NCPA - National Center for Policy Analysis

U.S. May Benefit From Y2K Fears Overseas

November 8, 1999

Financial analysts are predicting that foreigners who fear their countries' computer systems are not prepared for the arrival of 2000 may funnel money into American banks and securities for safekeeping. The U.S. financial sector is widely believed to be more fully prepared for the transition than financial centers in many other countries.

  • Experts say the U.S. Treasury Department would likely be the biggest beneficiary of any large-scale shift in funds.
  • A flight to quality in the U.S. would probably carry short-term economic benefits such as lower interest rates -- an effect similar to what occurred several years ago during Asia's economic turmoil.
  • Intelligence experts say the biggest computer problems are expected in China, Egypt, India, Indonesia, Russia, the Ukraine and other eastern European countries -- but even bankers from highly developed countries like Germany, Japan and Italy are reported to be troubled by public concerns over their systems' preparedness.
  • Japanese depositors jumped at the chance to do business with American banks when Japan deregulated its banking system earlier this year -- not only because U.S. banks are ready for 2000, but also because they are not weighted down by mountains of bad loans like most Japanese banks.

American experts have been alarmed by statements from Chinese officials saying they are postponing work on the Y2K problem because they have more pressing problems to solve at the country's insolvent state-owned banks. However, China is not as exposed to the Y2K bug as the U.S. is because it is not as computerized.

Source: Patrice Hill, "U.S. May Get Payoff From 2000 Phobia," Washington Times, November 8, 1999.


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