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NEVER MIND Y2K, LET'S THINK FOR A MOMENT ABOUT Y1999
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(March 24,1999) The upcoming event of January 1, 2000 reminds us of the Superbowl: the hype constantly tells us it's coming up, but once you get past all the commercials, are we really sure the Millennium will be all that exciting?
(March 24,1999) And so it is with Millennial fever. We can safely say that opinion is divided on what 1/1/2000 will bring, but we’re starting to see its effects early in 1999. It’s no secret that billions of dollars are being spent by corporations, small businesses and individuals to update software (and hardware) in advance of the year 2000. This, of course, means the prospect of much less economic activity in these areas come 2000, and a resulting drag on GNP at that time, since all this frantic spending is happening in 1999.

What else will happen in 1999? Well, we’re starting to see people withdrawing cash from bank accounts at a greater-that-normal rate, and this drawing down of bank accounts will inevitably increase as this year progresses. How significant can that become to our overall economy and particularly to the health of our banks? Well, it depends on how many people buy into the fear that come January 2nd, 2000, you’ll walk into your bank (or up to your ATM machine) and find that “the computer’s down” and for some unknown amount of time (Days? Weeks? How long?) you won’t have access to your money.

Pre-2000 fears and apprehensions are going to drive a lot of economic behavior this year, and people will take clues from various media ranging from raving alarmists (and the Internet is full of these) to the more sanguine views of the established media, which tend to downplay the idea that more than just a few minor, and easily fixable, glitches will occur here and there come 2000.

Our own experiences with the more mainstream media (newspapers, popular magazines, radio, and especially TV) show that the more spectacular and alarming a story is, the more it is likely to draw an audience. “Y2K experts” quoted by the popular media tend to be those who earn their living predicting the most frightening and extreme scenarios, and often those same experts profit handsomely by selling the cure for this upcoming Armageddon. If we see much more of their scare-mongering, then we’ll have a growing number of people who will believe the worst and plan their 1999 accordingly.

Certain numbers of people are already convinced we’re in for the worst (The End of the World As We Know It, or TEOTWAWKI) and will not only withdraw cash, but stockpile food, water, fuel, generators, medicine, and the various consumer goods they feel will be unavailable come TEOTWAWKI. Country acreage is being acquired, wells are being dug, gardens prepared for, all by the true believers in the seriousness of it all.

To what extent is this sort of behavior contagious? That’s the big question of 1999.

In the gold and silver business, we have seen a tremendous increase in demand, which started last August when gold hit a 19-year low of US$274 an ounce. From that point, record-setting demand in the U.S. for physical precious metals has continued virtually unabated, first from the bargain-hunters attracted by gold’s low price, and with a wave of new buyers who often cite Y2K concerns as a primary reason for buying tradable forms of gold, silver, and platinum.

WHERE’S THE MONEY? One trend emerging today is people have started thinking about money, their money, and the institutions entrusted with holding their money. The thinking goes something like this: if the computer networks go down, where exactly is that money that we are electronically credited with in banks, credit unions, cash management accounts, pensions, IRA’s, 401(k)’s, etc.?

So we have the phenomenon of growing numbers of plain, ordinary folks pondering the wondrously complex structure which is our credit economy. The curtain has been pulled away, and the naked fact staring back at them is that their money is a computer entry, and nothing more.

Whether this or that computer goes belly-up on January 1, 2000, or temporarily glitches out, or works just fine – it doesn’t really matter, if asset-holders come to a realization that their claim to their data-entry “wealth” is a pretty tenuous one, and they start taking serious steps in advance of the year 2000 to make their holdings more tangible.

If enough people start asking ‘where’s my money?’ then we’ve got a problem, right here in 1999.

Admittedly, the prospect of a large percentage of the asset-holders in this country taking steps to convert their credit economy assets to something tangible like precious metals is, for the most part, unlikely. But still…

Today we live in a growing peacetime economy. The stock market is in its twelfth, or seventeenth, or 25th year of a full-bore bull market. The Cold War is over, interest rates, unemployment, and oil prices are down over the last 18 years – in a nutshell, prosperity is ours.

What exactly could tip over this warm tub of bathwater in which we so blissfully relax today?


 

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