Canada is Finally #1 at something besides Hockey..

I hate apologizing for lack of writing the past couple of weeks, truth be told I am so swamped with work. Which is a good thing in today’s economic climate I suppose.

Also, while reading a lot of other blogs I just haven’t had anything to add to the conversations (besides “yup, I agree”) and I haven’t been inspired by design or game changes to write anything about that either.

So instead, I am going to recopy a little interesting economic piece about Canada. The best part is that this was written in a USA mag. I wrote a little bit about Canada here and the current climate but loved reading the following article (which I will post in full after the break). We Canadians are typically the quieter nation about our accomplishments and this was a happy read.

Worthwhile Canadian Initiative

Canadian banks are typically leveraged at 18 to 1–compared with U.S. banks at 26 to 1.

Fareed Zakaria


From the magazine issue dated Feb 16, 2009

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.

Canada has done more than survive this financial crisis. The country is positively thriving in it. Canadian banks are well capitalized and poised to take advantage of opportunities that American and European banks cannot seize. The Toronto Dominion Bank, for example, was the 15th-largest bank in North America one year ago. Now it is the fifth-largest. It hasn’t grown in size; the others have all shrunk.

So what accounts for the genius of the Canadians? Common sense. Over the past 15 years, as the United States and Europe loosened regulations on their financial industries, the Canadians refused to follow suit, seeing the old rules as useful shock absorbers. Canadian banks are typically leveraged at 18 to 1—compared with U.S. banks at 26 to 1 and European banks at a frightening 61 to 1. Partly this reflects Canada’s more risk-averse business culture, but it is also a product of old-fashioned rules on banking.

Canada has also been shielded from the worst aspects of this crisis because its housing prices have not fluctuated as wildly as those in the United States. Home prices are down 25 percent in the United States, but only half as much in Canada. Why? Well, the Canadian tax code does not provide the massive incentive for overconsumption that the U.S. code does: interest on your mortgage isn’t deductible up north. In addition, home loans in the United States are “non-recourse,” which basically means that if you go belly up on a bad mortgage, it’s mostly the bank’s problem. In Canada, it’s yours. Ah, but you’ve heard American politicians wax eloquent on the need for these expensive programs—interest deductibility alone costs the federal government $100 billion a year—because they allow the average Joe to fulfill the American Dream of owning a home. Sixty-eight percent of Americans own their own homes. And the rate of Canadian homeownership? It’s 68.4 percent.

Canada has been remarkably responsible over the past decade or so. It has had 12 years of budget surpluses, and can now spend money to fuel a recovery from a strong position. The government has restructured the national pension system, placing it on a firm fiscal footing, unlike our own insolvent Social Security. Its health-care system is cheaper than America’s by far (accounting for 9.7 percent of GDP, versus 15.2 percent here), and yet does better on all major indexes. Life expectancy in Canada is 81 years, versus 78 in the United States; “healthy life expectancy” is 72 years, versus 69. American car companies have moved so many jobs to Canada to take advantage of lower health-care costs that since 2004, Ontario and not Michigan has been North America’s largest car-producing region.

I could go on. The U.S. currently has a brain-dead immigration system. We issue a small number of work visas and green cards, turning away from our shores thousands of talented students who want to stay and work here. Canada, by contrast, has no limit on the number of skilled migrants who can move to the country. They can apply on their own for a Canadian Skilled Worker Visa, which allows them to become perfectly legal “permanent residents” in Canada—no need for a sponsoring employer, or even a job. Visas are awarded based on education level, work experience, age and language abilities. If a prospective immigrant earns 67 points out of 100 total (holding a Ph.D. is worth 25 points, for instance), he or she can become a full-time, legal resident of Canada.

Companies are noticing. In 2007 Microsoft, frustrated by its inability to hire foreign graduate students in the United States, decided to open a research center in Vancouver. The company’s announcement noted that it would staff the center with “highly skilled people affected by immigration issues in the U.S.” So the brightest Chinese and Indian software engineers are attracted to the United States, trained by American universities, then thrown out of the country and picked up by Canada—where most of them will work, innovate and pay taxes for the rest of their lives.

If President Obama is looking for smart government, there is much he, and all of us, could learn from our quiet—OK, sometimes boring—neighbor to the north. Meanwhile, in the councils of the financial world, Canada is pushing for new rules for financial institutions that would reflect its approach. This strikes me as, well, a worthwhile Canadian initiative.


© 2009 


Hopefully I can find something interesting to write about games again soon =)

4 comments / Add your comment below

  1. Pfft, 18:1 still means even a mild run on the bank crushes the thing. Yes, that’s better than the U.S. (which is more like 35:1 according to what I’ve read), but still, being the head of a class of dunces is a dubious honor. (And yes, here in the U.S., I’m well aware that my country is leading the pack in stupidity in a lot of ways. I’m an equal opportunity snarker.)

  2. LOL Tesh!

    The big difference in that leverage is that while 25% of all USA mortgages are of the “undesireable” sub-prime type, only 5% are in Canada. That basically means that a “mild” run is easily taken care of.

    As self employed my entire professional life, I always beleaugered how difficult it is to get financing in Canada for business opportunities. I have owned, operated, and sold 4 businesses since I was 20 – ALL of them were self financed. All of them were “successes” (profits, taxes, and sale prices) yet I couldn’t convince one Canadian bank to loan me the money. Two of them I self financed on credit cards (I have many of them, heh) and private loans at 11.5%. So while it is a good fluff piece above, it still doesn’t take into account missed opportunities. My one business gave to the governement no less than $250,000 in taxes a year, and gainfully employed 35 people. Yet when I went to go do my second business, I couldn’t get a loan for the life of me. (I do have great credit too.) If I had access to more capital no doubt I could have expanded, hiring more people, and giving more taxes back into the system.

    While it is very un-Canadian to “brag” about being good at something, it was still a nice to read it from a US source. Most of the time you guys just make fun of us for living in igloos and eating yellow snow. =)

    To paraphrase the whole article? EVERY bank runs a fine balance between Greed and Fear. In the USA, the scale tips towards Greed. In Canada, it tips towards Fear. Neither trait is a good foundation to build a world financial banking on : but hey, we’re #1 in dunces as the only financial “success” story (heavy emphasis on the quotes) is good, because we rarely get ranked anything above #4.

  3. Hey Chris,

    Good find! And I hear what you mean, I have amazing credit, and banks would never lend to me!

    I also have more available credit on cards then many peoples yearly income. So I use that!

    Just a note to everyone: call your credit card companies and ask to have your interest lowed! They will do it if you have good credit!

  4. Aye, Chris, the lower rate of subprime loans is another good thing. It’s also good to see someone here in the ‘States speaking well of Canada. Too many of us are way too narcissistic.

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