Y2K Currency Strategy... Just in Case Jude Wanniski December 13, 1999

Memo To: Sen. Robert Bennett [R-UT], Chairman
Senate Select Committee on Y2K
From: Jude Wanniski
Re: Good Job on Evans & Novak, Hunt & Shields

You did well, I thought, on CNN's weekend Evans&Novak show, discussing your concerns about the Y2K computer bug as we count down to the new millennium. You seemed a little rosier in your domestic outlook than I expected, but you did have at least a line about your concern "that the problems in this country will occur in small businesses, small communities, municipalities, and so on," but for no reason you weren't asked a follow-up or about any worst-case scenarios your committee has considered. I was glad, though, that you answered positively when Novak asked about the suggestion of Bob Mundell, our newest Nobel Laureate in economics, that we link the dollar to the euro and to gold -- at least temporarily. As you put it: "One of the things that makes currency trading around the world possible is the computer revolution. Because you could not keep track of all those fractions and fractions of differences between the value of Currency A and Currency B without computers. And if they fail, even in a relatively small percentage, you could disrupt currency trading around the world and cause some kind of emotional panic. And fixing them all to a single peg, whether it's gold or copper wire, or pork futures or whatever -- gold makes the most sense.. But you pick a commodity and fix them all to that peg, you obviate the need for those kinds of calculations for a relatively short period of time." Now I know you said it's not going to happen, but it was important that you said "theoretically, it's an idea very much worth considering." At least you are on record, so that if there are corruptions of the international information flow resulting from the floating exchange-rate monetary policy, the Clinton administration and the Federal Reserve will have you to thank for bringing it to a higher level of attention than either I or Mundell could manage. My op-ed on the subject did appear in the Washington Times over the weekend, as you may have seen.