Normalcy Bias

Edited from Wikipedia: The normalcy bias refers to a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring and its possible effects. This often results in situations where people fail to adequately prepare for a disaster. The assumption that is made in the case of the normalcy bias is that since a disaster never has occurred that it never will occur. It also results in the inability of people to cope with a disaster once it occurs. People with a normalcy bias have difficulties reacting to something they have not experienced before. People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.

When it comes to coming to grips with the country's finances, many show clear signs they are afflicted with normalcy bias.  Congress spends money we don't have because... well, they've always done that.  Some of our fellow citizens in Wisconsin don't do the job they were contracted to do because they won't deal with the first sacrifice asked of them.  Let's face it-- "shared sacrifice" in Wisconsin ended faster than the news coverage of Ron Paul's win in the CPAC straw poll.  My town is considering purchasing a private golf course that went belly up for lack of customers thus adding to the riskiness of town finances.  Add your own examples-- it shouldn't be difficult.

Last evening I attended an excellent seminar titled "The Monetary Breakdown of the West".  The presenter was a very capable young man recently out of college with a degree in economics.  About 100 attended-- mostly of the elderly persuasion like myself.  I suppose Generation X is too busy working and raising a family and Generation Y is too busy looking for someone to start a family with. My other theory is that baby boomers and especially the few remaining of the "greatest generation" can draw upon more life experience to judge what is possible.  What is normal.  Anyway, the history of the US dollar, the difference between fiat money and commodity money, the role of the Federal Reserve, how money gets created, the national debt, inflation, and reserve currencies were all up for discussion.  Very informative and troubling-- that was my take.

Here's what I believe is going to happen.  The United States is going to be using a different money. This new money may or may not be called dollars.  If the new money is called dollars, no matter, the words printed on the paper bill will be different.  The change to the new money would be of little import except the change will be accompanied by a sizable drop in living standards.  No one knows when the change will happen-- sooner rather than later is my guess.  For one thing, the scale of our debt precludes any remediation.  And no fiat currency such as the current dollar has lasted more than 40 years so time is about up.  Inevitably, big changes are on the way.  Not the end of the world obviously, but something to prepare for as you deem best.  Maybe start by curing that pesky normalcy bias.