Nightmares for Sale

The world is coming to an end. Again.

A friend sent me a link to a video entitled The End of America. The voiceover solemnly warns about the coming collapse of the U.S. dollar, and predicts riots, martial law, mass arrests, and that sort of thing. A bad time will be had by all – except those who are wise enough to subscribe to the newsletter the video promotes. They’ll learn a way to invest that saves them from the coming carnage.

We’ve seen this movie before. Remember Y2K?  That was the talk of the 1990s. Everybody was predicting economic meltdown then, too. It seemed that the end of modern civilization would come as the result of a computer glitch.  See, back then, computer memory was kind of scarce.  To save memory space, dates were always programmed with two digits each for day, month, and year: 12/31/97, for example.  Everyone knew that “97” was short for 1997. Since the first two numerals in a year were always 19, they were dropped to save memory. Then the realization dawned:  When the year 2000 came, computers wouldn’t know what to do with 01/01/00. Would your credit card companies think it meant the year 1900?  Would they charge you 100 years’ worth of finance charges on recent purchases? Would utility companies shut off service thinking that payment was 100 years overdue?  Would stock markets grind to a halt?  A million different doomsday scenarios were developed.

Just to dip their toes in the murky waters of digital destruction,  some people even turned the dates ahead on their VCRs. [For the benefit of younger readers, a VCR was the device that oldsters used for watching movies before there were DVD players or streaming video. ;-) ] When rolled to the double-aught year, most VCRs froze. They wouldn’t work, and the date could not be reset.  This was taken as proof positive that all the world’s computers would do likewise.

Of course, Y2K turned out to be a whole lotta nothin’.  Civilization did not end. Computer programs got patched or rewritten. The world let out a collective yawn and went about its business.

But many financial writers love a scary story, and employ them all the time.  Market crash!  Double-dip recession!  Your job outsourced!  What to do now! And every so often, a plausible nightmare scenario comes along that really grabs everyone’s attention the way Y2K did. I think there’s a part of most people’s psyche that actually likes imbibing a good dose of fear. How else do you explain the popularity of roller coasters and vampire movies?

Still, fear has no place in your personal finances. It can lead to paralyzing inaction, or worse yet, to taking crazy actions in preparation for extreme events that never come to pass. If you sink all of your money into building an underground bunker and stuffing it with canned goods and precious metals to ride out the apocalypse, you’re going to have serious regrets if this latest end-of-life-as-we-know-it turns out to be a bigger dud than Y2K.

In the end, the doomsayers make one mistake over and over. They extrapolate an ever-growing problem, such as our national debt – but they never extrapolate a growing ability to fix the problem. So inevitable disaster is always looming. Fortunately, history is not on the side of the nightmare salesmen. And it never has been.

I’ll say more on this, and how it relates to your financial decision making, in a future post. For now, let’s settle on what to call this gloomy brand of financial forecasting. Disasterology?  Apocanomics?  Chime in with your suggestions.  The winner (in the sole, arbitrary, and final opinion of yours truly) gets the internet immortality that comes with coining a new phrase!