Federal Reserve Board chairman Alan Greenspan warned that fears over the Y2K problem could lead to a bigger mess than any actual computer failures themselves, as businesses and consumers may alter their normal spending patterns. Greenspan, speaking at a Y2K conference in Washington, characterized the chances of any failures in mission critical systems as negligible citing the stringent testing that has already been carried out and the backup plans that most businesses and government financial agencies have in place.
But Greenspan warned that possible build-ups in inventories by US companies in the run-up to Y2K could have a short-term negative effect on the economy. If only a small percentage of businesses choose to add to their inventories as a hedge, the effect on production will be insignificant, Greenspan told the conference. However, should a large number of companies want to hold even a few extra days of inventories, the necessary, albeit temporary, increase in production (or imports) to accommodate such stock building cold be quite large. Bottlenecks could develop, and market pressure could ensue.
Another possible drag on the economy, Greenspan warned, could come from members of the general public that look to stockpile cash before the date change. Although not many people are currently expected to do so, The Fed has contingency plans set to allow for the printing of extra currency to quickly supply banks that may get caught short. Greenspan has repeatedly said that automated teller machines and electronic banking records are not expected to show any major ill effects from Y2K, adding that the safest thing people can do is to leave their money in the bank.
Although the banking system and ATM providers are about as prepared for Y2K as they can be, Greenspan said, we cannot realistically expect perfection over the New Year’s holiday any more than at similar periods in years past. He was quick to point out, however, that past failures have never resulted in systemic breakdowns in the economy. Nevertheless, Greenspan continued, it is at least conceivable that, as a consequence of our current dependence on computers, some Y2K-related failures could have noticeable effects on the economy. รก
