by Dr. Mark Skousen, Advisory Panelist
The U.S. financial system is a mess - according to the World Economic Forum, the United States ranks 40th among banking systems around the world. Without federal bailouts, the two largest banks in the country, Citibank (NYSE: C) and Bank of America (NYSE: BAC), would be in bankruptcy, and the good ol’ USA would be headed for the Greater Depression, as my friend Doug Casey likes to call it.
But you’ll never guess where the world’s No. 1 banking system is. No, it’s not fabled Switzerland nor booming Hong Kong.
While the central banks around the world are desperately trying to stem the flow of red ink, this country’s red is emblazoned on its iconic mounted police force.
It’s right next door: Canada. The land of hockey and moose has the world’s soundest banking system. While European and Asian banks are collapsing, Canada stands out as an oasis of financial calm.
Canadian Banks Receive Highest Rankings
According to the Global Competitiveness Report, Canadian banks received the highest ranking, 6.8, out of a possible 7.0 (healthy, with sound balance sheets). The lowest ranking of 1 means insolvent and possible government bailout.
Canada’s stock has been rising quietly - the Canadians are known for their modesty and self-restraint - as American financiers and media are astonished to find that their northern neighbors have somehow avoided the subprime lending scandal and the housing market mess.
What’s Canada’s secret? With the exception of oil-rich Alberta, Canada did not have a strong construction surge as the United States did during the boom years. And mortgage interest is not tax deductible in Canada.
Canadian banks are national in scope; the top five banks have branches in all 10 Canadian provinces, making them less susceptible to downturns. They have large numbers of loyal depositors and a more solid base of capital. They are more tightly regulated than their U.S.
