entertainment than petroleum, eh?

Well, anyway, if of that 2 trillion blow money, only 1 trillion is spent and 1 trillion 'saved' between Jan-June, that would be a 12% reduction in the GDP in two quarters which I believe is more in depression territory than recession. Is that right, Ken?

Or maybe that would just be a 'sharp' recession.

-- lisa (lisa@work.now), December 04, 1999

Answers

Wow, no typos or html-faux pas. Amazing.

-- lisa (lisa@work.now), December 04, 1999.

Anyone care to give an opinion as to why the American savings rate continues to drop? We've been negatively saving now for quite some time.

Can't find the article I read recently that indicated online stock purchases account for a significant amount of an increase in credit card deblt as well.

So it appears that not only are we not saving (spending what's there instead), we are deepening our consumer credit to unprecedented depths.

-- TA (sea_spur@yahoo.com), December 04, 1999.

The situation is similar to Sweden some 10-15 years ago. They had bubble boom as well, which seems to have encouraged speculative spending and borrowing. To this day they are in terrible economical hiccup.

-- Arthur Welsley (awelsley@hotmail.com), December 04, 1999.