Odds are, no one worries about the economic impact of year-2000 computer problems more than Edward Yardeni.
Last week, the chief economist at Deutsche Morgan Grenfell warned that he now sees a 60% chance of a severe global recession arising from information technology snafus-up from 30% when he began studying the issue last summer.
The downturn could start next year, Mr. Yardeni said, if banks anticipating problems among customers "cause a credit crunch by refusing to lend to companies most at risk of failing in 2000."
The recession could be as serious as the 1973-74 slump caused by disruption in oil supplies, he said. During that crisis, U.S. economic output fell 3.7% over a stretch of five quarters, and stock value fell $1 trillion.
The stroke of midnight on Dec. 31, 1999, is expected to bring a plethora of computer-based problems triggered by how dates are coded.
Early in the computer age, the scarcity and cost of data storage space led programmers to encode years as two digits instead of four-that is, "98" instead of "1998."
Accordingly, on Jan. 1, 2000, computers left unfixed will read the "00" date code as "1900" instead of "2000." The results will range from nonsensical calculations of ages, dates, and accrued interest to total system failure.
The looming and unmovable deadline for fixing what is called in shorthand the Y2K problem is forcing many companies and government agencies to focus their efforts on critical data systems, Mr. Yardeni noted during a recent interview.
That surely consigns to failure many other still-important information systems, a situation of unknown magnitude the economist calls "the epicenter of the potential Y2K earthquake."
"We all need to know if the products, services, information, orders, jobs, incomes, and payments we depend on have been doomed by the triage decisions of those who provide them," he said.
The dearth of comprehensive information about what functions may fail tops Mr. Yardeni's concerns. And he thinks neither government nor private industry is taking the issue seriously enough.
He urges governments to set up "Y2K war councils" to coordinate repair efforts and "prepare for the disruptive consequences of inevitable failures."
Similarly, he thinks business should establish intra- and inter-industry Y2K cooperatives to pool resources, establish standards, and coordinate testing of data problem remedies.
Mr. Yardeni thinks the problems are so serious that "we should study whether a one-week worldwide Y2K holiday might be necessary so that the global computer system won't be stress-tested under peak load conditions."
The economist warns that a recession in 1999 or 2000 may be as severe as the oil shock downturn of the 1970s, but would be different in a fundamental way-deflationary rather than inflationary.
Conceivably, U.S. prices might drop 5%, he said, using the mechanism for calculating economic production, with a loss of $1 trillion in output. If stock prices behave as during previous downturn, $1 trillion in value could be lost.
"Don't get me wrong. I'm not saying this is inevitable. I'm not predicting the end of life on planet Earth," said Mr. Yardeni. But he urged that Y2K be seen as "an emergency situation that requires immediate attention and enormous resources."