"The life of man, solitary, poor, nasty, brutish and short" wrote Thomas Hobbes in The Leviathan. He imagines life without government, with every man out for himself. To escape this, he concludes, a social contract is necessary. He was a Royalist and at one point tutor to the future King Charles II and so his ideal society was one where the population lives beneath a sovereign authority to whom all individuals in that society cede their natural rights for the sake of protection.
I am reminded of this today when the German government is the latest to provide a blanket guarantee for bank deposits. The theory is that such a guarantee will restore confidence in the banking system and protect individuals' hard-earned savings. What is needed, though, is that banks resume lending to each other and the US bail-out at least addresses this. European governments are effectively saying that they are prepared to print money to save voters' deposits which will not help Trichet's Euro-zone inflation target. The logical next step is to abandon inflation targets.