The new Hungarian government says that Hungary’s previous government cooked the books and lied about the state of the economy. Without knowing anything about the facts in the matter, I’ll say it’s very plausible. The previous government was run by the MSZP, Hungary’s former communist rulers, so it seems pretty likely they would lie about the economy, that being the standard practice of communists.
Megan McArdle adds:
There’s a saying I’ve heard from accountants: recessions uncover what auditors can’t. When a company has reasonable cash flow and access to credit, dodgy practices can be hidden for quite some time. But when sales dry up and banks tighten the purse strings, eventually companies are forced to admit that there is no money in the till.
That’s why recessions always seem to be accompanied by revelations of terrible accounting practices, which makes a lot of people think that an epidemic of dishonest accounting must have brought the economy to its knees. But there’s not much evidence that accounting practices actually get worse at the end of booms; it’s just that companies who might have gotten away with it and eventually made enough money to repair the hole in their balance sheets, instead are forced to disclose what they’ve done.
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