Newsweek is pointing to Canada as an example to follow in terms of banking regulation.
The legendary editor of The New Republic, Michael Kinsley, once held a "Boring Headline Contest" and decided that the winner was "Worthwhile Canadian Initiative." Twenty-two years later, the magazine was rescued from its economic troubles by a Canadian media company, which should have taught us Americans to be a bit more humble. Now there is even more striking evidence of Canada‘s virtues. Guess which country, alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors. Yup, it’s Canada. In 2008, the World Economic Forum ranked Canada’s banking system the healthiest in the world. America’s ranked 40th, Britain’s 44th.
The must read link however is Michael Lewis’ feature in Vanity Fair about how Iceland basically destroyed their economy beyond recognition for generations to come.
Iceland instantly became the only nation on earth that Americans could point to and say, “Well, at least we didn’t do that.” In the end, Icelanders amassed debts amounting to 850 percent of their G.D.P. (The debt-drowned United States has reached just 350 percent.) As absurdly big and important as Wall Street became in the U.S. economy, it never grew so large that the rest of the population could not, in a pinch, bail it out. Any one of the three Icelandic banks suffered losses too large for the nation to bear; taken together they were so ridiculously out of proportion that, within weeks of the collapse, a third of the population told pollsters that they were considering emigration.
Interesting article. In the past, American bank failures were often averted by arranging a buyout. A bad bank would be bought by a healthier one, and would get some incentives to make the deal worthwhile. It kept “bank failure” out of the press. I wonder if Canada has done the same?
Interest deductibilty is a factor in American home ownership, but so is real estate taxes. Is that a deduction in Canada? For Americans, typical taxes for a married couple making 100k are around 10 or 15 k, the deductibility of interest is helpful, but not huge, like it was 30 years ago.
Although well credentialed, Zakaria’s arguments are open to debate. Canadian medicine -”does better on all major indexes” ??? There’s a lot of Canadians who come to the US for treatment.
Zakaria’s arguments about “skilled immigration” are incredibly poorly written, especially for someone with his talent. Our H1-B visa program is a colossal fraud, used to pay low wages, not to attract top talent. It’s about the bucks, not the brains. In one sentence, Zakaria mentions “hiring graduate students”, then switches to “Chinese and Indian software engineers”, who are no longer students.
No it is hard to start a Canadian bank and the Canadian banks, RBC, TD, BMO, CIBC, and Scotiabank have all been around since confederation. They want to merge but the government has always said not a chance. There are some smaller banks but they have been around forever as well. Canada (especially the west) does have credit unions but they are tightly regulated as well (I think they are even more regulated). I think it has more to do with Canadians being more risk adverse than anything. On top of that with less banks and all of them national, a bank failure would be a disaster politically.
BTW the picture is fantastic, where is it from?
- Peace
Dave
[...] Cooper points out One Good Example, One Bad Example with links and a great image — on looking for lessons about the current economic, …uh, [...]