I think we're mixing terminology. There's a difference between distributed and decentralized. You can have a distributed blockchain, while still being controlled by a central authority (i.e. not decentralized). That's pretty much Ripple, and it still has many of the advantages of blockchain technology: distributed/quick settlement, highly secure, highly available, etc...

Actually there is. 21st century money.

It would be actually possible to use a government's money in various new ways. Think of what could happen in the economy if the government provided flexible and free payment services.

(Which is exactly why they'll never do it, but just pointing out that a government-controlled blockchain for normal people would have a LOT of applications)

"flexible and free payment services"

Actually my government already has rules on that. Using my debetcard at a store, withdrawing money from an ATM or transferring money between bankaccounts is free.

Its almost as if we live in 21st century already!

Okay, try to use your card to pay your neighbor or babysit, and tell me again how convenient it is.

Second, go to your nearest store, bakery or whatever, and ask them just how free debit cards are.

Why do you need blockchain for that if it's centralized and controlled by the government?