John, as you know, I'm no economist, and don't even play one on TV. Econ 100 was one of the most painful classes I had to suffer through, but as I see it (w/apologies to Yardeni if he's already covered it):
1. El Nino takes a big bite out of agribusiness in the South. Farmers take a significant hit, as do those who "feed" the farmers (i.e., equipment manufacturers, feed companies, mortgage companies, banks, etc.) and those the farmers feed (higher food prices, perhaps some shortages). The effects ripple through the economy, and assuming next year is closer to normal conditions, it takes about 3-4 years for this sector to recover from El Nino.
2. Exporters continue to take a hit, due to the Asian crisis. This especially hammers IT companies, and chip manufacturers in particular, who depend on exports to offset the general lack of sales in the U.S.'s relatively mature IT marketplace.
3. Telecom-related companies suffer satellite loses due to two natural events: the peak (or start?) of the Sun's 11-year electromagnetic cycle (or whatever it's called - due in mid- to late '99); and the extraordinary meteor shower that is also due next year. Can't remember what it's called, but it reportedly will be one helluva show. Of course, it could end up being a flop like some of the marque comets have been, but some of the eye-in-the-sky industry types tell me it is a legitimate concern.
4. U.S. businesses delay most new IT equipment purchases because they are channeling their IS budgets into fending off Y2K.
5. The stock markets begin to lose steam as investors begin to worry that their companies of choice may not be Y2K ready, technically and legally. The institutionals are already one step ahead of the game, which adds momentum to the Baby Boomer activity. 401(K)s and pension funds begin a slow, steady collapse, placing Boomers and Boomlets on even par.
6. Moreover, as Y2K-related problems begin to manifest themselves in ways that strike close to home, Joe Taxpayer starts to really focus on the phenomenon, and begins to act in ways that alter normal micro-economic patterns (mind you, the so-called elites are already way of him, even as they continue to advocate calm and sensible behavior). Joe T's collective actions are magnified by the fallout from increasing lay-offs across all industry sectors. Panic begins to build gradually, and then exponentially, like a tsunami.
7. Lastly, 'Frisco gets hit by the 8.1 that's been hiding among the igneous folds under the bay, only this time there is no Giants World Series and no Brett Butler to provide a real-time perspective. As he rides on BART, Old Bill Wexler gains a new appreciation for the true meaning of the word DOOM. His disciples scramble for a new leader (Shaw's "fat lady" perhaps?).
All of the above are either already happening, are inevitable, or are a distinct possibility. Okay, okay, so I made up the last one, but it could happen. ggg.
The net: major recession, and that's just in the U.S. It'll be far worse everywhere else in the capitalist and neo-capitalist world.
Of all the issues I cover in Washington, Y2K meetings are the only ones where you come out more depressed than when you went in. Oh, one final prediction -- Congress reinstates the business expense deduction for the three-martini lunch! ggg.
Ken |
