The "New Normal"

IB Publisher Jody Glynn Patrick writes about business for her column, with a departure to “no business allowed” in her blog “After Hours.” Even the print magazine’s parameters are loose for Jody, as she writes from the heart and typically more toward HR or human interest topics.

It’s a catchy phrase, "New Normal." I privately credit bank presidents with sprinkling it liberally in their conversations and populating the phrase "New Normal" in the business vernacular. However, research points toward Mohamed El-Erian, CEO of Pacific Investment Management Company, LLC (commonly called PIMCO), who first coined the word when he referenced America’s "New Normal" during a briefing on the new world economy.

The New Normal rhetoric supposes that we will never again see the hay-makin’ years made possible by access to easy, cheap credit. It posits that Americans have internalized and intellectualized this as a rational reality. We won’t expect home values to skyrocket, or to be approved for a car loan until we first pony up healthy credit scores. We’re more financially literate and believe in savings again. We can better delay gratification until payday. Our "keeping up with the Joneses" days are behind us – and good riddance.

In other words, the New Normal scenario supposes that we’ve renounced our wanton commercialism and recognized the recession as a necessary "market correction."

Really? Welcome to my New Normal Quiz. Just as Jay Leno doesn’t go to history professors for his "everyman" street quiz, I did not include financially-literate-by-profession folks like CPAs, attorneys, or stockbrokers in my polling. Instead, I recently asked 10 "average Joe and Jane" business managers the following eight questions:

Do you know your current credit score, let’s say within 10 points?

Exactly how much would you need in your IRA/savings to live "comfortably" to the age of 100 if you retired at age 65?

How much equity do you need for a start-up loan for $100,000 from a bank?

How many months’ salary should you have in a savings account for emergencies?

What percent of annual salary should one spend on an engagement ring?

What are your good/bad cholesterol numbers?

Who made the word "winning" infamous?

Name one person likely to be in the finals on Dancing with the Stars.

My subjects (who shall remain anonymous by sacred vow) ranged in age from about 40 to 65. They averaged four correct answers. The most correct responses were given to numbers 7, 8, and 3 – in that order. Most guessed at number 4 (half were right) and only one said he had as much in savings as he thought he "should" by formula. Only one – a woman – knew her exact credit score and what her retirement portfolio should look like. One person reported purposefully saving more; most said they were using credit cards less because (1) they were scared of the amount of debt they had or (2) the credit card companies made it harder to use the cards. But because they weren’t using cards as much, they couldn’t save more cash, either. Catch-22 time.

Three of the 10 knew their cholesterol numbers, but one manages a health care facility and another owns a fitness center, so that result was skewed.

I asked them all, if they had the power to wave a magic wand and return to the 2005 financial world, would they want that to be reality today? No one said, "Oh, no, we needed that financial recession/correction to remind us to save and to stop wanting goods and services beyond our ability to pay cash for them."

I asked about purchases they would want to make this year. All 10 either wanted (or had) an iPhone or an iPad. Six wanted a new car (they’ve put off buying one for the last couple years), three would like a bigger or better house (no one mentioned downsizing), but all of them said they were willing to wait another year or two until things were "more normal again." Their words.

More normal again? So much for internalizing the "New Normal." But maybe consumer demand is just what we need. Maybe the only thing that can save us in the end is the very rope that hanged us …

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