It is possible that this is kind like how the word bad itself was derived! (http://www.etymonline.com/index.php?term=bad)

>a mystery word with no apparent relatives in other languages. Possibly from Old English derogatory term bæddel and its diminutive bædling "effeminate man, hermaphrodite, pederast"

The persons in power can not do not and will not recontextualize racist terminology on their own.

We have lots of words that are racist/bigoted. Cad/Caddie. Villain. Vandal. We've forgotton what most of them mean; only the perjorative sense remains.

> Therefore what's important is not the origins of a word, but its current associations and effects: "my car was vandalized" is OK but "that movie is gay" is not.

On Dutch courage: the meaning is the courage you get when drunk, implying that a person is not courageous when not drunk. I don't think that on the scale of bad things this idiom is very bad at all, for one the Dutch are not often victims of discrimination, and neither is the association very strong nor the meaning very negative. I'm just pointing out that in general, what matters is not the origins of a word, but its current use and effect. So the fact that "Dutch" in "Dutch courage" originally referred to the drink and not to the Dutch does not automatically make it OK.

Off the top of my head: "We were just shy of our goal" -> "We met a shy girl", suggesting through the subconscious association that the shy girl is not quite good enough.

And if so, why is there no backlash to the usage of shy the way there is to gay and common racial terms, as examples, when used in similar contexts?

Note that in the association is between two meanings of a word: the association is between one meaning of shy and the other, not between shy and the girl. The latter are only associated because you used them together in a sentence. So the fact that you used "We were just shy of our goal" does not associate "girl" with something negative. It does associate "shy" with something negative. In contrast, if you use "that movie is gay", just by using that sentence on its own you are associating "gay", and hence a group of people, with "bad".

For why there is more backlash in one case than another you also have to keep in mind the direct effect. If you say "We were just shy of our goal", the potential to hurt a shy person who happens to listen in will likely not be large, but if you say "that movie is gay" and a gay person is listening in, it might very well hurt. Secondly, shy is already negative, so it would be a little strange to complain that using it as "almost but not quite" is damaging the status of shy people, since the other meaning of shy is already more negative.

I tend to agree that we have attached negativity to the usage, but only in the the way that gay is used negatively. They are often both used to point out "flaws", for lack of a better term, in other people. (not that either is a real flaw; only in the eye of some beholders)

I find it interesting that you assume that shy is already negative. I was actually skeptical of your original comment at first, but perhaps this actually serves to reenforce it.