Canada's Central Bank
By David Henderson
Yesterday, blogger Megan McArdle had an interesting post on Canada. She wrote:
Canada is now being held up as a regulatory example to us, but Canada has always been an odd duck–it was also the only major economy in the Great Depression not to have a banking crisis. You can tell a lot of stories about why this is so, but most of them–like nationwide banking, big downpayments on mortgages, and banks keeping substantial portions of the loans they originated, are found elsewhere.
By “why this is so,” she presumably means “why Canada didn’t have a banking crisis during the Great Depression.” I think she’s right to emphasize nationwide banking. But she leaves out one major factor that distinguished Canada from the United States: Canada had no central bank until 1935. For more on this, see Michael D. Bordo and Angela Redish, “Why Did the Bank of Canada Emerge in 1935?,” The Journal of Economic History, Vol. 47, No. 2, June 1987, pp. 405-417.
BTW, Ms. McArdle refers to herself as “The World’s Tallest Female Econoblogger.” Does anyone know how tall she is?