What are you going to be doing for a living in the year 2001? Unless you're a fix-it man living in a small town, you won't be doing what you do today. If you make your living in financial services, you will surely be doing something else. If you're a journalist, you will be in a new profession. But what? What other useful service can you provide? You have very little time to make the switch.

Let me show you why.

We live in a world that depends on a high division of labor. That world has less than three years to go. In one gigantic collapse, the division of labor will implode. This implosion will begin in 1999. It will accelerate in 2000 and thereafter. Those who work in highly specialized fields will find little or no demand for their skills, in the face of an enormous supply of desperate, low-wage competition. Any job classification that did not exist in 1945 will probably not have a lot of demand in 2001, with one exception: computer software programming.

The June 2 issue of Newsweek ran a front-cover story on the looming computer crisis of the Year 2000 -- called y2k (Year 2 K -- shorthand for a thousand). In the week it the article appeared (late May), the Dow Jones Industrial Average set a record new high. (It was beaten a week later.) If investors believed the information reported in the Newsweek article, the world's stock markets would have collapsed. Clearly, people don't believe it. That's why a small handful of people can get out now -- out of the stock market, the bond market, and any city over 25,000.

Not everyone can get out at the top of a bull market. This includes the "bull market" known as modern industrial society. Pull the plug on the local power utility for 30 days, and every city on earth becomes unlivable. What if the plug gets pulled for five years?

How do you rebuild the shattered economy if the computers go down, taking public utilities with them? Without electricity, you can't run the computers. Without computers, you can't fix computers. How can you assemble teams of programmers to fix the mess? More to the point, how do you pay them if the banks are empty?

Chase Manhattan Bank has 200 million lines of code to check and then repair. Citicorp has 400 million lines. All big banks are similarly afflicted. And even if this could be fixed, bank by bank, there is no universal repair standard. Thus, the computers, even if fixed (highly doubtful) will not work together after the individual repairs. A noncompliant bank's data will then make every compliant bank noncompliant. Thus, the world banking system will crash in 2000. When the public figures this out in 1999, the bank runs will begin.

You probably will not have your present job in 2001.

"It Just Can't Be True!"

You don't believe me, of course. Not yet. But I havepublished the evidence on this Web site. You can verifywhat I'm saying. But you still won't believe it. Why not? Because it's too painful. In their book, The Sovereign Individual, Davidson and Rees-Mogg make a very important observation:

A recent psychological study disguised as a public opinion poll showed that members of individual occupational groups were almost uniformly unwilling to accept any conclusion that implied a loss of income for them, no matter how airtight the logic supporting it. Given increased specialization, most of the interpretive information about most specialized occupational groups is designed to cater to the interests of the groups themselves. They have little interest in views that might be impolite, unprofitable, or politically incorrect (p. 339).

My views are all three: impolite, unprofitable, and politically incorrect. Impolite, because I am saying this: (1) those advising you are as blind as an eighth-century Israelite king; (2) they have given you information that will prove to be wildly unprofitable; (3) all the hype about your getting rich -- the world's getting rich -- is a clap-trap. We are heading for a disaster greater than anything the world has experienced since the bubonic plague of the mid-14th century.

Because the year 2000 begins on a Saturday, millions of victims will not be aware of their dilemma until the following Monday or Tuesday. They will pay no attention to advance warnings, such as this one, that they are at risk.

As you read this report, I want you to think to yourself: "How will this affect me? Is my business at risk? Is my income at risk? What should I do?" I also want you to visit my Web site, http://www.garynorth.com and examine the accumulating evidence, week by week.

The Origin of the Problem

Here is the problem. Over three decades ago, computer programmers who wrote mainframe computer software saved disk space -- in those days, very valuable space -- by designating year codes as two-digit entries: 67 instead of 1967, 78 instead of 1978, etc. Back then, saving this seemingly minuscule amount of disk space seemed like an economically wise decision. This may prove to be the most expensive forecasting error since Noah's flood.

What the programmers ignored for three decades is this: in the year 2000, the two digits will be 00. The computer will sit there, looking for a year. At midnight, January 1, 2000, every mainframe computer using unrevised software dies. If old acquaintances are in the computer, they will indeed be forgot.

Programmers who recognized the implications of this change did not care. They assumed that their software would be updated by year 2000. That assumption now threatens every piece of custom software sitting on every mainframe computer, unless the owner of the computer has had the code rewritten. In some cases, this involves coordinating half a billion million lines of code. (Example: AT&T) One error on one line can shut down the whole system, the way that America Online was shut down for a day in 1996 because of a one-digit error.

The handful of reporters who have investigated this problem have met a wall of indifference. "We're all using microcomputers now." "This is a problem only for a few companies that are still using mainframes." "Cheap solutions will appear as soon as there is demand." "The software will be updated soon, and I'll buy it then." "If this were a serious problem, we'd have heard about it." Yet this last response is given to someone -- a reporter -- who is trying to tell people about the problem.

I first read about this problem years ago in a book by the pseudonymous author, Robert X. Cringely: Accidental Empires. It is not as though the computer industry has been unaware of it. Only a few weeks ago, I read a Wall Street Journal column on computers that mentioned it. The writer wrote that his editor is getting tired of having him mention it. This is typical. The general public hasn't heard about it, yet editors are already tired of hearing about it. "It's old news." Well, it's new news for most people.

What does it matter, really? We use microcomputers. Microsoft has solved the Year 2000 problem, we assume. So have most software companies. Everyone uses desktop computers or, at the largest, minicomputers, right? Wrong.

Governments Rely on Aging Mainframes and Software

On September 24, 1996, Congressman Stephen Horn, who is Chairman of the Subcommittee on Government Management, Information, and Technology, submitted to the full committee a report on the Year 2000 problem. The Subcommittee held hearings on April 16. (Just one day of hearings. This indicates the degree of concern that the government has.) He said that these hearings revealed "a serious lack of awareness of the problem on the part of a great number of people in business and government. Even more alarming was the cost estimate reported to the Subcommittee to remedy the problem, which was said to be $30 billion for the Federal Government alone." Then he announced:

Without greater urgency, those agencies risk being unable to provide services or perform functions that they are charged by law with performing. Senior agency management officials must take aggressive action if these problems are to be avoided.

Yet despite Horn's valid warning, nothing visible is happening. He knows this. These agencies must shift hundreds of millions of dollars from their existing budgets to hire outside programmers to rewrite the code that runs these agencies. This isn't being done. More to the point, the longer they delay, the worse the problem gets. You can't just go out and hire programmers who are familiar with the code. As businesses find out what threatens them, the demand for these highly specialized services will soar. (If businessmen don't figure this out in time, payment will come due in January of 2000.)

The Subcommittee's report warns: "This issue may cause banks, securities firms and insurance companies to ascertain whether the companies they finance or insure are year 2000 compliant before making investment decisions." It also says that companies will start demanding contractual warranties guaranteeing against Year 2000 breakdowns.

A memorandum from the Library of Congress Research Service (CRS) has warned that "it may be too late to correct all of the nation's systems." So, the question arises: Which systems will survive and which ones won't? Here are some problem areas, according to CRS:

Miscalculation by the Social Security Administration of the ages of citizens, causing payments to be sent to people who are not eligible for benefits while ending or not beginning payments to those who are eligible;

Miscalculation by the Internal Revenue Service of the standard deduction on income tax returns for persons over age 65, causing incorrect records of revenues and payments due;

Malfunctioning of certain Defense Department weapon systems;

Erroneous flight schedules generated by the Federal Aviation Administration's air traffic controllers;

State and local computer systems becoming corrupted with false records, causing errors in income and property tax records, payroll, retirement systems, motor vehicle registrations, utilities regulations, and a breakdown of some public transportation systems.

I don't think these are small issues. They will probably start receiving media attention when it is so late in the process that there will be massive foul-ups in coordinating the revisions.

Notice, the biggest one is missing: an international bank run, as depositors demand cash. From that day on, all exchanges will be local: the collapse of the division of labor.

When the computers' clocks think it's 1900, it soon will be.

I realize that there has been tremendous progress in microcomputer power, but does anyone really think that all of the Federal government's forms -- not an infinite number, but approaching infinity as a limit -- can be put on three dozen Compaq desktop computers and run with, say, Lotus Approach or Microsoft Access? And even if they could, how would you re-train all of the bureaucrats to use the new systems? How fast will they learn? How fast do bureaucracies adapt? The Subcommittee's report warns:

The clock is ticking and most Federal agencies have not inventoried their major systems in order to detect where the problem lies within and among each Federal department, field office and division. The date for completion of this project cannot slip.

By "cannot," the Subcommittee's report-writer meant "must not." The date can surely be allowed to slip. It almost certainly will be allowed to slip.

Additionally, the task may be more difficult for the public sector, where systems have been in use for decades, may lack software documentation and therefore increase the time it takes from the inventory phase to solution.

Did you get that? The software code's records are gone! Remember also that we're not just talking about the United States government. We're talking about every government -- national, state, and local -- anywhere on earth that has its data stored on an unrevised mainframe computer system or which relies on any third-party computer service that uses uncorrected software.

As the year 2000 approaches, word will slowly begin to spread: "After the three-day weekend that will inaugurate the year 2000, there is going to be a hangover the likes of which we have never seen before." For some, it will be a time of celebration. For others, it will be the end of their dreams. It depends on whether they are being squeezed by the government or dependent on it.

But it's not just government that is at risk. It's private industry.

Kiss Medicare Goodbye

Some 38 million people will receive Medicare payments in 1997. In 2000, an estimated one billion claims will be filed, totalling over $288 billion. This, according to a May 16, 1997 report of the General Accounting Office (GAO): "Medicare Transaction System."

Problem: the Medicare system won't make it through 2000. The same GAO report shows why. Medicare claims are not actually administered by Medicare. It's administered by 70 private agencies. These agencies have been informed that their contracts will not be renewed in 2000.

The agency that officially supervises Medicare has plans for one huge computer system that will bring the program in-house. It is the same dream that motivated the Internal Revenue Service for the past 11 years. The IRS announced earlier this year that after 11 years and $4 billion, the attempt had failed.

Medicare now knows that it has a problem with its computers. They are not Year 2000-compliant. So, to make sure that they will be compliant, Medicare has issued an appeal to the 70 newly canned companies: please fix the year 2000 problem for us before you leave. As the GAO report puts it, "contractors may not have a particularly high incentive to properly make these conversions. . . ."

What if the system fails? (What if? Are they kidding? When!) The report says that the Health Care Financing Administration (HCFA), which is responsible for running Medicare, has not made contingency plans. "HCFA officials are relying on the contractors to identify and complete the necessary work in time to avoid problems. Yet the . . . . contractors not only have not developed contingency plans, they have said that they do not intend to do so because they believe that this is HCFA's responsibility."

Kiss the IRS Goodbye

The IRS has 100 million lines of code. Their code is not year 2000-compliant. After the failure of the 11-year project to upgrade the system, Chief Information Officer Arthur Gross announced that getting the IRS year 2000- compliant is the "highest priority for the IRS." The IRS has nearly 50,000 code applications to coordinate and correct. This task will require the IRS to move 300 full- time computer programmers to the new project. (Reported in "TechWeb," April 21, 1997).

For comparison purposes, consider the fact that the Social Security Administration began working on its year 2000 repair in 1991. Social Security has 30 million lines of code. By June, 1996, the SSA's 400 programmers had fixed 6 million lines.

What if the IRS isn't technically equipped to pursue tax evaders after December 31, 1999? What if the IRS computer system isn't fully integrated with all of its branch offices? What if the system's massive quantities of forms are not stored in a computer system that is Year 2000-compliant? More to the point, what if 20% of America's taxpayers believe that the IRS can't get them if they fail to file a return?

In 1999, the IRS may find a drop in compliance from self-employed people. If the IRS can't prosecute these people after 1999, there will be a defection of compliance by the self-employed. When word spreads to the general public, there will be a hue and cry -- maybe at first against the evaders, but then against employers who are sending in employees' money when self-employed people are escaping. Meanwhile, cash-only, self-employed businesses will begin to lure business away from tax-compliant businesses by offering big discounts.

This will start happening all over the world. Once it begins, it will not easily be reversed. The tax system rests on this faith: (1) the government will pay us what it owes us; (2) the government can get us if we stop paying. Both aspects of this faith will be called into question in the year 2000 if the governments' computers are not in compliance.

Big Brother is no more powerful than his software. On January 1, 2000, this strength may fall to zero. Actually, double zero.

If the IRS cannot collect taxes, and if all the other mainframe computer-dependent tax collection agencies on earth do not fix this, what will happen to the government debt markets worldwide? To interest rates? To the government-guaranteed mortgage market?

Kiss them all goodbye.

"No Problem! Trust me!"

There are a few conservative financial newsletter writers who have heard about y2k. They deny its economic relevance. A shut-down of all mainframe computers would mean that newsletter writers will be out of business after 1999 -- a thought too terrifying for them. So, they brush y2k aside with some version of this rebuttal: "Of course, the government may not get its computers fixed." This is supposed to calm you. It should terrify you. Ask yourself:

What happens to T-bills and T-bonds if the IRS computer breaks down and a tax revolt spreads because taxpayers know the IRS will never find them, and that if they pay their taxes, they won't get their refunds?

What happens to money market funds and bond funds that invest heavily in government debt when investors realize that if the IRS can't collect taxes, the government will default on its debt?

What happens to the banks when depositors figure out that the FDIC is bankrupt and that nobody insures their accounts any more?

What happens to your job when the banks close because of bank runs, and no business can borrow money or even write a check to its employees?

What happens to the delivery of food into cities when money fails because the banks are busted?

What happens to the delivery of public utilities when money fails because the banks are busted?

What happens to your retirement fund when ERISA, the government pension guarantee program, goes bankrupt?

What happens to the 38 million people in the U.S. who are dependent on Medicare?

What happens to 42 million people on Social Security?

What happens to every state government?

What happens to crime rates when the state cannot imprison violent criminals and may have to release those who are locked up because they can't be fed?

What happens to the world economy when this scenario is multiplied across every government?

Kiss you job goodbye. Especially if you're a journalist. I know. I am one. I figure I'll be out of work -- forced retirement -- January 1, 2000. I'm making plans to be in small-scale agriculture. I'm out of debt.

What about you?

Psychological Deferral

Those in authority prefer to defer thinking about this. They are playing Scarlett O'Hara: "I'll think about it tomorrow," followed by, "Well, fiddle dee-dee." Deferral is a normal response to distant problems. The question is: What can we afford to defer? People defer making this assessment. The fact that you have not read much about this looming problem doesn't mean that it isn't a problem. If your employer has not actively sought solutions to this problem, your firm had better not use mainframe computers or be dependent on suppliers that rely on mainframe computers.

Everyone assumes that someone else is doing something to solve these problems. "It's being taken care of." The problem here is the passive voice. Who, exactly, is taking care of it? What, exactly, is this person doing? Is he on schedule? How do you know for sure? Are you taking his word for it? Anyone who takes the word of a computer programmer that he is on schedule is a person of very great faith. If the programmer says "Sorry, I didn't make it" on December 31, 1999, you're dead in the water. Meanwhile, he moves on.

What You Should Do, Beginning Today

First, you investigate whether what I'm saying is true.

Second, think through what happens to you if the local power company and the local water and sewage company shut down in your city for six months. "Who ya gonna call?" Especially if your phone is dead? And if you do get through, how ya gonna pay if your local bank is defunct?

Third, here is my personal strategy. I have adopted a question:

"Can I prove on paper that he owes it to me?"

I want hard copy print-outs of everything I do with the government. If you are owed money from Social Security, and you're dependent on this income, contact the Social Security Administration every year and get a letter telling you what you're owed. This is true of every government pension system.

Do you have a copy of your birth certificate? If not, write to your place of birth and get it. Even if that community has not computerized the records, do it now. Even if it keeps the records in a desktop, do it. If word starts to spread, they may be buried in requests in 1999. You want your paperwork completed before word gets out.

Do you have a copy of your college transcripts? If not, get it. The same goes for your work record history. Assume that your records are in some company's mainframe computer. Assume also that the company has failed to update the software.

Do you have a print-out of all of your insurance records? Would they stand up in court? If not, get what you need, now.

Have you spoken with your local insurance agent? Is he fully aware of the problem? Ask him straight out if he has scheduled an update of his software if he relies on vendor-supplied software. He deserves to know what is coming. So do you. (If you want to photocopy this issue to send him, go ahead.)

Think through this problem in advance, before it gets out and creates a banking panic, all over the world. This story will get out eventually. In 1999, when reporters are running around looking for sensational Year 2000-third millennium stories, this one will at last surface. It already has: in Newsweek. At that point, every government bureaucrat whose agency is at risk will start playing the "No problem" game. "It's being taken care of." The bureaucrat's number-one rule is to evade responsibility. No one with any authority is going to admit that his malfeasance in office is going to create a disaster on Jan. 1, 2000. The basic response will be this: "There's no problem here, and furthermore, I'm not responsible when everything collapses next year!"

Keep visiting my Web site for updated information:

http://www.garynorth.com

E-mail this report to anyone you care about.

-- muzzy brown (muzzybrown@aol.com), January 03, 2001

Answers

If I remember right, I think Gary North had a similar scenario.

-- dejavue (dejavue@idontthikso.zon), January 03, 2001.

Eeerrrr never mind, I only read the first 3 paragraphs, and as I strolled down to read the remainder, I saw "Gary North's" name.....it pays to read the whole damn article before posting. However, have been plenty of dot.coms going out of business.

-- dejavue (dejavue@Idontthinkso.zon), January 03, 2001.