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August 12, 1998
Y2K + Asian Crisis = Trouble for U.S. Economy
By Declan McCullagh
Worried about the Asian crisis? Add to that the Y2K Problem, and then you can really start to get nervous. A top government economist believes the Year 2000 glitch could hogtie a U.S. economy already encumbered by Asian woes.
The situation so far? U.S. corporate earnings are at record highs, but new orders -- generally on the rise since 1992 -- are flattening out. Profits have been growing since 1989, but it looks like they're about to stagnate. Bank loans secured by real estate have plummeted to about one-quarter of their 1993 level. Imports rose to a new high while exports fell to their level of a year ago.
Now add Y2K to the mix. "That lends itself to potential credit problems in bank portfolios almost like what we're seeing in Asia," Nancy Wentzler, director of economic analysis at the Office of the Comptroller of the Currency, told us yesterday. She also warned of companies experiencing "an indirect effect on their suppliers" -- firms like General Motors rely on thousands of other companies to supply vital parts. In other words, if not everyone is Y2K-OK, the Y2K flu may turn out to be be a plague.