The millennium bug problem could trigger a global recession before a single computer fails, economists warned yesterday.
The global online Internet conference hosted by Ed Yardeni, chief economist of Deutsche Bank, heard that fear generated by the Year 2000 issue could start a recession next year, as companies and stock markets take defensive measures to limit their own exposure.
?We could see banks start to refuse credit next year to companies that can?t prove they are Year 2000 compliant,? Yardeni said. Stock markets were likely to go down in anticipation of a global recession, which could in turn depress consumer confidence and spending, he said.
Martin Barnes, managing editor of Bank Credit Analyst, warned that one of the biggest problems generated by the bug is that nobody can accurately predict the scale of the problem.
?That in itself could have a significant impact,? he said. Financial markets don?t like uncertainty, he pointed out, so there could be economic problems even if all computers work.
Yardeni believes the millennium bug is 70 per cent likely to start a recession in the US, a theory based on his belief that most US organisations are not ready for the problem.
He compared this possible recession with the 1973-74 slump brought on by the Opec oil crisis, both in its possible severity and its cause. If the Opec crisis disrupted the flow of petrol, the millennium bug could disrupt the flow of information, he argued.
However, Philip Menco, chief strategist at Dutch bank ING Barings, was more cautious about the effects of the millennium. His organisation was predicting only a mild recession in the first half of 2000, he said.
In any case, he pointed out, there was no point being too pessimistic about the Year 2000 crisis. ?If you?re really pessimistic, the whole Year 2000 problem will be solved on 1 January 2000 when the Russian nukes fire,? he said.
Gwynneth Flower, head of UK government pressure group Action 2000, also urged caution and called on the public not to take panic actions such as stockpiling (see related story).
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