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Gianluca Tisci's avatar

I don’t wanna dismiss completely the definition of Varoufakis as a false prophet of economics, being european I know fairly well some of its insights and opinions on europe economy and policy. However, the idea of central bank digital currency is not that fair away from the ECB proposal/developing infrastructure (https://www.ecb.europa.eu/euro/digital_euro/html/index.en.html).

Moreover, the arguments on payment system are at least thought provoking. There is a monopoly of visa and mastercard, and it’s at least interesting to pose the question “is this a natural monopoly?”. the problem is always independency of the institution that is controlling this systems. But if we succeeded to create an independent central bank, it means that we have some tools to have independent istitutions

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Mike Kutsch's avatar

Thank you for the thoughtful comment! As a fellow European, I agree that exploring alternatives to Visa and Mastercard is definitely a valid and important discussion. A CBDC could, in theory, promote financial inclusion, reduce transaction costs, and improve monetary policy tools.

BUT we should not treat these benefits as automatic or costless. Public infrastructure introduces its own risks. Political control over payment systems can lead to distorted incentives, including credit allocation to favored groups, suppression of innovation, and weakened institutional accountability. These outcomes are not merely theoretical; they have been observed repeatedly in both advanced and emerging economies (take Italy's IRI or France's Crédit Lyonnais for example).

Varoufakis, as a competent game theorist, understands how institutions respond to strategic behavior. That makes it all the more problematic when these risks are glossed over. Designing a system is one thing. Ensuring it always functions independently and effectively in practice is another. Economists draw a critical distinction between de jure structures and de facto realities for precisely this reason.

As the old proverb of economic policy goes: there are no solutions, only trade-offs. Ignoring the trade-offs does not make them disappear. It just shifts the costs to the future, often in ways that undermine the credibility of the ideas and the discipline promoting them.

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