Capitalism Rules, Socialism and Communism Suck Thread

[wufwugy]

An economist describes how Canada didn't have the Great Depression and pre-Great Depression bank failures like the US did because US banks were highly regulated and Canadian banks were not regulated.

http://econlog.econlib.org/archives/..._problems.html

To summarize, three reasons seem to explain why this bad solution was adopted.* First, an over-regulated banking system was fueling regular crises. Second, domestic and international opinion favored government intervention (supporting an old populist suspicion of private banks in America). Third, Wall Street bankers welcomed a central bank as a protection for their dominant position.

*The wide adoption of central banks.

[Poopadoop]

An economist describes how Canada didn't have the Great Depression and pre-Great Depression bank failures like the US did because US banks were highly regulated and Canadian banks were not regulated.

http://econlog.econlib.org/archives/..._problems.html



*The wide adoption of central banks.

I've heard the opposite explanation given for why Canada was less affected by the 2008 crisis than the US.

http://www.nber.org/digest/dec11/w17312.html

Though I guess you could say the difference was not in regulation vs. lack of regulation but in centralized regulation vs. fragmented regulation.

[wufwugy]

I've heard the opposite explanation given for why Canada was less affected by the 2008 crisis than the US.

http://www.nber.org/digest/dec11/w17312.html

Though I guess you could say the difference was not in regulation vs. lack of regulation but in centralized regulation vs. fragmented regulation.

It's more about what incentives individual regulations cause. I don't know anything about the Canadian banking system proximate to 2008. I know the US system well and the regulations incentivized the lending practices that have post hoc been labelled poor.

Leading up to 2008 was essentially the banks doing what was in their best interests given the standards the government set. Those standards led to outcomes that were atypical. When nominal GDP expectations began falling due to the Fed conducting contractionary monetary policy for somewhat unrelated reasons, the first thing to "go" was the newly atypical portion of the economy.

[wufwugy]

It's more about what incentives individual regulations cause. I don't know anything about the Canadian banking system proximate to 2008. I know the US system well and the regulations incentivized the lending practices that have post hoc been labelled poor.

Leading up to 2008 was essentially the banks doing what was in their best interests given the standards the government set. Those standards led to outcomes that were atypical. When nominal GDP expectations began falling due to the Fed conducting contractionary monetary policy for somewhat unrelated reasons, the first thing to "go" was the newly atypical portion of the economy.

BTW, this is the opinion (approximately) of a subset of economists. It is my opinion because it coheres the best with what I know of the data and the economic theory. A larger subset of economists is slowly (but surely) evolving towards many elements of the above. Neat to note, I had a professor who didn't agree with me at all on this, then at a later date I showed her data she hadn't seen before and she was surprised by it and she told me that she agreed with me on the relevant component (that she previously had said she didn't agree with). That was fun for me.