Y2K...Is The Problem Gone, or Just the Fear?
Dr. Gary North was instrumental in bringing the Y2K problem to the public mind. Thanks to his efforts, there is a now a substantial premium on U.S. gold and silver coins. And many self-sufficiency items are in short supply. Most people have come to terms with the Y2K threat. They have either dismissed it…or they’ve taken precautions. The fear has subsided…which is worrisome. Complacency triggers calamity.
I confess to a certain amount of skepticism on the Y2K theme. As Gary would be quick to point out, this skepticism is not based on any deep study of the situation. It is an emotional reaction. The division of labor – the ultimate target of the Y2K bug — can and does break down. But if I were looking for causes, I would not look to technical flaws that are well known well in advance of the crisis point.
The history of man is a history of increasing specialization. So is the history of all nature. And business. Organisms and organizations become increasingly sophisticated. They exploit new and better-defined market niches. A few years ago, you could go into a filling station and get almost anything done to your car. Now, there are specialized outfits for mufflers, oil changes, tires — you name it.
The earliest and most enduring partnership — between a man and a woman – works so well because the whole is more than the sum of its parts. By dividing life’s work between them, a man and woman do better than they could do alone. In a biological sense, they divide the work of creating a new vessel for their genes. And in economic terms, they divide the work of caring for their children and providing life’s necessities. The result is greater efficiency and productivity.
Members of primitive tribes probably could do anything that needed to be done. One member’s work could be done by practically any other member. But I could not build a particle accelerator or an automobile accelerator without many years of specialized training. And it would probably take the nuclear physicist a while to catch on to the publishing trade too — maybe the time between lunch and dinner, if he were slow.
But the more complex a system is…the more each component relies on the others. A member of a primitive tribe could walk off and live about the same on his own. I could not. I need someone to stock the shelves. I need someone to drill for oil and generate electricity. Thus, I am more vulnerable than the member of the tribe.
And when I read Dr. North’s description of the progress that has been made on the Y2K front, this vulnerability is exposed like a patch of naked skin on a raw winter day. Last month’s issue of Gary’s newsletter, Remnant Review reveals a weak link in the chain of our economic beings. That weak link is money. Money is increasingly an electronic code, not a pile of gold. Even the central bankers themselves are selling their gold in order to stock their vaults with electronic credits. Money has become information. It depends on an extremely complex assortment of people, infrastructure and technology. It depends, most urgently, on computers. And these computers are now threatened. Here’s an official report from the Bank of International Settlements:
“The Year 200 problem is unprecedented… It is inevitable that there will be…disruption…it is not possible to predict …how serious or widespread this disruption will be.”
That is the official line now being taken by almost all institutions. No one knows. Most likely, the disruption will not be too severe. But it could be — as Gary believes — a major setback for civilization. If the division of labor breaks down, this electronic money may disappear at the speed of light…or die with a whimper like paper promises of the Roman Republic. Your money may simply cease to exist. You may go into your bank with your banking records. But what is the bank to do? Where does it get the money to repay you? The FDIC only has about $1.40 for every $100 of insured deposits. This is plenty to protect against a bank failure here and there. But a system failure…an event at the extremes of a bell curve…would quickly overwhelm resources. Even if the whole of the money system could theoretically be put back together…the actual task would be Herculean. Faith in the whole system would be shaken…electronic money would then cease to be money. Gold would be money. Or canning jars. Once faith in the money system comes unglued, the entire system may come unstuck. In Marseilles, people rioted after a post office snafu delayed unemployment checks for 5 days. People expect their credit cards to work. If they don’t…how much patience will they have? How much faith will they retain?
Rome wasn’t crushed by invading hordes of barbarians. It was hollowed out…the barbarians were invited in….and they seeped in…to fill the empty space. The division of labor broke down over a period of many years until the most light-deprived peasant in the darkest corner of the darkest part of the dark ages had to fend almost completely for himself. There were no trade goods because there was no trade.
If electronic money disappears, trade may stop, too. Because the medium of trade — money — will fail. No trade, no goods and services. No goods and services….no division of labor…. Which would be a new era of an entirely different sort. As my friend in NY might say…sometimes bad things happen to good people — whether they want them or not.
August 9, 1999
Long Term Capital Redux?
By Bill King