« Joe the Illegal Plumber | Main | My dream »
Assorted links
1. Why Scottish independence might never happen: the bailout for the Royal Bank of Scotland
2. Why Canada has largely avoided a financial crisis
3. The scariest hour on Wall Street
Posted by Tyler Cowen on October 17, 2008 at 06:33 AM in Web/Tech | Permalink
Comments
Viz #3 - doesn't this suggest that American markets stay open 24 hours per day, 365 per year?
Posted by: wintercow20 at Oct 17, 2008 7:00:20 AM
Scotland has been on the dole since at least the 1930s, maybe longer. Probably has something to do with haggis. Independence would be instant poverty.
Posted by: Alan Gunn at Oct 17, 2008 8:28:49 AM
The Canadian article points out that we still haven't addressed the underlying cause of the current crisis - an obsession with home ownership. As long as mortgage interest remains tax deductible, there's potential for a problem.
Again, real solutions, whether in health care or finances, will require people to reduce their standard of living.
Posted by: Ted Craig at Oct 17, 2008 8:38:17 AM
I don't see how tax deductible mortgage interest has anything to do with it. Prices have simply adjusted to account for it, right? You're no better off buying in the U.S. because of the deduction as the prices are simply correspondingly higher. As far as real solutions requiring a reduction in standard of living, it is unclear what you are referring to. Is renting instead of owning a reduction in standard of living? I don't see why.
Posted by: Cliff at Oct 17, 2008 9:52:26 AM
I thought the "underlying causes" were:
- greedy fat cats on Wall Street
- predatory lenders
- the existence of the Fed and fiat money
- not being on the gold standard
- lack of regulation
- too much regulation
- lots of other stuff I've forgotten
Posted by: MM at Oct 17, 2008 12:29:57 PM
Let's Canada also avoided the Community Reinvestment Act under the reign
of one James Earl Carter (the last liberal disaster who was so
hypersensitive about the use of his middle name) its aggressive
implementation under Bill Clinton and his corrupt HUD secretary
Henry Cisneros. Oh yeah, do the have a Fannie & Freddie propping
themselves up with multiBILLION dollar fraudulent earnings statements.
Don't be a dork. The problem started on K street, not Wall Street. Our
"captains of industry" are to weak and pusile to create such a problem.
Greed will always be with us, in politics and finance. Somehow powerlust
is noble leadership.
Posted by: Superheater at Oct 17, 2008 1:05:05 PM
Tyler,
The article about Canadian banks gives the impression that regulation gets the credit for relative soundness of the banking system. The thing is though as you read the article, you see that the stability comes more from a lack of artificial incentive to buy homes.
I found the line about mortgage insurance when you have less than 20% down a bit bizarre since we do that too.
Posted by: John V at Oct 17, 2008 1:20:13 PM
"I think the regulatory framework in Canada is a little more stringent," Gregory said, "and Canadian banks are a little more conservative in terms of lending." The World Economic Forum this month rated Canada's banks as the world's soundest, ahead of banks in Sweden and Luxembourg.
According to the Canadian Banking Association, one reason for the system's solidity is that banks are national in scope. Each of the largest five institutions has branches in all 10 Canadian provinces, meaning they are less susceptible to regional downturns and they can move capital from region to region, as needed. "As far as I am aware, no American bank has branches in all 50 states," banking association spokesman Andrew Addison wrote in an e-mail.
The fact that Canadian banks are national in scope, unlike American banks, is a legacy of the latter's branch banking restrictions, which never existed in Canada.
(Don Boudreaux mentions branch banking restrictions in his letter this morning criticizing John Steele Gordon's recent WSJ article.) Only a Washington Post (or NY Times) writer would cite this as evidence of more regulation. Canadians have always done banking better than Americans, bacause they imported the ideas behind Scotland's more laissez faire system.
Canada's banks are sounder than America's precisely because they have always been less regulated. The latter are regulated by a crazy quilt of state and federal laws.
Also, the Bank of Canada didn't pursue nearly as expanionary a monetary policy as the Fed did under Easy Al. That was the real cause of the home building boom--and bust. Again, only the Washington Post (or NY Times) would ignore this.
Posted by: Bill Stepp at Oct 17, 2008 1:28:53 PM
How sensitive is that Canadian economy to the price of petroleum?
Posted by: floccina at Oct 17, 2008 3:09:02 PM
And to think the Act of Union was enabled by the bailout of the Darien scheme. Financial FUBARs are the true enemy of the nationalist Scot it seems, in 2008 as in 1707.
Posted by: Richard Green at Oct 18, 2008 2:44:19 AM
Bill Stepp: I would say that Canadian banks are better regulated not less regulated.
Posted by: Vincent Clement at Oct 18, 2008 9:48:26 AM
More wrong conclusions from incorrect deceptive propaganda - the Washington Post - keep letting corporate media think for you. Yeah banks in Scotland that carry the name Scotland are subservient to the will of the people? How easy is it to fool idiots, I guess the bank of England and the Federal reserve work in the interests of the American and English people? Wake up, you stupid capitalists.
Posted by: donjuan at Oct 18, 2008 2:33:39 PM
Vincent Clement:
There is no such thing as good regulation.
What the banking system needs is a rule of law and to ditch the regulators and above all the central bankers.
Canada's banking system has always been less regulated than America's.
See also Charles W. Caolomiris's article in the WSJ Saturday, "Most Pundits Are Wrong About the Bubble." He points to the "politicization of prudential regulation by the Basel Committee, which was itself the direct consequences of pursuing 'international coordination' among countries, which produced rules that work politically but not economically."
What the banking system needs is free banking and the rule of law, not central banking and political regulation.
And, yes, regulation always get politicized and gamed up by politicians and regulatees. Why shouldn't it?
Posted by: Bill Stepp at Oct 19, 2008 8:07:35 AM
No CRA saved Canada, Eh?
http://en.wikipedia.org/wiki/Canada_Mortgage_and_Housing_Corporation
Posted by: Simonl Lefaux at Oct 21, 2008 7:29:47 PM
