Wednesday, February 25, 2009

Home Sweet Home

The World Economic Forum in October ranked Canada’s financial system the soundest in the world. I've already mentioned this in my entry here.

President Obama visited Canada recently in his first foreign visit, and extolled the virtues of the banking system. This article from Bloomberg News says,

Before President Obama made Ottawa his first visit to a foreign capital earlier this month, he couldn’t resist telling the Canadian Broadcasting Corp.: “In the midst of the enormous economic crisis, I think Canada has shown itself to be a pretty good manager of the financial system and the economy in ways that we haven’t always been.”

Canadian regulators resisted pushes from some bank executives to loosen lending restrictions when the economy was booming, says David Dodge, 65, who stepped down as Bank of Canada governor a year ago...“The banks at the top of the cycle thought we were being too tight-assed,” Dodge said in a telephone interview.

Canadians were able to have 40-year mortgages until last year when they started to gain popularity among homebuyers seeking to reduce their monthly mortgage payments.

Another restraining factor is that Canadians, unlike their U.S. neighbors, can’t take mortgage interest as a tax deduction, removing an “inherent bias” to take on too much debt, Prime Minister Stephen Harper said in September.

In Canada, mortgage debt was not viewed "good debt" as the American media has led Americans to believe. For most Americans, the way to become rich and increase personal financial assets has been to take on more debt, especially if borrowed debt can be reinvested for higher returns. But many Americans are now losing their homes or in danger of it as they choke on debts, the high costs of healthcare and the high tax rate.

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