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Government Distrust

BUDGET TRANSPARENCY

The third section or recommendation from the OECD to increase trust is the transparency of budgets which is defined as:

the full disclosure of all relevant fiscal information in a timely and systematic manner.

This transparency comes in three parts:

Part 1 lists the principal budget reports that governments should produce and their general content.

Part 2 describes specific disclosures to be contained in the reports, including both financial and non-financial performance information.

Part 3 highlights practices for ensuring the quality and integrity of the reports.

Considering that these OECD recommendations have been available since 2002 and that they did not prevent any economic debacle in any OECD country, including the 2008 disaster, this should give you an idea of the "success" of such recommendations. Furthermore, although these recommendations did not prevent disasters, the transparency that they introduced was such that all these world-wide debacles were clearly forecasted and known ahead of time. And if you believe this one, we are selling hot properties in the galaxy of Gamma-Eridani, don't miss your chance for galaxial real estate investment!

Part 1 - Reports

Budget reports should outline income, expenditures and forecasts. Sure. Why not. There are only three tiny problems with this.

Budgets are nothing but wishful thinking approved by a bunch of political con artists who call themselves "your representatives". As such, budgets can and will always be expanded through the judicial implementation of the unholy trinity (tax, borrow and print). If this would not be the case, governments would not be completely, utterly and irrevocably broke (see for example Happy Breakeven Year or our Default Velocity Index - DVI).

Secondly, even if by some sort of miracle budgets would actually present hard limits to what governments can do, they are based on erroneous economic theories at best! And so, even if the data is correct, the consequences and forecasts are not!

Thirdly, budgets are never detailed because the details are what matter. As such, details will be decided behind closed doors by "interested parties".

The whole idea that having good budget reports will make governments more open and therefore trustworthy (which is what this is all about) is ludicrous.

Part 2 - Disclosure

Budgets should disclose economic assumptions and… well… why continue. This first item pretty much covers everything you may want to know. It so happens that this make-believe process of government budgeting is based on…drum roll please… assumptions! That's correct. And you believed that those tireless civil servants working day and night in the Ministry of Economy actually knew what they were doing. Not a chance in hell.

Consider this. If budgets are based on economic assumptions, then politicians can assume whatever they want! Isn't this the classic war of budgets at election time? Of course it is. What is a budget worth if it is based on assumptions? Exactly nothing. It is for this very reason that budgets must be "flexible" and "accommodating" of "unexpected" situations that "may develop" throughout the year. In bureaucratese this means that politicians will spend whatever they want whenever they want and budgets will be no deterrence at all. Confident of your government yet? Do you trust them now?

Part 3 - Quality and Integrity

It would seem that budgets in order to be transparent they need to follow proper accounting rules and be subjected to audits. Fine. But did you know that government do not follow standard accounting rules? Those rules for which governments will throw you in jail if you do not follow at tax time? Yeah… those rules do not apply to governments. But if governments play by rules that are…well…defined by governments, what good are those rules and what good are any audits performed against those rules?

The point is that governments do no need to cheat the rules in order to cheat because they wrote cheating rules themselves! Their cheating rules are legal! Which goes to show you the exact value of "legality" (as opposed to legitimacy). Governments can produce budgets of the highest quality and integrity and this won't affect their cheating, skimming and manipulating a bit because it is all legal! How is this doing for your confidence and trust?

CONCLUSION

This is the third article in a series of six detailing why you should not trust governments. Most of the information was kindly (and ridiculously expensively) collated by the OECD for our perusal… although we are pretty sure that this was not what they had in mind when they did so. The bottom line is simple; you should not trust governments because they are not open at any level. They implement all kinds of "openness" initiatives which, in the end, change nothing. They are but smoke and mirrors. Furthermore, when everything fails they offload on us pushing us to obtain our own solutions. The governments themselves are telling us that we don't need them! But if we don't need them, isn't this reason enough not to trust them? More to come in the next 3 articles.

Meanwhile, if you feel that you have been wronged by this article, it is your right to feel so. Next time you have your scheduled consultancy meeting with your open "representative" where you will disclose your orders to this person, please feel free to mention this article.

Note: please see the Glossary if you are unfamiliar with certain words.

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