Public companies occasionally dissemble or even lie. When they do, theperpetrators risk trouble with the law. Just ask the former chairman andvice chairman of Cendant. Governments are held to a different, lowerstandard. Indeed, although dissembling and outright lying are frowned upon,these sins usually go unnoticed and unpunished.
Take NATO's operations in Kosovo. After the 78-day aerial bombardment in1999, the chairman of the U.S. Joint Chiefs of Staff, General Henry Shelton,displayed an array of colorful charts to show the public that NATO had takenout 120 tanks, 220 armored personnel carriers and 450 artillery and mortarpieces. But later, a suppressed U.S. Air Force report emerged with thefollowing accurate count: 14 tanks, 18 armored personnel carriers and 20artillery pieces.
The Kosovo hocus-pocus is nothing new and hardly confined to the military.Official economic data have long been rife with chicanery. Themuch-ballyhooed Marshall Plan, which delivered U.S. aid to Western Europeafter World War II, is a case in point. One of the plan's top Europeanadministrators is on record as having said: "We shall produce any statisticthat we think will help us get as much money out of the U.S. as we possiblycan." You should be skeptical about whether the Marshall Plan's success wasall that it was advertised to be.
Central banks in particular have a long history of hiding information and,yes, lying. In the 1930s and 1940s Great Britain suppressed and Nazi Germanymisstated their respective gold reserve holdings to mislead the world abouttheir monetary strength.
In more recent times central banks of emerging-market nations have been theflimflam artists, making their positions look better than reality. TheNational Bank of Ukraine in 1996 and 1997 overstated its net foreign reserveposition, thus allowing Ukraine to con the International Monetary Fund intosending it money. The Bank of Indonesia illegally lent billions of dollarsto commercial banks, which put up no collateral. I uncovered the latterproblem when I was advising Suharto, then the president of Indonesia, in1998. An official audit later found that the practice had torn a huge holein the Indonesian central bank's balance sheet and left the bank insolvent.
The IMF, which keeps a lot of these nations afloat, demands current andaccurate disclosure of the condition of their central banks. After all, theyare the purveyors of money. And financial markets worldwide operate in realtime. A months-old paperbound report is useless. So what better way is therefor a central bank to open its books than on the web?
Alas, full and timely disclosure by way of the internet is beyond a lot ofthe banks. This I discovered after conducting an exhaustive search for thewebsites of the world's 174 central banks. Only 123 even had a site. Theother 51, ranging from the central bank of Afghanistan to that ofYugoslavia, tell us nothing. These countries may be poor, but poverty is noexcuse for not setting up a minimal, inexpensive website.
The heart of central-bank disclosure is the balance sheet, vital fordetermining what course monetary policy is following. It shows monetaryliabilities (the monetary base) on the right-hand side and their assetcounterparts (domestic government bonds and foreign reserves) on the left.
While most sites do contain balance sheets, many are not current. And exceptfor countries with currency boards (independent bodies that fix exchangerates), which have no monetary policies and thus nothing to hide,balance-sheet formats are literally all over the map. You need to beSherlock Holmes to interpret the financials of a lot of these banks. Only63 percent of the sites are in English, the language of the world's majorfinancial markets. Central banks clearly need the equivalent of the private sector's International Accounting Standards Committee to set rules.
The obvious conclusion is that central banks with no websites or those thattell little have something to conceal. The IMF should decree that anycountry that does not have a current balance sheet displayed on a website inEnglish and in orthodox fashion does not qualify for IMF support.
Taxpayer money is funding this international bail-out organization. Demand some accountability.