The Grexit Into Gold-backed Drachma Conspiracy Theory - or - Plan Z

Reggie Middleton's picture

 From Wikipedia:

Plan Z during 2012

"Plan Z" is the name given to a 2012 plan to enable Greece to withdraw from the eurozone in the event of Greek bank collapse.[16] It was drawn up in absolute secrecy by small teams totalling approximately two dozen officials at the European Commission (Brussels), the European Central Bank (Frankfurt) and the IMF (Washington).[16] Those officials were headed by Jörg Asmussen (ECB), Thomas Wieser (Euro working group), Poul Thomsen (IMF) and Marco Buti (European Commission).[16] To prevent premature disclosure no single document was created, no emails were exchanged, and no Greek officials were informed.[16] The plan was based on the 2003 introduction of new dinars into Iraq by the Americans[16] and would have required rebuilding the Greek economy and banking system ab initio, including isolating Greek banks by disconnecting them from theTARGET2 system, closing ATMs, and imposing capital and currency controls.[16]

Wolfson economics prize

In July 2012, the Wolfson economics prize, a prize for the "best proposal for a country to leave the European Monetary Union," was awarded to aCapital Economics team led by Roger Bootle, for their submission titled "Leaving the Euro: A Practical Guide."[19] The winning proposal argued that a member wishing to exit should introduce a new currency and default on a large part of its debts. The net effect, the proposal claimed, would be positive for growth and prosperity. It also called for keeping the euro for small transactions and for a short period of time after the exit from the eurozone, along with a strict regime of inflation-targeting and tough fiscal rules monitored by "independent experts."

The Roger Bootle/Capital Economics plan also suggested that "key officials" should meet "in secret" one month before the exit is publicly announced, and that eurozone partners and international organisations should be informed "three days before." The judges of the Wolfson economics prize found that the winning plan was the "most credible solution" to the question of a member state leaving the eurozone.

... In February 2015 the Russian government stated that it would offer Greece aid but would only provide it in rubles.[31]

Kathimerini reported that after the 16th February Eurogroup talks Commerzbank AG increased the risk of Greece exiting the euro to 50%.[32] The expression used by TIME for these talks is "Greece and the Euro Zone dance on the precipice".[33]

Effect upon the European economy

Claudia Panseri, head of equity strategy at Société Générale, speculated in late May 2012 that eurozone stocks could plummet up to 50 percent in value if Greece makes a disorderly exit from the eurozone.[34] 

Wait a minute! That's not possible. Goldmans Sachs says to buy EU eqities because of ECB QE and NIRP! We all know Goldman Sachs is always right, that's why more than half of hedge funds are following suit...

After all, do you remember Goldman's recommendation to sell the Swiss Franc? It worked out excellente', reference When Everybody Thinks They're Right, They're Almost Guaranteed to be Wrong! I Think This Is The Biggest Bubble In World History.

Bond yields in other European nations could widen 100 basis points to 200 basis points, negatively affecting their ability to service their own sovereign debts.[34]

Hopefully with no correlation whatsoever to US-based debt, cause Goldman also recommended - Long U.S. High-Yield credit risk: The recent underperformance of the U.S.High-Yield market should prove transitory, the bank reckons. I addition, what will the ECB do after all of this QE and NIRP if bond yields spike anyway? Well.. More NIRP and QE of course!

But, as early as March 2010, other European financial economists had supported the notion a swift Greek withdrawal from the Eurozone and the simultaneous reintroduction of its former national currency the drachma at a debased rate, arguing that the European economy as a whole would eventually benefit from such a policy change : "Such an abrupt readjustment might be painful at first, but it will ultimately strengthen the Greek economy and make the Eurozone more cohesive, and thus better at confronting the difficult economic circumstances and dealing with them." [15]

Effect upon the world economy

Europe in 2010 accounted for 25 percent of world trade, according to Deutsche Bank.[34] Economic depression within the European economy would ripple worldwide and slow global growth.[34]

Immediate economic fallout inside Greece

The theory behind the readoption of an independent Greek national currency is that such a currency, freely floating on the international markets, would be able to depreciate in value and thus Greek exports and shipping services would become more competitively priced on the world market. Imports would be correspondingly more expensive, encouraging domestic production in Greece. However, persuading the Greeks and their businesses to replace their euros with a currency intended to collapse in value would be more than somewhat challenging, and current Greek debts would remain denominated in euros.

On 29 May 2012 the National Bank of Greece warned that "[a]n exit from the euro would lead to a significant decline in the living standards of Greek citizens." According to the announcement, per capita income would fall by 55%, the new national currency depreciate by 65% vis-à-vis the euro, and the recession which Greece has been in for five years would deepen to 22%. Furthermore, unemployment would rise from its current 22% to 34% of the work force, and the inflation, which is currently at 2% would soar to 30%.[20]

According to the Greek think-tank Foundation for Economic and Industrial Research (IOBE), a new drachma would lose half or more of its value relative to the euro.[17] This would drive up inflation, and reduce the purchasing power of the average Greek. At the same time, the country's economic output would drop, putting more people out of work where one in five is already unemployed. The prices of imported goods would skyrocket, putting them out of reach for many.[17]

Analyst Vangelis Agapitos has estimated that inflation under the new drachma would quickly reach 40 to 50 per cent to catch up with the fall in the new currency's value.[17] To stop the falling value of the drachma, interest rates would have to be increased to as high as 30 to 40 per cent, according to Agapitos.[17] People would then be unable to pay off their loans and mortgages and the country's banks would have to be nationalised to stop them from going under, he predicted.[17]

But what if Greece put a floor under its currency with a peg to gold and a soft redemption policy (with a borderline prohibitive premum to be paid if the drachmas were actually redeemed for the gold)? Such a floor may actually make the Drachma preferable to what would be a rapidly destabilizing euro with a guarantee of further debasement, QE and volatility to come. Under such a scenario, capital may actually fly into the drachma, particulalry of they default on current euro based debts and wipe the slate clean. Concerns about paying back euro denominated debt with the drachma are ill founded if the euro based debt faces mass defaults. Look at the chart below. Someone was at least thinking about this idea.

Below the chart is a trade setup to monetize such an event within three months.

The Grexit into Gold Conspiracy Theory

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peaceful's picture

Reggie, I have the utmost respect for you...Are you sure this will work

peaceful's picture

Reggie, I have the utmost respect for you...Are you sure this will work

Rodders75's picture

I consulted a pretty well connected local this morning who told me this story is total horse shit

Rodders75's picture

Interesting article Reggie. Is there any actual proof that the Greek CB is buying gold? It says here that the CB actually sold gold coins even if people in the street are buying...

The Limerick King's picture

This article reminds me of a limerick I wrote in 2012:


The Greeks should be daring and bold

Default on the debt bankers hold

Bring Greek fiat back

Devalue the Drach

Then peg the new Drachma to gold

cwsuisse's picture

A devaluation of Drachme2 should be healthy and in a world where all currencies race to the bottom it should be an advantage and not a problem to have a weak currency. The logic of the article is build on assumptions that are not questioned. The assertion by the Central Bank of Greece that the income would drop by 55% under Drachme2 regime is hardly credible, i.e. only credible if measured in EURO and than hardly relevant. And anyway for the substantial part of the population living close to or on the level of a subsistence economy it does not matter. A gold backing for Drachme2 should hence be obsolete. The article is very theoretical. 

trader1's picture

Although Varoufakis and Tsipras (on behalf of the Greek people) are committed to stay in the EMU/EZ/EU, Varoufakis briefly talked about quasi-currencies in a video I posted over a week ago:




Anonymous_Beneficiary's picture

Thank you for posting this, Reggie. I'm captivated by your mode of innovative thought, it is inspiring to me regardless of the fact it is most certainly the fringe. Somewhat similar to you, I'm working on a way to render the parasitic strata of society partially irrelevant. Enough of us doing the same thing are bound to render it wholly irrelevant.

Good luck, if you even need it.

Stained Class's picture

Hey, guys, don't underestimate Mssrs. Tsipras, Yanafoukis, and Middleton, in no particular order. There will come a day when you ZHer's will have a front row seat to something really big.

DeadFred's picture

Here's to hoping the show starts in the next week or two.

lakecity55's picture

Hey, Greek guys, they don't have serial numbers on the coins!!! Crank 'em out!

Arius's picture

To start with, Europe was designed to fail from the start.  Why? who knows, but if I had to guess it makes sense if the final goal is to achieve one world currency .... it is a stage towards creating a more equal playing field by bringing everyone down...


There is one currency, yet, country issues its own bonds.

That is like Michigan or California can issue their own bonds.

So, the bonds of each country can be picked one by one and it is like betting against singular currencies.


After greece, there will be spain etc....

Yen Cross's picture

 I've nothing "per se' " against  Mr. Middleton. I just think crypto currencies aren't going to be the favored (exchange) choice at your local Post Apocalyptic

 Holiday Inn

kaiserhoff's picture

Same here, Yen, and well said.

If I had to worry every day about the security of my money, what it was worth, and who if anyone would exchange beer and pretzels for it, I wouldn't have energy for much else.

I'm glad people like Reggie push the envelope.  If nothing else it must worry the NSA;)

Prisoners_dilemna's picture

One cool aspect of this Ultracoin is that it utilizes bitcoins, but does not require holding them (I believe). But utilizing bitcoins, we can now leverage up on gold ETFs, somehow denominated in Euros, so that we make a bunch of fiat when Greece backs the maybe new Drachma with maybe physical gold.

I dont use Ultracoin myself yet as...  well above is how I think it all works. I haven't been able to make sense of the whole system yet so I stick with what I do know, PMs and BTC.


Speaking of which, of all my money in all its forms stored in all the myriad locations that I use, the only money which I feel is truly secure is my bitcoins in my Electrum wallet. Me and I alone control that money. I feel emplowered.

The Duke of New York A No.1's picture


Yen Cross's picture

 Anyone that's thinking about investing in anything, should be visiting your local matress and undertaker purvevors.

 Sit tight and relax.

RaceToTheBottom's picture

Wait, Doesn't Grexit and pinning the Drachma to Gold require that Greece be fiscally conservative?

kaiserhoff's picture

Pretty much.  This is so rambling, it's hard to parse, but a 3.33% backing is not a meaningful pin.  Still, it's both trivial and dangerous for a small country.  As the new currency starts to dive, which it would, many would demand conversion of the fiat into gold.  What then?

bluskyes's picture

Would 6.66 be more meaningful?

BobPaulson's picture

Well, the concept of gold backed currency is that you only issue as much as you can back with gold. Seems so simple it's astounding!


kaiserhoff's picture

Yup, and most of us love a strong currency, but if it's truly gold backed your currency is limited to the amount of gold you own.  For any country, but especially a small one that creates problems of currency stability.  That's why a market basket of metals is probably better.

MaxThrust's picture

I  think the current Greek government's handling of the situation is just fine. They are playing hardball with Europe.

Buy negotiating tough they may get some deal to tide them over for a few months. If they get nothing they can blame the Grexit on Europe or specifically Germany.

One thing they cannot do is fold and give in to the current situation, if they did, that would be the end of Syriza and all its politicians and they know it.



Reggie Middleton's picture

Grexit is extremely dangerous to the EU, and not just because of the volalitilty and daisy chain losses it may send through German and French banks. The real risk is that Grexit occurs and Greece does no worse than does now. That will essentially be the end of the euro, as Portugal, Ireland, Spain and Italy will follow suit or play extreme hardballl in a threat to do so.


Remember Iceland was supposed to burn in hell if they didn't succumb to banker demands? Well, hell's not that hot since 7 periods out of the last 11 Iceland's GDP growth outsripped that of Germany's. Go figure. Remember, don't believe everything that you're told.

Wild Theories's picture

but there's a rub...

last I checked the sentiment polls, the Greeks themselves still wish to remain in the Eurozone. 

so really Greece want to both default and stay, they still want the best of both worlds.(one of the options has to give)


btw didn't junk you, wasn't me

DeadFred's picture

You may have missed the part about 'default'.

realWhiteNight123129's picture

Greece has Gold mines and could nationalize them. 

jez's picture

And then have gummint bozo office workers do the actual mining? Yeah, that'll work.

Venezuela nationalized everything and the results have been perfect. Except if you want to buy something in a shop. Or wipe your shitty arse.

Reggie Middleton's picture

Yet, gold as measured by troy ounces, is still being stockpiled by Greece since the date of that article. Don't believe everything that you read, my friend. 

Cashboy's picture


With my dealings with Greeks, if the government did buy any gold it will more than likely be in possession by dodgy government officials.

Greek people just can't help themselves; it seems to be in their DNA.

So I don't believe that Greek government will have any gold.



Joebloinvestor's picture

I would like to see some proof of that one, and proof of any gold remaining in the treasury.

If Greece does have any gold, it will be so fractionalized to support a new drachma it might as well be another fiat.


Pool Shark's picture





Reggie is just blowin' smoke...


kaiserhoff's picture

Hmmm.  Needs more pixie dust,

  but knowing Reggie, plan B is,,,,,bitcoin;)

Reggie Middleton's picture

Let me challenge you right here. What is Bitcoin? I'll bet the farm you can't give me a correct answer.

kaiserhoff's picture

I spent a couple of weeks looking into it.

It is a bank with no insurance that gets robbed every week.

When you get that fixed, I might take another look, but I don't see any improvement on PMs.

Frankly the wasteful make work of "mining" that crap as opposed to real mining is enough to make me nauseous.

Where's my farm?

Reggie Middleton's picture

Bitcoin has never been violated from a security perspective. Never. What you call a bank, get's hacked daily, with the largest hacking in computer history just occuring a few weeks ago.

Bitcoin is a protocol-driven, decentralized value transfer system that features inherent distributed consensus decision making, analogous to the protocol-driven data transfer system many call the internet - without the the consenus portion. Part of what makes Bitcoin unique is that it inherently prevents fraud, double spends, etc. where the Internet cannot.

I knew that was going to be your next answer, right? You don't see improvement over PMs because you don't know what your comparing the PMs to. Ask me, I'd love to teach you. Those charts in teh article above are generated by a system that literally takes your favorite investment bank capabilities and congeals it into P2P software that lives in the cloud, in the blockchain. It improves on the bank's capabilities, it slashes costs by 85%, and it improves safety by factor of 5.

Oh, yeah! It's completely programmable to make contracts that are unbreachable. 

bluskyes's picture

As far as I can tell, bitcoin is just a huge ledger of accounts. The initial unit of account being initially distributed through the "mining" operations.

What is to stop the NSA from setting up one of their bot-nets as a miner with >50% mining capacity, and becoming a compromised verifier of transactions - and thus taking posession of all the bitcoins? I ask out of curiosity. Bitcoin does intrigue me.

Is there a vetting process for miners, or a way of blacklisting bad ones?

doc333's picture

Bitcoin: Imaginary "money" with NO intrinsic value (you can't even wipe your ass with an electron)

kaiserhoff's picture

Bitcoin has never been violated from a security perspective?

You have a strange concept of "violated".  Tell that to all the people who have lost plenty of what they thougt was money.

So the "block chain" expands exponentially forever and ever?

Any group of moderately intelligent people could come up with a much better crypto currency, and someone no doubt will, but it will still have all of the problems listed below.

You're a bright guy, Reggie.  You should devote your time and attention to something that is not full of basic, structural problems.

HardAssets's picture

You can agree or disagree with him on particular issues, but IMO you gotta respect that Reggie comes here to openly duke it out at ZH Fight Club.

I can't think of another writer/analyst that does that.

kaiserhoff's picture

Bruce Krasting used to, but good point.

Reggie Middleton's picture

Yes, the blockchain has NEVER had a security breach. Can you point to just one incident? I doubt so very seriously. What's most interesting is the faith that's put in the legacy banking system which is hacked from a technological perspective nearly every day, whose investors (yes, if you have a checking or savings account, you're a creditor - an investor in said bank) are defrauded regularly due to manipulated earnings and financial reportings (quite a few of which I put forth on my blog months before said banks collapsed (see below), and currency debasement by the banks' banker, the Fed at the expense of you, the guy who is not forced to recieve 25 basis points as compensation for the relatively risky loans he is giving said banks (via demand deposits).

If you think I'm a bright guy, you should listen to what I have to say and approach it with a clear, analytical mind. Totally disregard the tabloid media. Remember, their job is not to report the truth, it is to churn eyeballs. Don't get it twisted:

  1. The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear? | After the collapse, a prudent bullish call as well... Joe Lewis on the Bear Stearns buyout Monday, March 17th, 2008: "The problem with the deal is that it is too low, and too favorable for Morgan. It is literally guaranteed to drive angst from the other side. Whenever you do a deal, you always make sure the other side gets to walk away with something.  If you don’t you always risk the deal falling though unnecessarily. $2 is a slap in the face to employees who have lost a life savings and have the power to block the deal. At the very least, by the building at market price and get the company for free!" | BSC calls are almost free and the JP Morgan Deal is not signed in stone Monday, March 17th, 2008 | This is going to be an exciting, and scary morning Monday, March 17th, 2008 | As I anticipated, Bear Stearns is not a done deal Tuesday, March 18th, 2008 [Bear Stearns stock goes from $1 and change to $10, front month calls literally explode from pennies to several dollars]

  2. The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008)Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 (It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC. The question is, “Can they monetize those hedges?”. I’m curious to see how the options on Lehman will be priced tomorrow. I really don’t have enough. Goes to show you how stingy I am. I bought them before Lehman was on anybody’s radar and I was still to cheap to gorge. Now, all of the alarms have sounded and I’ll have to pay up to participate or go in short. There is too much attention focused on Lehman right now.) | I just got this email on Lehman from my clearing desk Monday, March 17th, 2008 by Reggie Middleton | Lehman stock, rumors and anti-rumors that support the rumors Friday, March 28th, 2008 |  May 2008
kaiserhoff's picture

The fundamental problems with bitcoin, since you didn't ask are simple:

There is an infinite number of potential crypto currencies, so it is always a race to the bottom.  Any bar and grill can have one, just like they could print their own scrip, but it's never convertible into real goods for long.

Ths security problems are legion and legendary.

It's a massive waste of energy, intelligence, and computer power.

Working in multiple currencies is always a waste of time and adds risk.

The whole enterprise is a magnet for cops and regulators, who will destroy it at their leisure.

At the end of the day, it is mostly a silly cult, which adds no value to legitimate enterprise.

Reggie Middleton's picture

There is an infinite number of potential crypto currencies, so it is always a race to the bottom.  Any bar and grill can have one, just like they could print their own scrip, but it's never convertible into real goods for long.

Nonsense. There are hundreds, if not thousands of soveriegn currencies. do they theaten the hegemony of the USD? 

In economics and business, a network effect (also callednetwork externality or demand-side economies of scale) is theeffect that one user of a good or service has on the value of that product to other people.
Network effect - Wikipedia, the free encyclopedia

Ths security problems are legion and legendary.

More nonsense. There has never been a security breach of the bitcoin blockchain, at least not to date. I doubt you can name any other system with such a track record. You are, undoubtedely getting your intel from tabloid media, without researching the actual facts.

It's a massive waste of energy, intelligence, and computer power.

And exactly how much is being wasted? How much is the ability to sidestep the Fed, and all other central and money center banks with completely programmable money that can be sent through capital controls for pennies, instantanesouly?

Working in multiple currencies is always a waste of time and adds risk.


The whole enterprise is a magnet for cops and regulators, who will destroy it at their leisure.

Right, just like they did P2P file sharing, which works on a similar node to node concept! Cops and regulators outlawed P2P file sharing and tried to shut it down. How'd that work out? ... In North America, more than half of all upstream traffic (53.3%) on an average day can be attributed to P2P

Is the trading app referenced above a silly cult with no use in the enterprise? The software description below refers to a product that is built 100% on the Bitcoin Blockchain. You remind me of the naysayers who use to poo poo the Internet back in 1992, '94 and 1994 without even bothering to learn what the internet was. Learn, my friend... Learn...

Macro Trading Has a New Power Tool: Peer to Peer,
Counterparty Risk-Free Swaps for Value Transfer & Trading

Trade the value of over 45,000 tickers of
instruments in every asset class from every major geography and exchange with up
to 10,000x pricing leverage without concerns of counterparty/credit/default
risk or margin calls. Very big claims… substantiated by a very big discovery in
value transfer and security.

Veritaseum is the worldwide leader in the
financial implementation of “smart contracts” – unbreakable, self-executing bilateral
agreements between two or more parties. We use these smart contracts to create
peer to peer swaps for the transfer of value through the “blockchain,” a worldwide,
open ledger of pseudonymous transactions that can be seen and audited by
anyone, any time in the cloud. The blockchain is considered unhackable and one
of the most secure implementations of cryptography to date.

With the use of financial “wallets”, client
side applications that use a simple interface to guide users in the quick (as
in minutes – enter ticker(s), amount to risk, collateral, expiry and leverage required)
creation of a smart contract (in this case a P2P swap), users trade OTC directly
with other parties – totally bypassing and intermediating exchanges, with even
less risk. Monetary value is committed up front, a leverage factor is digitally
dialed in (anywhere from 2x to 10,000x) and the smart contract is created and
sent to the blockchain to await a match. Once matched, the funds are locked into
the transaction until expiry, at which point profits and losses are distributed
along with principal and unused collateral (the capital chosen to be put at
risk). A novel, risk averse, extremely powerful, and quite frankly - ingenious
way to trade macro strategies.

Not only can one go long or short any ticker
in any asset class from any region for any currency, one can go long one ticker
relative to another. For instance, those with a bearish outlook on the S&P
500 normally short it for USD. You can now short (pay) the S&P 500 index
directly while going long (receiving) Eurozone equities (or 10 year treasury
yields, or Swiss francs or the CNYPY pair or bitocin), in a single transaction –
with or out without leverage.

Since the exchange is peer to peer, we never
hold or control any of your assets, hence you are not exposed to our balance
sheet, credit, default or counterparty risks (the blockchain is your effective
counterparty). Veritaseum is a software concern, not a financial concern or intermediary!
You can always track your assets and trade through the blockchain at any time. The
capital is loaded in the wallet in the form of bitcoin, and for those who
choose to minimize exposure to bitcoin market price volatility, leverage can be
used to nearly eliminate the noise. Below is a link to an Excel spreadsheet
that can be used to model any trade in detail before actually committing capital
to a trade. You can also conduct trades using a demo mode
and test coins, so as to use the system without risking actual capital.

Best of all, since this is purely blockchain software driven, it's absolutely
free to download and use. There are no account sign ups or web site

The Shodge's picture

Buttcoin is only money as long as people agree it is money, because there is no intrinsic value. The only entity that could enforce the agreement that bitcoin = money would be a government. So as long as bitcoin is a hobby for a small group of believers, it may work for them, but as soon as it becomes a currency for the masses, a government will take it, then fuck with it, and then abandon it or replace it by a new crypto currency generating twice the number of coins in its mathematical space and give you a shitty exchange rate for your old coins. Good luck with it, I keep my gold.


doc333's picture

Regg---- Money MUST have 6 characteristics to be successful long term as money:

1) Must have intrinsic value.

2) Must be durable.

3) Must be easily divisible.

4) Must be consistent in quality.

5) Must be valuable relative to its weight.

6) Must be relatively scarce.

Gold/PMs  are some of the few things (if not the only things) on Earth that have ALL of these characteristics. Everything else is either fiat paper or unicorn notes. When I can hold a bitcoin and DO something with it, I'll think about aquiring some - 'til then, not interested.

JustUsChickensHere's picture

1) is wrong ..... nothing has intrinsic value.  Many things have attributes, and various people value those attributes... but there is nothing intrinsic about ...and that goes for gold and all PM's.

In fact, strange as it seems, the less attributes that are 'non money' the better for a money contender.

The classic example is trading recorded/stored by standard amounts of wheat ... the trouble is, wheat also has attributes that make directly useful as a food stuff.... so just using it as a trade token, impacts a possible food source (it gets hoarded as a store of wealth).

The best money, is actually useless for any other purpose... and until recently, that was gold. Now gold also has industrial uses .. so there is a competing use case that is slightly reducing gold as used for money.

Bitcoin is utterly useless for any purpose other than being used as money (or related contractul stuff - which is also a form of money).

It has all the other attributes you mention in 2 thru 6 ... and more... and at present a very small number of people realise that. Network effect is curently very low compared to the gorilla USD.... but it is increasing,