Y2K still likely to spark recession
news.excite.com
WASHINGTON (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 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, 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." |
