Nov. 22 bonus column - Year 2000

--- begin forwarded text Resent-Date: Wed, 18 Nov 1998 00:29:09 -0700 Date: Tue, 17 Nov 1998 23:28:33 -0800 (PST) X-Sender: vin@dali.lvrj.com Mime-Version: 1.0 To: vinsends@ezlink.com From: Vin_Suprynowicz@lvrj.com (Vin Suprynowicz) Subject: Nov. 22 bonus column - Year 2000 Resent-From: vinsends@ezlink.com X-Mailing-List: <vinsends@ezlink.com> archive/latest/596 X-Loop: vinsends@ezlink.com Precedence: list Resent-Sender: vinsends-request@ezlink.com FROM MOUNTAIN MEDIA DUE TO LENGTH, PLEASE CONSIDER THIS YOUR BONUS ESSAY FOR NOVEMBER FOR IMMEDIATE RELEASE DATED NOV. 22, 1998 THE LIBERTARIAN, By Vin Suprynowicz I don't know nothin' 'bout no Y2K OK, I admit it: I've been ducking the "Y2K" question. It's the most frequent inquiry I get, these days. And last weekend, while participating in an electronic chat room organized by the Liberty Roundtable, I had the questions come up several more times: "What do you see happening in the Y2K crisis? To what part of the country should we move to be safest?" For those who have been in a cave, "Y2K" is shorthand for the problem that develops because -- computer memory having been at a premium -- the programmers who set up many of our mainframe computers back in the 1970s and '80s created only a two-digit field for "year." Now -- starting April 1, 1999, if not sooner -- operators are going to try to program the computers that monitor our utility grids and phone systems, the factory machinery that generates "just-on-time delivery" of goods, even our railroad and airport switching equipment, giving those machines their instructions for the first quarter of the year "00." But (pardon my anthropomorphing) many of those computers will "assume" the year 00 happened 99 years ago. Anecdotes are already circulating about mortgage holders being billed for 99 years of delinquent interest, or supermarket debit machines rejecting as "expired" brand new debit cards which carry expiration dates ending in "00" or "01. " So far, opinion among thoughtful people has been split on the likely repercussions. Some perfectly wise folks argue that our economy and technology are the most innovative and resourceful ever devised. Even if your bank's ATMs go on the fritz for a couple of days, even if the railroad switching equipment bogs down and produce deliveries to your supermarket grow spotty for a few weeks, armies of well-paid technicians will hurl themselves into developing "work-arounds." To this way of thinking, survivalists who foresee the collapse of large segments of our urban culture, putting a premium on ownership of a cow and a well and a garden for the first time in 50 years, are merely engaging in wishful thinking. Generally a bunch of Bible-thumpers (as this line of thought goes), they would find it mighty handy for some kind of cosmic rain of brimstone to wipe away the urban Sodom and Gomorrah they view as the cause of all their problems, proliferating as that urban culture does the legions of the socialists, the welfare queens, the abortionists, the enviro bug-worshippers, the gun-grabbers. How fitting and handy to envision them all killing each other off, fighting over the last moldy crust of bread. And, if the Y2K "crisis" were about to occur in perfect isolation, that argument would hold some water (even if this revelation of a nation divided into urban-versus-rural, East-versus-West, gun-lover versus gun-hater, would be worth some further study, all by itself.) But remember, Y2K is "shorthand." And as it turns out, it stands for a lot more than just "Year 2000." The problem is that -- not exactly simultaneously, but all within the next couple of years -- a few other problems are likely to crop up. Without predicting a specific order: # # # 1) The fractional reserve banking system that dates back to the creation of the Federal Reserve in 1912-13 is in deep crisis. Buoyed by the supposed guarantee that the International Monetary Fund (our long-suffering friends, the U.S. taxpayers) would bail out any failures, our "private" bankers (and those of Japan) have been recording trumped-up double-digit returns by loaning billions to such bankrupt chicken farms as Malaysia, Indonesia, Russia, Brazil, and Mexico. These loans are no good. And they are pyramided and leveraged atop one another like something out of Dr. Seuss. In this country, too, the pursuit of ever-higher returns and the presumption that everyone can live the good life on credit have encouraged foolish loans and investments based on the notion that the federal government "insures all deposits," and that we can always pay off our debts with that raise we hope to get next year. Once these assumptions start to unravel, the only debate will be whether to describe the fallout with references to "dominoes," or that old favorite, the "house of cards." Remember, as Jimmy Stewart explains to his depositors every year in "It's a Wonderful Life," the current system is based on the assumption (are you noticing that word crop up a lot?) that only a small percentage of depositors will ever want to take all their money out at the same time. Otherwise, the banks would be, well, bankrupt. This kind of fraud is only legal because the government specifically licenses people to do it, on the theory that it "creates more credit, to promote economic growth." 2) Then comes that old stalwart, the New York Stock Exchange. Prices there have been many times what can be justified by traditional price-to-earning ratios for years. That sounds arcane, but what it means is that few investors are buying stocks these days because they've always wanted to own a piece of Hammermill or Coca-Cola, and look forward to reading the annual reports and living off the dividends in their golden years. Dividends? Mere pennies! Folks buy these stocks today because the guy who's selling them made an 18 to 21 percent return in 1997, and the buyer hopes to realize 18 to 21 percent when he sells them in the year 2000. When the holder of a mutual fund can no longer even tell you what products or services are offered by the underlying firms that issued the stocks in his or her "portfolio," what you have is a "bubble." Think tulip bulbs, Everglades building lots, Cabbage Patch dolls, baseball cards, beanie babies. # # # 3) Today's dollar is intrinsically worthless. First it was made of gold; then it said "pay to the bearer in gold;" then silver, now it's a certificate redeemable for exactly nothing. Dollar-denominated Treasury bonds are also intrinsically worthless. They are merely a promise to tax our children or grandchildren to pay us back in still more paper -- Libertarians call them "extortion futures." Bill Clinton is one of the luckiest men in history ... so far. Most rational (non-Keynesian) economic models would predict that -- at the rate at which the United States has been printing and passing worthless green paper for the past 30 years -- we should be in the midst of a hyperinflation that would make the Weimar Republic look boring. But the funniest thing happened: All over the world, people love and respect America as the font of freedom, and figure the dollar must really be worth something -- certainly more than their worthless domestic ruble or zlotny. So they hide dollars in their mattresses. Those dollars don't come back to these shores to bid up the price of American goods. So we're fine ... so far. But there's a reason why the guys who get arrested by your local bunko squad are called "con artists." Their stock in trade is "confidence." Remember Y2K? Imagine now that the ATM machines stop working. Since the nation's major railroad switching yards are now entirely computerized -- the old manual switches were torn out years ago -- the grocery store runs out of fresh produce. Some computer messes up at the sewage treatment plant, and before they can figure out a manual override some sewage backs up into the reservoir. Suddenly you're warned to boil your cooking water, like some barefoot Third World peasant. Without explanation, the phones go dead. Long lines form as folks start panic-buying remaining supplies of gasoline, kerosene lanterns, and canned goods -- price no object. There are a few fistfights over the last rolls of toilet paper. Pressed by jealous mobs to "do something," blustering politicians declare that anyone who stores too much stuff is a "hoarder." Neighbors are encouraged to turn in neighbors -- offered a reward from the seized goods when they're "redistributed." Every electronic alarm in the city goes off all at once, leaving police and fireman scurrying around, clueless. Some looting starts -- after all, it's the "hoarders" who are the real criminals, right? TV pictures of all this go out overseas, until the broadcasts are limited "to prevent panic." What has just been lost? "Confidence." Now folks want to draw out their bank accounts in cash. They want to sell their stocks ... but how can everyone sell when the prices are falling so quickly that there are no buyers, and the phone lines to your broker are tied up for days on end? 4) There is no "Social Security Trust Fund." The thief you keep sending back to Congress helped them spend it all. Already, the retirement age is being raised, and there's serious talk of "means testing" payments -- only making full payments to the drunks and losers and compulsive gamblers who accrued no other savings or assets. Kind of like taxing all the industrious little ants, but only paying off the lazy grasshoppers. Sound like a "guaranteed annuity" to you? Assurances of ongoing "Trust Fund" solvency are based on the optimistic assumption (there's that word again) that Social Security payments by younger workers will continue at current levels. But what if there's a recession, with big layoffs? What if the computers at the IRS are rumored to be down as of late 1999? What if lots of people decide to just stop filing and paying federal taxes in early Year 2000, on the theory, "They're off line, anyway. If we ALL stop, they can't come find ALL of us"? (This would never have happened in the 1950s, of course, when American taxpayers -- generally paying less than 5 percent of gross income so you could still support a family on one salary -- considered it "our" government and were proud to do their patriotic duty at tax time. But since then the liars have brought us Vietnam, Watergate, Chinagate, Filegate, Ruby Ridge, and Waco ... IRS auditors and drug police routinely referring to average Americans as "scum" and gleefully seizing our homes, businesses and bank accounts, tens of thousands of young people jailed for marijuana despite popular votes to legalize the stuff, defendants railroaded by smug federal politician-judges without even being allowed to read the Bill of Rights to their juries. Still consider it your "patriotic duty" to feed this beast with half of what you earn? Or did you think your pal the congressman was suddenly, desperately searching for "an alternative to the IRS" just out of the goodness of his heart?) And what happens now to the carefully-drawn charts that show Social Security is "sound until the year 2012"? # # # Irresponsible speculation? If so, I'm not alone. Appearing in Las Vegas on Tuesday, Nov. 17, U.S. Sen. Bob Bennett, R-Utah, chairman of a Senate Special Committee on the Year 2000 Technology Problem, said turn-of-the-century computer glitches could cause "an economic downturn" in the United States and abroad. "Potentially, this could tie up huge parts of the economy," Sen. Bennett told John G. Edwards of the Las Vegas Review-Journal, after a private meeting with executives at the Comdex computer trade show. "There will be a problem. There is no question that we can't fix everything that needs to be fixed (over the next 14 months)." Sen. Bennett told the newspaper he believes less developed countries in Asia, Africa and South America will be most affected by Y2K problems, though they're reportedly "working hard" to resolve the computer glitches. "My current assumption is that the United States will overcome this without overwhelming, crippling problems," the senator proclaimed. Then he said he is also concerned about how the millennium bug will affect the health care industry. "I wouldn't want to get sick in some rural hospital," the senator said, cheerily. Meantime, the Sacramento Bee reported (also on Nov. 17) results of an August poll that shows most California cities and counties have a plan to eradicate the year 2000 bug ... "but less than half have set aside the money to pay for it." Feeling reassured? Into this potential maelstrom, toss three wild cards: 1) If Americans, hypothetically told at some future date that stocks and bonds have fallen to one-third of their previous nominal values, could be counted on to behave like sophisticated, diversified investors, saying "Oh well, you win some, you lose some," then the market could indeed fall by two thirds without causing a meltdown. But the behavior of large groups of people, once they start moving, is rarely so rational. Would you want to be the last one on your block to cry "Sell"? When a market crashes, folks lose their jobs. What happens then to folks who have no hard savings or supplies but plenty of debt ... who have barely been keeping their heads above water? What liberties -- yours as well as theirs -- would they then gladly trade for a steady supply of hot porridge? 2) The kind of people who gravitate to government "service" never voluntarily accept blame, but they (start ital)are(end ital) always looking for ways to expand their power. Can you spot any aspects of these "Y2K" scenarios that might give government agencies an excuse to seize more power; to further restrict our freedoms under the guise of "offering relief and restoring order"; and then to blame the whole situation on someone else. "Greedy capitalists," perhaps, who have been operating with "too little regulation"? 3) We will be increasingly reassured that "the best minds" are hard at work re-writing computer code to prevent any of this from happening. But computer nerds and denizens of the Internet are, in my experience, the most free-thinking, libertarian ... even anarchist residents of our little global village. They are immensely confident in their self-sufficiency. And they do not like Big Brother -- especially when he threatens to mess with their privacy and freedom. So ... what if a few of them are only (start ital)pretending(end ital) to fix the problem? It may take a village to raise a socialist, but it wouldn't take many Y2K saboteurs to seize this opportunity to "topple the state." # # # A long way around to a relatively short answer: No, I'm not a professional financial advisor. But yes, I know exactly what is going to happen. Everything listed above is going to happen. I just don't know (start ital)when(end ital) each thing is going to happen, or in what particular order -- which is what you really need to know, if you think about it. But since there's no real penalty for being "too prepared" -- other than perhaps looking a bit foolish -- I will fearlessly give a little (absolutely amateur) advice, which should apply in the face of almost (start ital)any(end ital) unforeseen emergency. (And if you start preparing yourself for the smaller emergencies now, at least you'll be part-way home.) Pay down your debts. Turn a hobby into a second, part-time business ... a small but separate income stream. Diversify. Owning a bunch of "funds" with different names, which are in fact all dollar-denominated electronic blips at some government-regulated bank or brokerage house, is not sufficient. Do you own any bullion-value gold coins (not coins with grossly-inflated "collector value," but coins priced at no more than twice their meltdown worth)? Have you hidden away any bags of "junk silver" (pre-1965 real silver dimes and quarters, now selling at about four times face value)? Do you have a supply of greenbacks somewhere other than "in the ATM?" Enough to live on for a week? A month? Rich folks can look into Swiss annuities. But even those of moderate means can think about a beat-up looking American pickup truck ... with enough dough left over to stockpile an extra water pump, an extra fuel pump, extra tires and wheels, an extra battery ... and some wrenches, you yo-yo. Don't panic. Don't sell everything and move somewhere to become an unemployed stranger ... unless you really have the assets, the manpower, and the handyman skills to set yourself up right. Do consider whether you could dig a well (or drink out of the creek) and plant a vegetable garden where you live, should things get tough for a time. If not, do you have friends or relatives within driving distance, where such things are possible? Would they take you in if you arrived as an unwashed beggar? For how long? But what if you were to contact them now, asking permission to store some supplies there, and even to help finance their plans to fix up a room in the loft, to till and fence a bigger garden, or to share the costs and ownership of a four-wheel-drive vehicle? What then? Do you have water and non-perishable food stored to get you through a week? A month? (Freeze-dried gourmet camper's fare is fine for the well-heeled, as are surplus Army MREs. But bulk rice, oats, and dried peas in plastic tubs are surprisingly cheap, if you shop around.) More than a week's supply of toilet paper, soap, and other hygiene products? Pet food? The doctors and insurance companies don't want you to stockpile the prescription medicines you legitimately need, do they? How hard have you worked at outsmarting them? As a last resort, think "veterinarian." Do you have alternative ways to heat and light your home, if the power were to go down? (Residents of blizzard country will actually have a head start, here.) If not, is that because you look forward to someday living in a "government resettlement camp"? Could you protect your family and belongings from home invaders, if the police could not be reached? Would your neighbors help? Would you help (start ital)them(end ital)? Do you even know their names? Do you own any firearms? Are they listed on government pre-confiscation lists? Why? Do you know why shotguns and handguns are generally better home-defense weapons than rifles? Do you know with what types of bullets or shells it's best to load such weapons for home defense? Got any? Why not? Afraid that once you start to learn new stuff it might become a habit? Dying during a crisis is not the worst thing that can happen to you. I imagine that watching the suffering of those who counted on you to protect them can be much worse. Vin Suprynowicz is the assistant editorial page editor of the Las Vegas Review-Journal. Readers may contact him via e-mail at vin@lvrj.com. The web sites for the Suprynowicz column are at http://www.infomagic.com/liberty/vinyard.htm, and http://www.nguworld.com/vindex. The column is syndicated in the United States and Canada via Mountain Media Syndications, P.O. Box 4422, Las Vegas Nev. 89127. *** Vin Suprynowicz, vin@lvrj.com The evils of tyranny are rarely seen but by him who resists it. -- John Hay, 1872 The most difficult struggle of all is the one within ourselves. Let us not get accustomed and adjusted to these conditions. The one who adjusts ceases to discriminate between good and evil. He becomes a slave in body and soul. Whatever may happen to you, remember always: Don't adjust! Revolt against the reality! -- Mordechai Anielewicz, Warsaw, 1943 * * * --- end forwarded text ----------------- Robert A. Hettinga <mailto: rah@philodox.com> Philodox Financial Technology Evangelism <http://www.philodox.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'