Hmm… There’s two ways of interpreting this. One is that the US, as evidenced by Texas’ willingness to change its history standards, is already all crazy all the time (ACATT). The other is that because Texas has changed its history standards, the next generation will grow up brainwashed by their educational system to become ACATT.

The US has always had some propensity for and some tolerance of craziness. Salem witch trials, McCarthyism, Sacco and Vanzetti, Japanese internment, the Civil war, Trail of Tears, etc. were all things that could have signaled ACATT. They have not had a consistent representation in our history books. That was during a time a child couldn’t simply request a random article from wikipedia and learn something amazing. I have some faith we will bounce back.

While I don’t think we’re ACATT yet, I do think there’s a significant risk that things will get worse both inside and outside the US.

I believe in finding hedges to all big bets, particularly when the well being of your family is at stake. Whether you actually use such a hedge is a separate issue. I have a buddy in Honduras with several acres of farmland and an invite to work on his farm if civilization collapses. I have a couple hundred dollars in Canadian and Mexican physical currency. For just over $1000, I could add a water system to my sailboat. These keep a few options open, depending on how fast we descended into ACATT.

What indicators would I use? It depends on your threshold of tolerance for ACATT. The M1 money multiplier will probably be a good indicator of a monetary crisis unfolding (when it rises back above 1.5, subject to the constraint that the Fed isn’t actually succeeding in removing their excess liquidity). I’d also watch the yield on 10 year treasuries. I check the monthly report on average interest owed on the national debt. Two sequential months of increasing numbers will make me nervous. A single month of spiking rates will make me more nervous.

I already think it’s risky to bet on US stocks. For every $10k I’ve put into stocks, I’d also buy an SPY put 3 months out. I’d put the strike price at 20% out of the money. I’d do that every month or two (I’d have some overlapping protection). I’d consider that catastrophe insurance. I’d diversify outside the US on principle. That’s not my actual strategy, as I’m now significantly more bearish (ever since the first time the S&P hit 1150, I’ve been able to support one sided bets against the market financed by cashing out my upside bets). I’m hoping that’s a short-term outlook.

If I didn’t have any hope for the future of the dollar and American companies, I’d also have to measure that against my faith in other currencies and national economies. As bearish as I am right now, I’m more bearish on the rest of the world, with a few exceptions.

Now, what about a worst-case ACATT? Civil unrest is a pretty good indicator. We’ve had some interesting episodes of civil unrest in the US that didn’t lead to ACATT. As a consequence, I feel fairly comfortable expecting to see civil unrest before ACATT. Necessary but not sufficient. Once we see civil unrest, we’ll look for other indicators.

The most important “indicator” will be how we navigate the next crisis. It has been fun trying to figure out what the next crisis will be, but that’s largely irrelevant. What is relevant is how we respond to it as a nation. This won’t be a single metric, and that sort of makes it a bad indicator. Let’s say, for the sake of argument, that the states hit a budget crisis. Do they get bailed out? If not, what actions do the state governments take? How do the citizens respond? If they do get bailed out, same questions. Whether or not I am afraid of the crisis is dependent upon the whole chain of events, not necessarily a particular link in the chain.

I’m not particularly pleased with how we’ve responded to this crisis, but I think all reactions have been consistent with a muddle-through recovery (subject to both ups and downs, lasting for 7 years). Some of the reactions have limited our potential responses to future crises, though. Some of the reactions have increased the probability that a crisis happens sooner, rather than later. That will make things more interesting as time passes.