The New Sovereign Debt Crisis- Hungary

As I write this at 8:15AM this morning, the S&P futures are at 1068, up slightly from Friday's close. Apparently, European equity markets have recovered from some serious declines, thus relieving pressure on the US equity market's open this morning.

The news on CNBC was all glowing about Hungary, seeking to minimize the effects and implications of Friday's disclosure that the country's prior administration had misrepresented its fiscal situation.

I swear it looked like the European correspondent for CNBC behaved like the network had become a paid publicity agent for the country and its new government.

We were told that Hungary's debt/GDP level isn't nearly as bad as Greece's, being only about 78%, and only 4 points above the EU average. It's debt as a percentage of its budget was something like 3%, whereas Greece's was said to have been 9%.

See? Hungary's really okay. You were worried over nothing.

I don't believe it.

To me, the lesson of Friday's sudden, Hungarian-induced selloff in US equities, was about lying. About official governmental misstatements of fiscal facts.

It isn't about whether Greece is only 5% of the EU's GDP, or whether Hungary is as badly-off as Greece. Or, for that matter, whether the source of the comments on Hungary's prior fiscal lies was some administration official speaking to a small group of entrepreneurs in a town of which he was once the mayor.

It's about the slowly-dawning realization by global investors that, unlike private sector companies, whose accounting statements are at least cursorily audited by outside parties, governments can simply lie about their fiscal condition and get away with it for years.

Since governments everywhere printed money and stimulated like crazy in the past 18 months, global investors are now understandably worried about the capacity for those countries to repay their debts. And about the whether they can even rely on stated financial conditions of said countries.

Gone from business news headlines are discussions of the Euro's future. But I don't think the actual crisis has passed.

To me, the fundamental concern is not knowing which country, on which day, will suddenly announce that its prior stated financial condition was all wrong. Regardless of the reason, we'll learn that the truth is much uglier.

This is about confidence. The confidence global investors can have in the stated condition of the finances of many European, and probably other countries.

I doubt we're finished with this topic yet.