|
The Fed has announced that it regards y2k as the potential equivalent of an earthquake or hurricane or other major natural disaster. And it has a plan to deal with this: to create liquidity. ("Liquidity" is the banking industry's code word for "monetary inflation," i.e., fiat money.)
He did not say how the Fed plans to distribute this fiat money if Fedwire and other bank wire transfer systems are defunct. If they are defunct, then the solution is obvious: the tried-and-true tradition of printing up paper money -- for as long as the printing presses, ink supplies, and paper supplies last. (This may not be very long if the banks go down.) If Western civilization is on the brink of collapse, print money! This is a central banker's solution to every known problem.
Here is an extract from FRB member Edward Kelley's July 30 testimony to the Senate Banking Committee.
* * * * * * *
In this regard, we regularly conduct exhaustive business resumption tests of our major payment systems that include depository institutions. Moreover, as a result of our experience in responding to problems arising from such diverse events as earthquakes, fires, storms, and power outages, as well as liquidity problems in institutions, we expect to be well positioned to deal with problems in the financial sector that might arise as a result of CDC. We are, of course, developing specific CDC contingency plans to address various operational scenarios. Our existing business resumption plans will be updated to address date-related difficulties that may face the financial industry.
We already have arrangements in place to assist financial institutions in the event they are unable to access their own systems. For example, we are able to provide financial institutions with access to Federal Reserve computer terminals on a limited bases for the processing of critical funds transfers. This contingency arrangement has proven highly effective when used from time to time by depository institutions experiencing major hardware/software outages or that have had their operations disrupted due to natural disasters such as the Los Angeles earthquake, hurricane Hugo in the Carolinas, and hurricane Andrew in south Florida. In these cases we worked closely with financial institutions to ensure that adequate supplies of cash were available to the community and also arranged for our operations to function virtually without interruptions for 24 hours a day during the crisis period. We feel the experience gained from such crises will prove very helpful in the event of similar problems triggered by century date change.
|