mises.ca / By Redmond Weissenberger / Monday, December 3rd, 2012
The propaganda you hear about the Canadian banking sector is just that – propaganda. Canadian banks are as leveraged up as there international counterparts – if not more: in fact Canadian banks have no reserve requirement whatsoever, zero. Of course you needn’t worry about your deposits in the event of a banking crisis, deposits of up to $100 000 insured by the Canadian Deposit Insurance Corporation. The CDIC doesn’t hold enough cash on hand to actually pay out the potential claims, but it does have the Bank of Canada ready to print the money up out of thin air to make you whole – with your own money. How do we know that the BoC would pony up the fiat currency? We come to the dirty little secret of Canadian Banking – the big five were bailed out just like every other bank in the world. The report in question was prepared by a left wing think tank, so we can question their motives, but the reality is that Canadian bank sector is subject to the same problems of fractional reserve banking as the rest of the western banking system.
Now what could lead to a Canadian banking crisis? Simple: exactly the same factors that led to the housing crisis in the US and Europe, namely artificially low interest rates leading to a bubble in real estate prices and unsustainable consumer debt.
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