Dave Adlard called me on a contradiction on this blog.

On the one hand, I’m an unabashed booster of right wing economic thinking.

On the other hand, I gloated that the Canadian banks did not suffer the melt down of the American banking system.

Dave’s right. (I don’t actually have a PhD in Economics.)

As the story of the collapsing economy evolved in Fall of 2008, my first realization that I was wrong about unrestricted competition in banking was when Economist magazine instantly came out in favour of bailing out the banks. They could not be allowed to fail.

What !!??

That was the first time it dawned on me that banks are not the same as other businesses that should be allowed to go out of business — newspapers and automobile companies, for example.

Guys like Ben Bernanke MUST closely regulate banks. Or banks will make stupid, risky gambles with other people’s money.

For the record, I do believe in some government regulation of the market. But the less the better.

The strength of the Canadian banks in this recession is probably LUCK more than any kind of foresight on the part of regulators.

Lucky Canada.

UPDATE: Bernanke is live on TV right now trying to explain why AIG could not be allowed to fail. On the other hand, he said it would have been preferable to have originally agreed to break up the company with the first bail-out.

A company that insures perhaps 1/3 of businesses in the USA is TOO BIG.

Of course the bonuses paid to executives is symbolic. A drop in the bucket of the public money being wasted by AIG.