Right now many people are focused on how Cyprus is raising the money needed to get a EU bailout. Now that is very important but I think there is a bigger lesson to learned here.
Eventually you will have to pay the piper!
It doesn’t matter if we are talking about individual finances or public finances. It doesn’t matter if your debt in on credit cards, student loans or treasury securities. The simple fact is that the time will come when you must pay the debt. If you are smart you pay it off over a long period and it will be rather painless. But if you let it go too long then it is going to hurt when you have to pay. Individuals can end up repossessions and bankruptcy while government could end up defaulting or needing a bailout.
We need to realize here in the US and other debt ridden countries is that the time will come to pay the piper whether we like it or not. We will not be able to control exactly when that time will come if we ignore the problem. Instead we need to start planning for that time now so that it isn’t too painful.
Cyprus wasn’t prepared and now they are taking huge amounts of money from private accounts to pay for it. Some have a major issue with that but I don’t really take issue with it too much. The simple fact is that the government overspent for a long time and the population reaped the benefits of that overspending. Now the population is stuck paying it back. We don’t want to end up paying back our national debt out of our own personal accounts so we should move toward eliminating the deficit then paying down the national debt.
So the lesson here isn’t that the government can take the money of private citizens to pay off debt. Rather the lesson is that eventually you have to pay your debt in one way or another. If we want it to be painless then we need to start paying willingly. If we ignore it too long the debt will come due and we will be forced to pay it in whatever manner is possible at that time.