Nov. 22 bonus column - Year 2000

[Robert Hettinga <rah@shipwright.com>]

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    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

* * *

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-----------------
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'