A Different Greek Debt Plan

February 7, 2015

Over the last decade or so, I have been in contact with the leaders of several countries, offering suggestions on how they can turn around the “difficult” economic situations which their countries were living through. In Greece, I contacted, among others, Syriza Party leader Alexis Tsirpas, several years before his recent election as Prime Minister.

Sadly, Greek leaders did not accept my proposal. I’d like to share with you several points from the recovery plan which I presented.

  1. Declare a Debt Moratorium: Greece was (and still is) unable to repay its debt – or even the interest on that debt. Rather than making believe that they had any credit credibility by borrowing more Euros just to pay the interest, I suggested that they simply say, “We can’t pay you now. The money you already have loaned to us is valid debt, our debts will continue to accrue interest, and we’ll pay the whole thing back in a few years.”

  1. Declare a Regulatory Moratorium: Regulations coming out of Brussels are destructive of the Economy. For the most part, they’re even worse than here in the US, and that’s saying something. I suggested that they say, “Greece is a sovereign nation, which must accept the task of putting our own Economic house in order. During this transition period, we reserve the right to not obey regulations emanating out of Brussels as needed.”
  2. Borrow Needed Funding Within Greece: I suggested a highly unorthodox approach. The government would issue Zero Coupon, Bearer Bonds (ZCBB), designed to look and feel like Euros issued by the European Central Bank. A 10 Euro ZCBB would mature in say 3 years and would be redeemed for 11 Euros at maturity, returning about 3% a year in interest. Because it looked and felt like a Euro, it facilitated use in everyday transactions – almost like Euro currency. Greek public employees, and businesses selling to the government, would receive these ZCBBs in payment.
  3. Hire the Unemployed: With 25% Greek unemployment, there was a lot of work which could be done, for which unemployment benefits already were being paid. I suggested that products be bought from Greek companies, in sufficient quantities, so that the companies would start hiring the unemployed. But, what to do with all the stuff you’ve bought? If you sold it locally, then you’d be putting other Greeks out of work. So, sell the products internationally – export them. I suggested setting up an export business network, owned by the government, to market the goods. This would turn the Value Added Tax collections on these goods into a profit center, lowering the cost of the goods. I expected that 30-40 Billion Euros a year would eliminate unemployment, and possibly encourage immigration.

  1. Get Gold & Silver: The revenue from the increased exports would not be needed immediately to pay the wages, since the ZCBBs could be used. Instead, I suggested that the sales be used to accumulate something of real value, which later could be used to redeem the ZCBBs. I said buy Gold and Silver. Now, that much buying of Gold & Silver would put dramatic pressure on the prices of those metals – if that much metal could be found to purchase. I expected that the prices of the metals would rise, perhaps to $10,000 an ounce for Gold and $500 an ounce for Silver.
  2. Issue official Silver & Gold Drachma Currency: The accumulating Silver & Gold metal would be minted into a new 1oz One Drachma Silver Coin and 1oz Twenty Drachma Gold Coin. At the end of the moratorium period, these coins would be issued as the official money of Greece. Greeks still would be allowed to deal in Euros or other currencies if they chose, but the official Greek currency would be the Drachma, made of Silver and Gold (with fractional units to facilitate daily use). A new exchange rate would be determined by the Silver & Gold prices, and the exchange rate would be stabilized by the Greek government purchases of the metals whenever the metal prices fell below a certain price. The new purchases would be minted into new coins.

  1. Repay the Debt: Since the metals’ prices would have increased many fold since purchases had begun, the value of the new currency would be able to repay the ZCBBs and the external Euro debt with most left over to remain in the Greek Economy, or in the Greek Treasury. The Drachma in the Treasury could be used to purchase equity in foreign companies, which would provide a future revenue stream. With zero debt, and with money coming into Greece from their investments, Greek taxes could be much lower – perhaps as low as zero – allowing the Economy to be even more vibrant. Unemployment would have been eliminated, and the Standard of Living for all Greeks would rise continuously.

As it turns out, several countries – most notable China – have been buying Gold and likely will be issuing a Gold-backed currency. So far, while their purchases are significant, they still are smaller than what I suggested to Greece. Even so, those purchases have influenced the Precious Metals’ prices positively.

There is considerable trouble brewing in most countries’ Economies. Even so, Greece probably still would have sufficient time to implement my suggestions today, but that likely is not to be.

Robert (Bob)  Shapiro is self-taught in Austrian Economics and has consulted briefly for the governments of Mexico, Greece, Portugal and Spain. He has traded Gold & Silver and their stocks since 1970. Bob Shapiro’s blog is http://us-issues.com

1 cubic foot of silver weighs approx 655 pounds whereas 1 cubic foot of gold weighs more than half a ton.