Financial guru: Y2K ripple effect likely from abroad It may take some time for U.S. economy to show Y2K effects Source: Peoria Journal Star

CHICAGO (ANS) -- Y2K may have serious enough ramifications around the world to put the United States in the same position it found itself in after World War II, says the head of a Chicago-based financial management firm. "We'll end up helping our trading partners as we did then," said Dennis Grabow, CEO and founder of the Millennium Investment Corp.

The likelihood of foreign Y2K-related computer failures is very serious and troublesome, Grabow said.

"International trade will face serious disruptions due to year 2000 problems in offshore countries," he said.

"What many firms are beginning to realize is that their foreign trade business partners are not going to be able to ship the products and parts they need to keep operating."

And the biggest Y2K problem may not be in the days or even weeks following Jan. 1, 2000, says Bruce Webster, author of "The Y2K Survival Guide."

Webster also is a software engineer and co-chairman of the Washington, D.C., Year 2000 Group, which he says is the largest Y2K organization in the world.

"What concerns me is the economic impact months into the year 2000," Webster said. "It will have a real drag on the economy."

The reason, he said, is the U.S. economy is so dependent on inexpensive foreign imports, which may stagger to a halt if overseas computers are not Y2K compliant. Many are not.

"It will be far worse overseas than people realize, and that will have a ripple effect. This could mean retriggering of inflation because companies may not be able to get the inexpensive foreign goods," Webster said.

Grabow said a recent Department of Commerce report showed that a sharp rise in the trade deficit has been caused in part by an inventory buildup by U.S. manufacturers in anticipation of Y2K. Even though the Department of Commerce predicts no major Y2K economic damage, Gragow says that foreign and U.S. companies that have Y2K problems will decline in value, while other companies will gain market share.

"This is the defining economic issue of our time," he said.

"This is the classic setup for a recession," he said. What people need to do is to expect and prepare for a recession by doing things such as reducing or eliminating debt.

"I'm starting to pay off my credit cards," he said.

The good news, Webster said, is that while an economic recession may be imminent because of Y2K, the United States probably will not see the social breakdown and chaos that some predict.

"The more prepared and calm we are about Y2K, the less impact it will have," he said. "If people react poorly, even something minor can have catastrophic consequences."

Wealth will be determined by a company's ability to get through Y2K, Grabow said. "No one wants to talk about this because it will affect their share price. But not all companies will be done on time. These companies will lose customers and market share."

In the end, said Grabow, the stronger companies will survive the shakeout, purchase and fix noncompliant companies, and move on.

While Y2K problems will cause worldwide disruption, Gragow sees this as a positive.

"Y2K is like a product recall. For the past 40 years it's like we've been making a bad product. In the end, this will be a good process," he said. "It will purge from the global inventory bad systems. We will eventually rebuild our technology. But we'll stumble in the process."

-- Roland (nottelling@nowhere.com), December 03, 1999

Answers

Just a simple impression; do prognosticators ever 'let it go'? That is, is this prognostication business (and that's what it is, folks) something akin to weather reporting? Ignore the fact that past prognostications were wrong, make faulty explanations and then 'hedge your bet' with regards to the current prognostication---drag out the 'problems' you foresee over a longer course of time to maintain the precarious credibility (cough, hack) that you have in your own camp.

Does spin, misinformation and public relations angles (and faulty reporting) apply to the 'doom-minded', as well?

-- Bad Company (johnny@shootingstar.com), December 03, 1999.

IMHO, there is NWIH that our situation RELATIVE TO OTHER INDUSTRIAL NATIONS after Y2K starts to recede will be anywhere near as favorable as it was after WWII ended. We're going to get nailed hard, too. That said, I do expect that there will be a number, quite possibly many, countries substantially worse off than us. Japan and Saudi Arabia certainly come to mind as probable members of this list, as does any nation that is a major net food importer, has little local potable water, few forests or other fuel, is at above-average risk of tropical diseases once public health/modern medical care goes down for the count, is unusually dependent on foreign trade to even be able to afford food, etc. Any country (probably most of the CIS?) with multiple nuke plants that blow will be in a world of hurt as well, but that goes without saying. Then, there's intentional stuff (war, terrorism, diversion of river water by upstream entities, trade embargoes of critical goods, etc.), but that is even hazier in the crystal ball.

www.y2ksafeminnesota.com

-- MinnesotaSmith (y2ksafeminnesota@hotmail.com), December 03, 1999.