A Fiscal Lesson in Cyprus for Americans
Jacob G. Hornberger
of Freedom Foundation
by Jacob G. Hornberger: Rand
Paulís Misplaced Celebration
the European Union is teaching Americans what lies at the end of
the road of out-of-control federal spending and debt. Cyprus is
the latest country that has required a bailout. But this time, the
authorities have crossed the Rubicon in how they have addressed
The basic approach
to overextended EU countries is to grant them immediate bailout
money to enable them to make payments on their debts and other expenses,
including their massive welfare doles to their citizenry. As a condition
to receiving the bailout money, the EU requires the government to
slash expenses, especially by reducing payments to the dole recipients,
and to raise taxes. Additionally, bondholders have been required
to take a loss on their investments.
things have taken a different turn. To avoid having to slash expenses
and raise taxes, the president of Cyprus announced that the government
would simply expropriate money that people have deposited in the
countrys banks. Those who have deposits in excess of 100,000
Euros would have about 10 percent of their monies confiscated. Those
with less would have about 7 percent confiscated.
So, here you
have an entire group of people who have saved their money, never
dreaming that they would have to bear the consequences out of control
government spending and debt, especially for those on the government
the Cyprus plan is having consequences, namely with old-fashioned
bank runs. People are trying to get their money out of the Cyprus
banks before the parliament formally approves the deal. Even more
ominous, depositors are now taking their money out of banks in weaker
countries and moving them to stronger countries.
why thethe president of Cyprus is keeping the nations banks
closed on an extended holiday. Perhaps thats also
why both he and the parliament are now balking at implementing the
bank-deposit confiscation plan.
ago, the Argentine government was faced with a tremendous shortfall
of revenues to cover its ever-burgeoning expenses. It simply confiscated
peoples retirement accounts.
Would the U.S.
government ever do these sorts of things? Well, dont forget
that President Roosevelt did it during the Great Depression when
he nationalized gold and made it a felony offense to own it, notwithstanding
the fact that it had been the official constitutional money of the
United States since the founding of the nation. FDR ordered Americans
to deliver their gold to the federal government, which paid them
off in cheapened, devalued, irredeemable notes. It was a confiscation
of wealth no different in principle from that that was done by the
Argentine government and that is now being conducted by the Cyprus
is an enormous debate occurring here in the United States over the
issue of out-of-control federal spending and debt.
are saying: Dont worry. Be happy. Everythings
fine. The government should just keep spending and spending and
borrowing and borrowing. Its the key to economic prosperity.
are saying: Out-of-control federal spending and debt is the
road to national bankruptcy. Look at Greece, Italy, Spain, and now
Cyprus. Governments cannot spend people rich. They spend people
into impoverishment. Its time to get off this road before
its too late. Its time to dismantle, not reform, the
welfare-warfare state. Otherwise, be prepared for drastic measures
employed by the federal government against the American people.
continue following the statists, they will rue the day. Only by
following the sound-money fiscal policies of the libertarians can
we restore fiscal sanity to our land.
from The Future of Freedom Foundation.
Hornberger [send him mail]
is founder and president of The Future
of Freedom Foundation.
© 2013 Future of Freedom Foundation
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