Yanis Varoufakis States “Let The Banks Burn”

The former Finance Minister of Greece, economist Yanis Varoufakis, who is now the leader of his own political party, DIEM 25, is proposing a “de-coupling of payment systems from credit intermediation” to ease the “unecessary suffering” of people.

In an article titled “Let the banks burn,” published in Project Syndicate, and a subsequent interview to Al Jazeera, Varoufakis explains what can be done differently in the wake of the present banking crisis, compared to the Great Recession of 2007-9, and why workers always seem to bear the brunt during times of economic downturn.

“It is absolutely impossible to stabilize a banking system which has been built, designed almost, to be unstable. These mega banks, and the smaller banks, which live parasitically on mega banks, are constructed on unsound foundations, and no amount of tightening regulations can actually stabilize them,” he tells UpFront Special host, Marc Lamont Hill.

On the other hand, the Greek economist opines that today’s technology offers “a splendid alternative” to private banks when it comes to ways of channeling money to the people.

Central bank digital wallet VS. private banks

In his original article “Let the banks burn,” Varoufakis describes how “banks were designed not to be safe” as business models, and proposes a banking system where central banks would provide everyone with a free digital wallet, bearing interest equivalent to the central bank’s overnight rate.

“Freed from the compulsion to keep their money in a private bank, and to pay through the nose in order to transact using its system, people will be free to choose if and when to use private financial institutions offering risk intermediation between savers and borrowers,” he explains in his piece.

“Even in such cases, their money will continue to reside in perfect safety on the central bank’s ledger,” Varoufakis adds.

Current bank crisis worse than 2007-9 recession

In addition, the former Finance Minister of Greece believes that the present banking crisis, which saw Silicon Valley Bank and Credit Suisse collapse in March, is more worrying than the 2007-9 one when it comes to banks failing, as “none of the regulators in the United States and Europe could credibly claim – as they did in 2008 – to have been blindsided.”

“This crisis should make us more worried, because this is much more of a systemic crisis and less of a result of serial fraud,” he tells his Al Jazeera interviewer.

As a conclusion, Varoufakis suggests the abandonment of what he considers to be an “unfixable” banking system which delivers for property owners and shareholders at the expense of the majority.