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Another way it can work is this.

The extension of deposit guarantee from €20k to €100k will lure the binladens out into banks' savings, and that will compensate the flow from ordinary savings to government bonds. The net effect will be as if the bonds had been purchased with binladens. Maybe this is part of the reason for Spain raising the guarantee above the EU's agreed new minimum of €50k. Spain's per capita incomes are not among the highest in the Eurozone so it makes no sense that we'd have among the highest deposit guarantees.

Otherwise, if it works it will say something really weird about the Spanish political economy.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Oct 8th, 2008 at 11:47:23 AM EST
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