CHAPTER VII. A View From Wall Street (EXCERPT)
Naval War College Think Tank
The biggest pro-crash argument concerned oil, and the argument was an unusual one. Most participants were sanguine about the oil companies themselves and the shipping of oil over the seas, whereas the biggest concern revolved around the transshipment ports and specifically, the record keeping or "admin." The reality is that it doesn't take much of decrease in the flow of oil, for example, into the United States to trigger short-term price rises. A slowdown in the range of only 5 percent is sufficient to send gasoline prices significantly upward, according to Department of Energy representatives, and once that happens, the economy adjusts accordingly to account for higher cost in such a crucial commodity. In short, that price rise alone is enough to make Wall Street sit up and take notice of the possibility of a Y2K-induced downturn ...
Another pro-crash argument centered around the enterprise software systems that allow for the just-in-time supply chain margins that have come to define the New Economy ...
Another pro-crash argument concerned countries with xenophobic tendencies. In short, those states that have a hard time letting outsiders help may be in for the harder times ...
Finally, there was the sense that International Financial Institutions like the World Bank and IMF would be forced, for lack of funding, to turn a deaf ear to those states suffering Y2K-induced economic crashes that had not "cleaned up their acts" following the 1997-98 Global Financial Crisis ...
Moving on to the anti-crash arguments, the first and most obvious one offered was that the markets would naturally take Y2K into account when forecasting 1st Quarter earnings estimates, with consideration given to firms that experience unusually high volume in the last two quarters of 1999 and suffer a dearth of sales in the first due to a combination of Y2K disruptions and the inevitable draw down of stockpiled supplies ...
A second anti-crash argument cites a perceived but not yet proven IT "lockdown" by major firms, meaning a freeze on IT purchases through the last two quarters of 1999 until Y2K passes ...
Another anti-crash argument notes the usual "January effect" whereby markets, responding to positive earnings reports from the previous year's 4th Quarter, tends to look rather optimistically toward the future year, especially if the markets end up in positive territory after the first business week (historically a good sign of positive returns for the year) ...
Finally, participants predicted that the IMF, World Bank, and the US Treasury would work hard to protect those emerging economies that had suffered much in 1997-98 but had "cleaned up their acts" as a result ...
What's the Likely Long-Term Market Impact from Y2K? ... [more]
geocities.com
Cheryl
159 Days until 2000 |
