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A really interesting paper on the "Nothing to hide" argument is "'I've got nothing to hide' and other Misunderstandings of Privacy", which you can read for free online.[1]

I would really recommend spending the 30 minutes and reading it in full, it is really nice.

[1] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=998565&

Good question... How bad is security these days really? Everyone has every reason to be concerned about privacy after several major cyber attacks this year. I think this is just the beginning.