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the World Economic Forum rankedCanada’s banking system the healthiest in the world.

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In 2008, the World Economic Forum rankedCanada’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 theUnited 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 withU.S. banks at 26 to 1 and European banks at a frightening 61 to 1. Partly this reflectsCanada’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 theUnited States. Home prices are down 25 percent in theUnited States, but only half as much inCanada. Why? Well, the Canadian tax code does not provide the massive incentive for overconsumption that theU.S. code does: interest on your mortgage isn’t deductible up north. In addition, home loans in theUnited States are “non-recourse,” which basically means that if you go belly up on a bad mortgage, it’s mostly the bank’s problem. InCanada, 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 thanAmerica’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 inCanada is 81 years, versus 78 in theUnited States; “healthy life expectancy” is 72 years, versus 69. American car companies have moved so many jobs toCanada to take advantage of lower health-care costs that since 2004,Ontario and not Michigan has beenNorth America’s largest car-producing region.


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