Remember Yanis Varoufakis From The Greek Economic Crisis? He Says 'Let The Banks Burn'

Former Greek Finance Minister Yanis Varoufakis reportedly said the much touted strategy of tightening monetary noose around society's neck while lavishing bailouts on banking system is a surefire way to condemn most people to unnecessary suffering.

What Happened: In an article published on Project Syndicate titled “Let the Banks Burn”, Varoufakis argued the reason central banks did nothing when confronted by banks' fragile business models was a very disturbing one — "It was central banks' response to the 2008 financial crash that had given birth to those business models – and policymakers knew it," he wrote.

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Varoufakis highlighted the effects of the post-2008 policy of harsh austerity for most and state socialism for bankers. He said one of the effects was that it ensured "there is no single nominal interest rate capable of restoring the balance between money demand and money supply while also averting a wave of bank failures."

The second, he explained, was that Western bankers assumed if and when inflation soared again, central banks would hike interest rates while bailing them out. "They were right: this is precisely what we are witnessing now," he wrote.

Alternative: The former Greek minister also detailed an alternative to banks. Varoufakis explained how a central bank could use cloud-based technology to provide free digital transactions and savings storage to all, with its net revenues paying for essential public goods.

People will be free to choose if and when to use private financial institutions, he said. "Even in such cases, their money will continue to reside in perfect safety on the central bank's ledger," he added.

Varoufakis also noted that privacy could be better safeguarded if transactions were to be concentrated on the central bank ledger under the supervision of an authority that would comprise randomly selected citizens and experts.

"The banking system we take for granted is unfixable. That's the bad news. But we no longer need to rely on any private, rent-seeking, socially destabilizing network of banks, at least not the way we have so far," he wrote.

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