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February 25, 2010

On the superior attributes of Canada’s financial system

Harry Koza explains the real difference(s) between American and Canadian banking systems (pdf); more to do with a rational calculation of interest (if you will forgive the pun) than an excuse for a "re-regulation" of the United States banking system (via Small Dead Animals).

The first major difference between the US and Canada that Mr. Krugman neglects is that we do not have the perverse government-spawned incentive of mortgage interest deductibility.

I realize this does not sound like gripping stuff. It is, however, the only convincing explanation of the problem I have yet to read.

Posted by Ghost of a flea at February 25, 2010 06:57 AM

Comments

Mortgage interest deductibility is hardly "perverse" and certainly not the problem. As an incentive, it differs not a whit from any other government-written tax rule, every single one of which is meant to tweak the economy in some way.

A responsible person will not refinance his home just to get a larger tax refund, and an irresponsible person should be someone the banks shun regarding loans. If any "government-spawned" incentive can be considered "perverse", it should be the Fannie-and-Freddie hijinks wherein the government pushed to have money made available to the irresponsible and the money men were led to believe that the government would cover their "assets" for them.

Posted by: soirish [TypeKey Profile Page] at February 25, 2010 01:56 PM