Is honesty always the best policy?

Ever since I was a little girl, I have heard people say, "honesty is the best policy," but, is it really?

How many of us can say that we have never lied. Don't we start lying to our very own children the moment they are old enough to understand Christmas and Santa Claus? After all, there is no big, round, jolly man, who slips down our chimneys, bringing our children gifts if they've been nice. No! It is us, their parents, who purchase and place the brightly wrapped gifts.

How many of us have told a friend they look amazing, when in actual fact, they look a little dodgy or told them they are in the right, when they have had a fight with their partner, even when we've actually felt that they were the one in the wrong and not their partner?

If we follow the rule that honesty is always the best policy, then surely we must confess the truth about Santa to our children and tell our friends that their behaviour is actually down right out of order, regardless of whether or not we will hurt their feelings.

Surely, the truth of the matter then is that honesty is only the best policy sometimes. 

There are obvious times when honesty is best. If you accidentally break something that doesn't belong to you, then you should be honest, as well as offering to pay for the item to be replaced,

if you do something that you know you shouldn't have, if you overspend in your joint bank account, perhaps.

The problems arise when we hit those grey areas, such as when someone you care about is putting other people out but doesn't seem to realise it. 

For instance, if you had a friend who was living with family and had been for several years and you know that the family members ( let's say a married couple with no kids) are making hints that they want there home back, yet your friend has become comfortable there. He/she doesn't understand that those family member might want their space back; that sometimes married couples just need their own space. Do you tell the friend straight out, gently try to hint like their family members are doing, or just say nothing and watch, as your friend gets hurt, as his family slowly starts to leave him out more and more?

What if a friends husband/wife is cheating on them and you become aware of it? Do you tell the friend and risk them becoming angry at you and possibly ending the friendship or is it best to say nothing and just sit back and wait to pick up the pieces when they discover the truth for themselves?

We naturally want to protect the people we care about, but it isn't always easy. So, what do you think? Is honesty always the best policy or is it in fact better to keep your lips sealed and hope for the best?