Holding up Canada as a model of how to run a banking sector, New York Times columnist Paul Krugman declared his long-time fascination with the country whose "dull" banks managed to avoid the mess Wall Street fell into.
"Above all, Canada's experience seems to support those who say that the way to keep banking safe is to keep it boring - that is, to limit the extent to which banks can take on risk," Mr. Krugman writes. "The United States used to have a boring banking system, but Reagan-era deregulation made things dangerously interesting. Canada, by contrast, has maintained a happy tedium."
The Nobel-winning economist posits then dismisses two misconceptions about the differences between the countries in the time leading up to the financial crisis:
The central bank
caused a bubble
Nope. Mr. Krugman notes that Canada had similarly low interest rates - the same ones blamed for inflating the U.S. asset bubble.
The U.S. banks
were just too big
Wrong. Canada's market is dominated by just five banks.
Staff