[Fwd: Blind Man's Bluff in the Year 2000]

[dorisdavis@earthlink.net]

Subject: Blind Man's Bluff in the Year 2000
Date: Mon, 8 Jun 1998 14:50:52 -0400
From: info@garynorth.com
To: dorisdavis@earthlink.net

           BLIND MAN'S BLUFF IN THE YEAR 2000

      What are you going to be doing for a living in the
year 2001?  Unless you're a fix-it man living in a small
town, you won't be doing what you do today.  If you make
your living in financial services, you will surely be doing
something else.  If you're a journalist, you will be in a
new profession.  But what?  What other useful service can
you provide?  You have very little time to make the switch.

     Let me show you why.

     We live in a world that depends on a high division of
labor.  That world has less than three years to go.  In one
gigantic collapse, the division of labor will implode.
This implosion will begin in 1999.  It will accelerate in
2000 and thereafter.  Those who work in highly specialized
fields will find little or no demand for their skills, in
the face of an enormous supply of desperate, low-wage
competition.  Any job classification that did not exist in
1945 will probably not have a lot of demand in 2001, with
one exception: computer software programming.

      The June 2 issue of Newsweek ran a front-cover story
on the looming computer crisis of the Year 2000 -- called
y2k (Year 2 K -- shorthand for a thousand).  In the week it
the article appeared (late May), the Dow Jones Industrial
Average set a record new high.  (It was beaten a week
later.)  If investors believed the information reported in
the Newsweek article, the world's stock markets would have
collapsed.  Clearly, people don't believe it.  That's why a
small handful of people can get out now -- out of the stock
market, the bond market, and any city over 25,000.

      Not everyone can get out at the top of a bull market.
This includes the "bull market" known as modern industrial
society.  Pull the plug on the local power utility for 30
days, and every city on earth becomes unlivable.  What if
the plug gets pulled for five years?

      How do you rebuild the shattered economy if the
computers go down, taking public utilities with them?
Without electricity, you can't run the computers.  Without
computers, you can't fix computers.  How can you assemble
teams of programmers to fix the mess?  More to the point,
how do you pay them if the banks are empty?

      Chase Manhattan Bank has 200 million lines of code to
check and then repair.  Citicorp has 400 million lines.
All big banks are similarly afflicted.  And even if this
could be fixed, bank by bank, there is no universal repair
standard.  Thus, the computers, even if fixed (highly
doubtful) will not work together after the individual
repairs.  A noncompliant bank's data will then make every
compliant bank noncompliant.  Thus, the world banking
system will crash in 2000.  When the public figures this
out in 1999, the bank runs will begin.

      You probably will not have your present job in 2001.

                   "It Just Can't Be True!"

      You don't believe me, of course.  Not yet.  But I
havepublished the evidence on this Web site.  You can
verifywhat I'm saying.  But you still won't believe it.
Why not? Because it's too painful.  In their book, The
Sovereign Individual, Davidson and Rees-Mogg make a very
important observation:

      A recent psychological study disguised as a
      public opinion poll showed that members of
      individual occupational groups were almost
      uniformly unwilling to accept any conclusion that
      implied a loss of income for them, no matter how
      airtight the logic supporting it.  Given
      increased specialization, most of the
      interpretive information about most specialized
      occupational groups is designed to cater to the
      interests of the groups themselves.  They have
      little interest in views that might be impolite,
      unprofitable, or politically incorrect (p. 339).

      My views are all three: impolite, unprofitable, and
politically incorrect.  Impolite, because I am saying this:
(1) those advising you are as blind as an eighth-century
Israelite king; (2) they have given you information that
will prove to be wildly unprofitable; (3) all the hype
about your getting rich -- the world's getting rich -- is a
clap-trap.  We are heading for a disaster greater than
anything the world has experienced since the bubonic plague
of the mid-14th century.

      Because the year 2000 begins on a Saturday, millions
of victims will not be aware of their dilemma until the
following Monday or Tuesday.  They will pay no attention to
advance warnings, such as this one, that they are at risk.

      As you read this report, I want you to think to
yourself: "How will this affect me?  Is my business at
risk?  Is my income at risk?  What should I do?"  I also
want you to visit my Web site, http://www.garynorth.com and
examine the accumulating evidence, week by week.

                 The Origin of the Problem

      Here is the problem.  Over three decades ago,
computer programmers who wrote mainframe computer software
saved disk space -- in those days, very valuable space --
by designating year codes as two-digit entries: 67 instead
of 1967, 78 instead of 1978, etc.  Back then, saving this
seemingly minuscule amount of disk space seemed like an
economically wise decision.  This may prove to be the most
expensive forecasting error since Noah's flood.

      What the programmers ignored for three decades is
this: in the year 2000, the two digits will be 00.  The
computer will sit there, looking for a year.  At midnight,
January 1, 2000, every mainframe computer using unrevised
software dies.  If old acquaintances are in the computer,
they will indeed be forgot.

      Programmers who recognized the implications of this
change did not care.  They assumed that their software
would be updated by year 2000.  That assumption now
threatens every piece of custom software sitting on every
mainframe computer, unless the owner of the computer has
had the code rewritten.  In some cases, this involves
coordinating half a billion million lines of code.
(Example: AT&T)  One error on one line can shut down the
whole system, the way that America Online was shut down for
a day in 1996 because of a one-digit error.

      The handful of reporters who have investigated this
problem have met a wall of indifference.  "We're all using
microcomputers now."  "This is a problem only for a few
companies that are still using mainframes."  "Cheap
solutions will appear as soon as there is demand."  "The
software will be updated soon, and I'll buy it then."  "If
this were a serious problem, we'd have heard about it."
Yet this last response is given to someone -- a reporter --
who is trying to tell people about the problem.

      I first read about this problem years ago in a book
by the pseudonymous author, Robert X. Cringely: Accidental
Empires.  It is not as though the computer industry has
been unaware of it.  Only a few weeks ago, I read a Wall
Street Journal column on computers that mentioned it.  The
writer wrote that his editor is getting tired of having him
mention it.  This is typical.  The general public hasn't
heard about it, yet editors are already tired of hearing
about it.  "It's old news."  Well, it's new news for most
people.

      What does it matter, really?  We use microcomputers.
Microsoft has solved the Year 2000 problem, we assume.  So
have most software companies.  Everyone uses desktop
computers or, at the largest, minicomputers, right?  Wrong.

      Governments Rely on Aging Mainframes and Software

      On September 24, 1996, Congressman Stephen Horn, who
is Chairman of the Subcommittee on Government Management,
Information, and Technology, submitted to the full
committee a report on the Year 2000 problem.  The
Subcommittee held hearings on April 16.  (Just one day of
hearings.  This indicates the degree of concern that the
government has.)  He said that these hearings revealed "a
serious lack of awareness of the problem on the part of a
great number of people in business and government.  Even
more alarming was the cost estimate reported to the
Subcommittee to remedy the problem, which was said to be
$30 billion for the Federal Government alone."  Then he
announced:

      Without greater urgency, those agencies risk
      being unable to provide services or perform
      functions that they are charged by law with
      performing.  Senior agency management officials
      must take aggressive action if these problems are
      to be avoided.

      Yet despite Horn's valid warning, nothing visible is
happening.  He knows this.  These agencies must shift
hundreds of millions of dollars from their existing budgets
to hire outside programmers to rewrite the code that runs
these agencies.  This isn't being done.  More to the point,
the longer they delay, the worse the problem gets.  You
can't just go out and hire programmers who are familiar
with the code.  As businesses find out what threatens them,
the demand for these highly specialized services will soar.
(If businessmen don't figure this out in time, payment will
come due in January of 2000.)

      The Subcommittee's report warns: "This issue may
cause banks, securities firms and insurance companies to
ascertain whether the companies they finance or insure are
year 2000 compliant before making investment decisions."
It also says that companies will start demanding
contractual warranties guaranteeing against Year 2000
breakdowns.

      A memorandum from the Library of Congress Research
Service (CRS) has warned that "it may be too late to
correct all of the nation's systems."  So, the question
arises: Which systems will survive and which ones won't?
Here are some problem areas, according to CRS:

            Miscalculation by the Social Security
            Administration of the ages of citizens,
            causing payments to be sent to people
            who are not eligible for benefits while
            ending or not beginning payments to
            those who are eligible;

            Miscalculation by the Internal Revenue
            Service of the standard deduction on
            income tax returns for persons over age
            65, causing incorrect records of
            revenues and payments due;

            Malfunctioning of certain Defense
            Department weapon systems;

            Erroneous flight schedules generated by
            the Federal Aviation Administration's
            air traffic controllers;

            State and local computer systems
            becoming corrupted with false records,
            causing errors in income and property
            tax records, payroll, retirement
            systems, motor vehicle registrations,
            utilities regulations, and a breakdown
            of some public transportation systems.

      I don't think these are small issues.  They will
probably start receiving media attention when it is so late
in the process that there will be massive foul-ups in
coordinating the revisions.

      Notice, the biggest one is missing: an international
bank run, as depositors demand cash.  From that day on, all
exchanges will be local: the collapse of the division of
labor.

      When the computers' clocks think it's 1900, it soon
will be.

      I realize that there has been tremendous progress in
microcomputer power, but does anyone really think that all
of the Federal government's forms -- not an infinite
number, but approaching infinity as a limit -- can be put
on three dozen Compaq desktop computers and run with, say,
Lotus Approach or Microsoft Access?  And even if they
could, how would you re-train all of the bureaucrats to use
the new systems?  How fast will they learn?  How fast do
bureaucracies adapt?  The Subcommittee's report warns:

      The clock is ticking and most Federal agencies
      have not inventoried their major systems in order
      to detect where the problem lies within and among
      each Federal department, field office and
      division.  The date for completion of this
      project cannot slip.

      By "cannot," the Subcommittee's report-writer meant
"must not."  The date can surely be allowed to slip.  It
almost certainly will be allowed to slip.

      Additionally, the task may be more difficult for
      the public sector, where systems have been in use
      for decades, may lack software documentation and
      therefore increase the time it takes from the
      inventory phase to solution.

      Did you get that?  The software code's records are
gone!  Remember also that we're not just talking about the
United States government.  We're talking about every
government -- national, state, and local -- anywhere on
earth that has its data stored on an unrevised mainframe
computer system or which relies on any third-party computer
service that uses uncorrected software.

      As the year 2000 approaches, word will slowly begin
to spread: "After the three-day weekend that will
inaugurate the year 2000, there is going to be a hangover
the likes of which we have never seen before."  For some,
it will be a time of celebration.  For others, it will be
the end of their dreams.  It depends on whether they are
being squeezed by the government or dependent on it.

      But it's not just government that is at risk.  It's
private industry.

                    Kiss Medicare Goodbye

      Some 38 million people will receive Medicare payments
in 1997.  In 2000, an estimated one billion claims will be
filed, totalling over $288 billion.  This, according to a
May 16, 1997 report of the General Accounting Office (GAO):
"Medicare Transaction System."

      Problem: the Medicare system won't make it through
2000.  The same GAO report shows why.  Medicare claims are
not actually administered by Medicare.  It's administered
by 70 private agencies.  These agencies have been informed
that their contracts will not be renewed in 2000.

      The agency that officially supervises Medicare has
plans for one huge computer system that will bring the
program in-house.  It is the same dream that motivated the
Internal Revenue Service for the past 11 years.  The IRS
announced earlier this year that after 11 years and $4
billion, the attempt had failed.

      Medicare now knows that it has a problem with its
computers.  They are not Year 2000-compliant.  So, to make
sure that they will be compliant, Medicare has issued an
appeal to the 70 newly canned companies: please fix the
year 2000 problem for us before you leave.  As the GAO
report puts it, "contractors may not have a particularly
high incentive to properly make these conversions. . . ."

      What if the system fails?  (What if?  Are they
kidding?  When!)  The report says that the Health Care
Financing Administration (HCFA), which is responsible for
running Medicare, has not made contingency plans.  "HCFA
officials are relying on the contractors to identify and
complete the necessary work in time to avoid problems.  Yet
the . . . . contractors not only have not developed
contingency plans, they have said that they do not intend
to do so because they believe that this is HCFA's
responsibility."

                   Kiss the IRS Goodbye

      The IRS has 100 million lines of code.  Their code is
not year 2000-compliant.  After the failure of the 11-year
project to upgrade the system, Chief Information Officer
Arthur Gross announced that getting the IRS year 2000-
compliant is the "highest priority for the IRS."  The IRS
has nearly 50,000 code applications to coordinate and
correct. This task will require the IRS to move 300 full-
time computer programmers to the new project.  (Reported in
"TechWeb," April 21, 1997).

      For comparison purposes, consider the fact that the
Social Security Administration began working on its year
2000 repair in 1991.  Social Security has 30 million lines
of code.  By June, 1996, the SSA's 400 programmers had
fixed 6 million lines.

      What if the IRS isn't technically equipped to pursue
tax evaders after December 31, 1999?  What if the IRS
computer system isn't fully integrated with all of its
branch offices?  What if the system's massive quantities of
forms are not stored in a computer system that is Year
2000-compliant?  More to the point, what if 20% of
America's taxpayers believe that the IRS can't get them if
they fail to file a return?

      In 1999, the IRS may find a drop in compliance from
self-employed people.  If the IRS can't prosecute these
people after 1999, there will be a defection of compliance
by the self-employed.  When word spreads to the general
public, there will be a hue and cry -- maybe at first
against the evaders, but then against employers who are
sending in employees' money when self-employed people are
escaping.  Meanwhile, cash-only, self-employed businesses
will begin to lure business away from tax-compliant
businesses by offering big discounts.

      This will start happening all over the world.  Once
it begins, it will not easily be reversed.  The tax system
rests on this faith: (1) the government will pay us what it
owes us; (2) the government can get us if we stop paying.
Both aspects of this faith will be called into question in
the year 2000 if the governments' computers are not in
compliance.

      Big Brother is no more powerful than his software.
On January 1, 2000, this strength may fall to zero.
Actually, double zero.

      If the IRS cannot collect taxes, and if all the other
mainframe computer-dependent tax collection agencies on
earth do not fix this, what will happen to the government
debt markets worldwide?  To interest rates?  To the
government-guaranteed mortgage market?

      Kiss them all goodbye.

                     "No Problem!  Trust me!"

      There are a few conservative financial newsletter
writers who have heard about y2k.  They deny its economic
relevance.  A shut-down of all mainframe computers would
mean that newsletter writers will be out of business after
1999 -- a thought too terrifying for them.  So, they brush
y2k aside with some version of this rebuttal: "Of course,
the government may not get its computers fixed."  This is
supposed to calm you.  It should terrify you.  Ask
yourself:

            What happens to T-bills and T-bonds if the
      IRS computer breaks down and a tax revolt spreads
      because taxpayers know the IRS will never find
      them, and that if they pay their taxes, they
      won't get their refunds?

            What happens to money market funds and bond
      funds that invest heavily in government debt when
      investors realize that if the IRS can't collect
      taxes, the government will default on its debt?

            What happens to the banks when depositors
      figure out that the FDIC is bankrupt and that
      nobody insures their accounts any more?

            What happens to your job when the banks
      close because of bank runs, and no business can
      borrow money or even write a check to its
      employees?

            What happens to the delivery of food into
      cities when money fails because the banks are
      busted?

            What happens to the delivery of public
      utilities when money fails because the banks are
      busted?

            What happens to your retirement fund when
      ERISA, the government pension guarantee program,
      goes bankrupt?

           What happens to the 38 million people in
     the U.S. who are dependent on Medicare?

          What happens to 42 million people on Social
     Security?

            What happens to every state government?

            What happens to crime rates when the state
      cannot imprison violent criminals and may have to
      release those who are locked up because they
      can't be fed?

            What happens to the world economy when this
      scenario is multiplied across every government?

      Kiss you job goodbye.  Especially if you're a
journalist.  I know.  I am one.  I figure I'll be out of
work -- forced retirement -- January 1, 2000.  I'm making
plans to be in small-scale agriculture.  I'm out of debt.

      What about you?

                     Psychological Deferral

      Those in authority prefer to defer thinking about
this.  They are playing Scarlett O'Hara: "I'll think about
it tomorrow," followed by, "Well, fiddle dee-dee."
Deferral is a normal response to distant problems.  The
question is: What can we afford to defer?  People defer
making this assessment.  The fact that you have not read
much about this looming problem doesn't mean that it isn't
a problem.  If your employer has not actively sought
solutions to this problem, your firm had better not use
mainframe computers or be dependent on suppliers that rely
on mainframe computers.

      Everyone assumes that someone else is doing something
to solve these problems.  "It's being taken care of."  The
problem here is the passive voice.  Who, exactly, is taking
care of it?  What, exactly, is this person doing?  Is he on
schedule?  How do you know for sure?  Are you taking his
word for it?  Anyone who takes the word of a computer
programmer that he is on schedule is a person of very great
faith.  If the programmer says "Sorry, I didn't make it" on
December 31, 1999, you're dead in the water.  Meanwhile, he
moves on.

              What You Should Do, Beginning Today

      First, you investigate whether what I'm saying is
true.

      Second, think through what happens to you if the
local power company and the local water and sewage company
shut down in your city for six months.  "Who ya gonna
call?"  Especially if your phone is dead?  And if you do
get through, how ya gonna pay if your local bank is
defunct?

      Third, here is my personal strategy.  I have adopted
a question:

        "Can I prove on paper that he owes it to me?"

      I want hard copy print-outs of everything I do with
the government.  If you are owed money from Social
Security, and you're dependent on this income, contact the
Social Security Administration every year and get a letter
telling you what you're owed.  This is true of every
government pension system.

      Do you have a copy of your birth certificate?  If
not, write to your place of birth and get it.  Even if that
community has not computerized the records, do it now.
Even if it keeps the records in a desktop, do it.  If word
starts to spread, they may be buried in requests in 1999.
You want your paperwork completed before word gets out.

      Do you have a copy of your college transcripts?  If
not, get it.  The same goes for your work record history.
Assume that your records are in some company's mainframe
computer.  Assume also that the company has failed to
update the software.

      Do you have a print-out of all of your insurance
records?  Would they stand up in court?  If not, get what
you need, now.

      Have you spoken with your local insurance agent?  Is
he fully aware of the problem?  Ask him straight out if he
has scheduled an update of his software if he relies on
vendor-supplied software.  He deserves to know what is
coming.  So do you.  (If you want to photocopy this issue
to send him, go ahead.)

      Think through this problem in advance, before it gets
out and creates a banking panic, all over the world.  This
story will get out eventually.  In 1999, when reporters are
running around looking for sensational Year 2000-third
millennium stories, this one will at last surface.  It
already has: in Newsweek.  At that point, every government
bureaucrat whose agency is at risk will start playing the
"No problem" game.  "It's being taken care of."  The
bureaucrat's number-one rule is to evade responsibility.
No one with any authority is going to admit that his
malfeasance in office is going to create a disaster on Jan.
1, 2000.  The basic response will be this: "There's no
problem here, and furthermore, I'm not responsible when
everything collapses next year!"

      Keep visiting my Web site for updated information:

                    http://www.garynorth.com

      E-mail this report to anyone you care about.

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