Y2K still likely to spark recession: forecaster

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Y2K still likely to spark recession: forecaster

By Jim Wolf

WASHINGTON, Aug 10 (Reuters) - Despite progress fixing the Y2K computer glitch, there is still a 70 percent chance that it will spark a global recession, Edward Yardeni, a top U.S. economic forecaster, said on Tuesday. "Indeed, Y2K could cause another energy crisis," Yardeni, chief economist at the investment bank Deutsche Morgan Grenfell in New York, said in an update of his famously gloomy Y2K predictions.

Yardeni said the other most likely cause of a Y2K-related recession were possible breakdowns in the "global just-in-time manufacturing system" because of weak links in the supply chain.

"I am truly amazed by the complacency about Y2K given the lack of good data," he added in a report posted on his Web site, www.yardeni.com.

Yardeni acknowledged that he was alone among noted economists and Wall Street investment strategists to forecast a Y2K-related recession.

Two years ago, when he started to research the software problem's disruptive potential, Yardeni concluded that there was a 30 percent chance of its causing a global downturn.

About a year ago, he raised the odds to 70 percent, adding that he might scale back his forecast if developments warranted.

"I remain at 70 percent," he said in the survey posted Tuesday. He said he was heartened by upbeat progress reports but concerned that most were not independently verified.

"Even more worrisome is the lack of any good information on preparations around the world," Yardeni said. "Like everyone else, I am hoping for the best. But I think it is a big mistake to plan for the best, rather than for plausible worst-case Y2K scenarios."

He said the most serious Y2K problems were likely to occur in industries that have long and complex global supply chains, lots of suppliers and are heavily dependent on information technology systems.

"This certainly describes the oil industry," said Yardeni, who has compared possible Y2K fallout to the recession that followed the 1973-1974 oil supply cutbacks by the Organization of Petroleum Exporting Countries.

The so-called Y2K glitch could cause computers to misread the year 2000 and potentially cause wide-ranging systems failures. Bruce McConnell, director of the United Nations-backed International Y2K Cooperation Center, a kind of clearinghouse for Y2K data, urged governments Tuesday to disclose more about system readiness and about contingency plans for systems that have not yet been upgraded.

"In the absence of information, markets will assume the worst," he said in an interview with Reuters in his Washington office. "We don't know whether this is going to be a 1 on the Richter scale or a 7."

John Koskinen, chair of President Clinton's Council on Year 2000 Conversion, said Thursday that he was increasingly confident that basic U.S. infrastructure -- notably telephones, power and aviation -- would handle the date change without significant disruptions.

But Koskinen, in the third of four scheduled quarterly reports, said it was still "difficult to gather reliable data about other countries' progress."

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Gee, I think Ed may be a bit behind in current events. Maybe Decker can bring him up to speed.

-- Ray (ray@totacc.com), August 10, 1999

Answers

Snip:

"Edward Yardeni, a top U.S. economic forecaster, said on Tuesday. "Indeed, Y2K could cause another energy crisis," Yardeni, chief economist at the investment bank Deutsche Morgan Grenfell in New York, said in an update of his famously gloomy Y2K predictions. "

Now that crude oil prices have nearly doubled since last fall and oil refinerys are exploding left and right Ed thinks there MIGHT be another energy crisis, quite an astute observation!!

Ray

-- Ray (ray@totacc.com), August 10, 1999.


Oh really, Ray?

Are you and Decker privy to some conclusive facts that no one else seems to be sure of? If so, let's hear it - we're STILL waiting!!

-- @ (@@@.@), August 10, 1999.


"@" commented:

"Oh really, Ray?

Are you and Decker privy to some conclusive facts that no one else seems to be sure of? If so, let's hear it - we're STILL waiting!! "

"@" are you confused or are you possibly an economist?????

Ray

-- Ray (ray@totacc.com), August 10, 1999.


Ray,

Hell no, I am not an economist. Most economists are full of crap and so busy studying numbers that they don't see the big picture. At least Yardeni is wise enough to admit that you can't just ignore Y2K because it will definitely be significant to our economy.

Confused? YES, BY YOUR POST!

Exactly what the hell did you mean by this remark, Ray?

"Gee, I think Ed may be a bit behind in current events. Maybe Decker can bring him up to speed."

????

-- @ (@@@.@), August 10, 1999.


"@", easy does it, I don't want to be responsible for one of those infarcts. It appears our view on economists is quite similar.

My feeling on Ed Yardeni is that he has not changed his position on y2k since day 1. Now he comes out on august 10, 1999 and starts talking about another energy crisis. Crude oil has more than doubled since last fall. How come he didn't mention it then. MANY countries have been in recesssion or depression for a long period of time and Yardeni is giving a world wide recession a 70% chance!!

I just think he is another Wall Street SHILL with a little more refinement than most.

Ray

-- Ray (ray@totacc.com), August 10, 1999.



Alright Ray, I guess I can see what you're saying. I don't think Yardeni is trying to pretend that he can predict the future, just laying the odds as he sees them, based on his CURRENT assessment of our situation. This time last year there was a glut of oil, and so there was no reason at that time to anticipate that Y2K would be enough to hurt us.

In their eternal pursuit of the almighty dollar however, the oil companies have now maneuvered us into a supply situation that puts us on the verge of an oil shortage. They want to be absolutely sure that when Y2K disruptions begin we will already be in a vulnerable position, thereby allowing us to slip into a much more severe crisis situation. While they exploit this predicament by reaming us for outrageous profit ratios, of course they will have Y2K to blame.

I believe that is basically what Ed was trying to say, although it was not as obvious last year as it is now that the bastards are actually going to do it.

-- @ (@@@.@), August 10, 1999.


"@", quite perceptive my friend!!

Ray

-- Ray (ray@totacc.com), August 10, 1999.


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