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...chips to be checked, but even many of the suspect ones are programmed with manual overrides or "soft-landing" outcomes where safety is an issue. (Nonetheless, the Gartner Group estimates that litigation costs over Y2K service and product failures, both real and imagined, could soar to $1 trillion or more.) Duggan's forecast for the impact of Jan. 1, 2000, sounds like a tolerable weather report: "It's going to be like a couple of inches of snow that stays on the ground for a few days...
...comes the bad news. Some $10 trillion (yes, $10,000,000,000,000) in derivative contracts are set to mature this year for U.S. bankers, and the U.S. bankers are holding their collective breath to see which of their Asian clients will pay up. Many won't. "Those who believe there won't be any further derivative losses from Asia couldn't be more mistaken," says Edward Furash, a bank consultant based in Washington...
...result: in just three decades, the volume of derivative contracts with U.S. commercial banks exploded, from practically zero in the early 1970s to more than $25 trillion today, an amount exceeding the size of the U.S., European and Japanese economies combined. Bankers quickly, and appropriately, point out that this figure really represents just the "notional" amount, or face value of the derivatives, and not what they could potentially lose. But the amount due, or at risk, is derived (hence derivative) from those vast notional amounts...
...institution holding the biggest bag of derivatives is Chase, with $7.6 trillion. Interestingly, Chase raised the red flag in its 1997 annual report, noting, "Management expects there will be an increase in nonperforming assets in 1998 primarily as a result of the deterioration of credit conditions in a number of Asian countries." Unlike other banks, Chase refused to talk publicly about its derivatives exposure with clients that are below investment grade, but it already has more than $1 billion in total nonperforming assets. A report issued by the OCC examiners puts its total credit risks from derivatives at $81.9 billion...
...speculation and extrapolation, the reports forecast many trends that have come true: decentralization, the communications revolution, the rise of services, genetic engineering, threats to privacy, nuclear proliferation. They were optimistic about the economy, predicting huge increases in personal income and the GNP (they forecast an increase to $3.6 trillion, thus falling short of the actual figure, at latest count, by about $5 trillion). They also foresaw a rise in hedonism and a decline in the work ethic. There were the inevitable misjudgments and omissions--especially, as Bell now concedes, a lack of any reference to the dramatic change...