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The Great Recession Part 1: Caused By Y2K – The Storm of the Century

Note: The first in a multi-part series on the current economic crisis. The series will take a look at the causes, evolution and current attempts to end it the Great Recession.

The Great Recession Part 1:
Caused by Y2K – The Storm of the Century

While the politicians are all pointing fingers and posturing for position to take credit for positive events and cast blame for negative events, the fact is no single person or party is to blame for the events that have led to the mess we find ourselves in today. There are things that have been done that should not have, and things that could have been done, but were not, to be sure.

The events that led to the world recession are not really that hard to understand in hindsight. And the one single event that led to the economic woes of today was the Y2K “bug” as it was called.

Everyone knows what Y2K was. Programmers long ago began using a two digit year without any thought as to the possible confusion it would cause after the turn of a century. To put it simply, how can a computer tell if “01” is supposed to be 1901 or 2001? How will bank computers calculate interest?

Normally, corporate technology purchases were driven from the bottom up. A department must make a case to the higher ups for a new mainframe, Voice Response System, etc. and justify every penny.

This bottom up dynamic began to change in the mid 1990’s and by 1997-1998 turned into a full blown top down panic as CEO’s, CFO’s and CIO’s were pounded with dire warnings of complete meltdowns on 1/1/2000 if they did not take care of this problem. And they would be blamed for ATM’s not working and planes falling from the sky.

Whether this was justified or not is beyond the scope of this article, but the orders came down from the top to spend whatever it takes to make sure this is not a problem.

And the economic storm formed.

The last two or three years of the 1990’s saw businesses and consumers spend money like never before. From supercomputers to toasters, everything was replaced. Most businesses decided to spend money up front in 1998 and 1999 and hold technology expenses close to zero for the next five years or so.

And the economy boomed like never before.

A massive amount of cash began flowing throughout the economy. High Tech companies expanded and still struggled to meet demand. Money was invested in many areas, but initially “Dot Com” companies became the investment darlings. Many people began to believe the new Tech Sector economic boom was being driven by the Dot Com revolution. But they were wrong. It was Y2K money driving everything.

We all held our breath on New Years Eve in 1999. Geeks across the world were on standby. We watched as country by country the year changed to 2000. When it hit the UK with no major issues, we took a breath. As it changed on the East Coast of the US and ATM’s still worked, we began breathing again. The dreaded event that we had worked so hard to avoid was over. And all was well.

Though we were unaware at the time, another chapter in the Y2K story began at the same time. Technical sales stopped. Immediately and abruptly. Corporate board rooms that had been showing the Tech Sector and Dot Com revolution graphs pointing skyward as far as the eye could see were shocked when the graph dropped totally to zero. Sales Flat-lined.

In Part II we will take a look at the aftermath of the Y2K boom and what happened with all that money.

About Tom White

Tom is a US Navy Veteran, owns an Insurance Agency and is currently an IT Manager for a Virginia Distributor. He has been published in American Thinker, currently writes for the Richmond Examiner as well as Virginia Right! Blog. Tom lives in Hanover County, Va and is involved in politics at every level and is a Recovering Republican who has finally had enough of the War on Conservatives in progress with the Leadership of the GOP on a National Level.

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Tom White Says:

Nothing is more conservative than a republican wanting to get their majority back. And nothing is more liberal than a republican WITH a majority.

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