Don't kill the messenger.

Posted 19/10/99 9:56pm by Thomas Greene in Washington DC

Brit firm shows US Senators 'the real turd in the Y2K punchbowl'

An analyst with London Y2K consultants International Monitoring lashed out at numerous US government agencies for soft-pedalling international Y2K threats during a Senate Y2K Committee hearing last week.

Chief among these is the Clinton Administration's special Y2K working group, whose recent, soothing report IM analyst Nick Gogerty denounced as "potentially reckless". At worst, he predicted, this sort of Pollyanna pandering could lead the administration to lose its credibility during the looming crisis, and with that its ability to lead the populace to sanity once the madness begins.

Committee Chairman Robert Bennett, a Republican from Utah, might have delighted in pointing out that the Clinton Administration has hardly any credibility left to lose, but graciously held his tongue.

The US State Department also drew fire for suppressing the awful truth about international travel at rollover time. The Department has issued a general travel advisory; but it won't name the names, Gogerty speculated, because it wishes to maintain "near-term objectives", which he declined to elaborate.

What might these be? Deterring cyber-attackers from exploiting the world's weakest transportation systems under Y2K cover? Fear that finger-pointing abroad might lead to retaliatory accusations and subsequent lean times for the American tourist industry? Reluctance to ridicule the Chinese and South Koreans, who can scarcely keep their planes in the air under the best of circumstances? (Come on, is anyone really going to fly CAAC or KAL on 1 January?)

Transportation, energy, insurance, emergency services: all these industries have far more potential to suffer from Y2K mischief than we suspect, Gogerty believes. But it is in the international banking system where he sees the greatest threat to the continued survival of the human race. Here a loss of confidence can lead to widespread panic, and panic can lead to economic catastrophe.

International Monitoring prepared a detailed report on the banking issues, but, as Gogerty said, it would not be prudent "to publicly discuss the detailed risks...in a public forum such as the one before us today." He submitted the report as prepared testimony.

The Register despaired of ever seeing it. But the Senate Committee apparently disagreed with Gogarty's estimate of its potential to scatter the herd, and promptly posted it on its Web site.

It was a difficult read, but we persisted. The report boldly asserts that "Herstatt risk could be the real turd in the Y2K punchbowl." And, no, we haven't got a clue what "Herstatt risk" means either, but we do love a good metaphor. The best we could make of it is that Herstatt is a German banker who gained fame by inadvertently rendering his bank insolvent.

We think it could be called "Leeson risk" as well. If we read it right, the greatest of all risks faced by an institutional bank are eagerly provided by the human beings it employs, all of whom, according to Gogerty's reckoning, are imbeciles. The banking system functions only because computerised accounting provides a safety infrastructure which catches errors and prevents the imbeciles from doing what God created them to do: accidentally bringing the entire world economy to grief.

It might work like this: enormous banking "clearinghouses" handle, on a daily basis, credits and liabilities in the range of tens of billions of dollars. A single human error -- say, something trivial like a misplaced decimal point -- is allowed to pass the computerised accounting infrastructure by an obscure Y2K stuff-up.

This causes some gigantic and time-sensitive payment upon which a hapless clearinghouse depends to be missed. The clearinghouse then defaults on payments it owes to others because it can't collect the income it's owed. A domino effect develops, and total world anarchy ensues.

Alternatively, the clearinghouse might make its payments in spite of being unable to collect, simply by borrowing hundreds of billions of dollars. Paying interest on that, even for a matter of days, might wipe out a month's profits. If the problem were to appear in several markets at once, the dreaded domino effect might yet be triggered, and blood flow in the streets.

"We believe Y2K will be the second costliest accident in history," Gogerty claimed. (Assuming WWI was the first, then Herstatt really is the Mother of all turds.) But, "barring nuclear or major chemical failures, loss of life should be minimal in the USA," he chirped. He had perhaps meant to reassure the Committee, but one could have heard a pin drop when he finished his speech. It was all over their faces: "what the Hell is 'minimal' supposed to mean? And worse, what might 'maximum' mean, and which poor tribe is going to represent that extreme?"

It was several minutes before Co-chair Christopher Dodd (D--Conn) summoned the courage to ask.

"There is a constant rate of loss of life due to industrial accidents in the this country every day," Gogerty explained. "The Y2K bug and, let's say, the 'non-standard behaviour' of individuals around that [time] will...lead to a spike in accident rates."

"All right, we'll leave it there," Dodd replied with a nervous smile. He didn't seem to appreciate that, from Gogerty's point of view, he'd just been given the good news. .

This article is located at

http://www.theregister.co.uk/991019-000022.html

and is in reference (and linked) to...

http://www.senate.gov/~y2k/hearings/991013/gogerty_intl.pdf

Now, the above article is not very optimistic by my reckoning. Author doesn't seem to think so.

Watch six and keep your...

-- eyes_open (best@wishes.not), October 25, 1999

Answers

What an ominous LINK!!!

-- PJC (paulchri@msn.com), October 25, 1999.

That IS somewhere is the world were reporters report and don't regurgitate press releases.....

-- PJC (paulchri@msn.com), October 25, 1999.

Case of countries pointing the finger and saying "The grass is BROWNER over there!"

The whole globe is gonna get hit with the Y2K Turd Hitting The Fan.

-- Ashton & Leska in Cascadia (allaha@earthlink.net), October 25, 1999.

"Committee Chairman Robert Bennett, a Republican from Utah, might have delighted in pointing out that the Clinton Administration has hardly any credibility left to lose, but graciously held his tongue."

Funny, I was thinking the same thing when reading the politically motivated criticisms by Paula Gordon. The Republicans have torn Clinton a new asshole with the Monicagate fiasco, basically rendering him a powerless lame duck. He has been shot down by Republicans on Health Care reform, Budgets, The Nuclear Treaty, and most recently the Financial Services legislation reform. Jeesh, it's no wonder he was out whacking golf balls like a lunatic last week, this is his way of symbolically saying to the world that he has no control anymore. Now they expect him to stand up and tell the whole world to get ready for a disaster that no one knows for sure will happen? Hah! If that isn't a setup for another embarassment I don't know what is. I said it a year ago, and I'll say it again, it is a no-win scenario for Clinton, because the pirahnas are going to tear him to shreads no matter which side he takes on this thing. I think it's time for people to start taking responsibility for themselves instead of looking for a scapegoat again.

-- @ (@@@.@), October 25, 1999.

You are all too pessimistic. Everything will be fine. Everything the administration says is to be believed. Bill is the greatest leader of all time.

-- Dr. Pollydork (DrPollyDork@SingleDigitIQ.com), October 25, 1999.

Wow... who could have thought? A Y2K consulting firm predicting Y2K problems. Anyone else want to weigh in on listening to consultants?

http://www.intl-monitoring.com/

-- Ken Decker (kcdecker@worldnet.att.net), October 25, 1999.

Instead of bowing to image concerns, he coulda salvaged his "legacy" and WARNED and ENCOURAGED PREPARATION 5 years ago! He might have been so busy coordinating useful alternatives, practical contingency measures, that he wouldn't have been so smitten by thong snapping. Get a grip!

-- Ashton & Leska in Cascadia (allaha@earthlink.net), October 25, 1999.

Talk about getting a grip! You guys (A&L) have been getting increasingly more irrational lately and I'm starting to wonder if you aren't dipping into your advance prescriptions a bit early. If people are not willing to prepare with 2 months left, how in God's name do you think you could convince them to prepare 5 years ahead when they don't even know whether or not it will be fixed? Yeah right, people are going to spend their hard earned money getting ready for 5 years, and if it then ended up being fixed they would sue the government who told them to buy all the stuff! I find it amazing that all of these people who are constantly bitching that they DON'T like government telling them what to do, turn around and in the very same post say they WANT them to tell them what to do!! You're insane!

-- @ (@@@.@), October 25, 1999.

I really wish someone would open the pdf for Gogerty n the seante site and post the releant info reagrding what he had to say in writing about the banking industry. Why hasn't anyone done that? I tried and failed. I read his oral testimony, its the written info regarding the banking that he wouldn't talk about in front of the public that is of interest here.

If someone wld post that here, it would be very helpful indeed.

-- peacefarmer (peacefarmer@thefarm.com), October 25, 1999.

Uh, @, we were referring to Clinton's reaction to the Thong Thang, as in getting a grip on his, uh, erm, enthusiastic Outting reaction to them snappers, uh, instead of, and at the expense of, Getting The Word Out about Y2K. We didn't want to make it more clear, though, at the risk of, well, being too rude & crude about the Prez's short comings, uh, well, you know ...

The King of Spain will understand these posts! ;^)

-- Ashton & Leska in Cascadia (allaha@earthlink.net), October 25, 1999.

According to the Star-Crossed Report, guess he did "get a grip" around that time, on certain, um, handles. Sorry, Special Prosecutor, we stand corrected ;^)

-- Ashton & Leska in Cascadia (allaha@earthlink.net), October 25, 1999.

You're talking in riddles again, maybe KOS can understand it but I sure don't.

-- @ (@@@.@), October 25, 1999.

Good post. Good eye opening article but I have a criticism. What do you think of their explaination of 'Herstatt Risk'? I think it sucks. This ISN'T like the Nic Leeson deal or a the result of a single human error.

-- Downstreamer (downstream@bigfoot.com), October 25, 1999.

Many of you don't get it: Government is populated by power trippers and idiots. Looking to government for leadership is like looking to your two-year old. QUIT LOOKING TO GOVERNMENT TO WIPE YOUR FRICKING NOSES!!!

-- A (A@AisA.com), October 25, 1999.

Many of you don't get it: Government is populated by power trippers and idiots. Looking to government for leadership is like looking to your two-year old. QUIT LOOKING TO GOVERNMENT TO WIPE YOUR FRICKING NOSES!!! All government can do is screw things up even more. EGTTTS (Everything Government Touches Turns to Shit).

-- A (A@AisA.com), October 25, 1999.

A -- Nice Acronym!!!! I love it!

Mr. Decker -- Well, lets see now... If we look at government, business, utilities, etc, and analyze their risks, we find that if any business were to stand up and say 'We're not ready, and are unlikely to be ready.' their stock would tank, and their execs would be out looking for a job. NOW, not 2 months from now. Likewise, if the govt. were to say 'There are problems and they are unlikely to be fixed and therefore you had better make preparations for an extended period of problems.' they would precipitate the panic NOW instead of two months from now. And so forth. So we are supposed to believe their pronouncements rather than look at a consultant, WHO HAS ALREADY BEEN PAID AND HAS NO STAKE IN THE ACTUAL RESULTS AS TO WHETHER OR NOT HE GETS PAID! Okay, makes perfect sense to me.

-- just another (another@engineer.com), October 25, 1999.

Maybe I'm going out on a limb, but if Clinton Himself said we should all prepare for the end, MAYBE a few would. But not many. Scary Gary has preached fire and brimstone to his disciples, but the country still stands. The fact is, only a minority will prepare. No matter what the warning. People want to be believe everything will be OK, and if that means believing the newspaper boy over Clinton himself, they will.

Owl

-- Owl (a@a.com), October 25, 1999.

Economist FAQs

Q. If two economists were out walking, how would you recognize the econometrician?

A. He's the one walking randomly.

Q. What do economists and computers have in common?

A. You have to punch information into them.

Q. How did the French Revolution affect world economic growth?

A. Too early to say.

Q. What does an economist do?

A. Not a lot in the short-run, which means nothing in the long-run.

Q. Why were economists created?

A. To make weather forecasters look good.

Q. Why was astrology invented?

A. So that Economics could be an accurate science.

Q. Why don't sharks attack economists?

A. Professional courtesy.

Q. What do you get when you cross the Godfather with an economist?

A. An offer that you can't understand.

Q. What is the difference between Economics and DoubleDutch?

A. DoubleDutch is incomprehensible, Economics just doesn't make sense.

-- Igotta (million@of.em), October 26, 1999.

Haha!! I love it.

-- mil (millenium@yahoo.com), October 26, 1999.

I'm so glad I made this information available to the forum. Now we can have another "It's not Clintons fault" fest. And you know what, it's not, really. It's the voters. Clinton had no more affect on Y2K remediation/preperation than he did on the economic upturn. Let's leave hi out of this. It's always been our responsibility to take care of ourselves, no matter what the government tells you.

@

I doubt you'll even see a problem with Clinton. Ok. I have freinds like that. Here's something to keep in mind. It was about perjury, not sex. And when the Democrats stood up in the senate and declared that they were NOT a jury, they were reserving the right to not remove the president even if they thought he committed perjury. Turn off the TV and learn to think. (Actually, I've seen you demonstrate the ability to think. More is the shame then that you refuse to do so in some important matters.)

Mr. Decker

I'm a consultant. A "Y2K" one now, since I am currenty supporting a Y2K remediation project. Guess what. Most consultants are sought after for their services. We don't create a crisis, real or imagined, and then proclaim that we have the only solution. We leave that to politicians.

Watch six and keep your...

-- eyes_open (best@wishes.not), October 26, 1999.