LIBERTAD by Hugo Salinas Price
The last Mexican economic debacle of 1994-1995 prompted my search for monetary stability.
Intuitively, I first thought of gold, but I reached the conclusion that the enmity of the United States and of the IMF toward the monetization of gold would make that avenue a dead end. Therefore, I took the alternate route, a plan to monetize silver, a metal of which Mexico is the world's No. 1 producer.
Mexico's history is inextricably linked to silver money, since silver minted in Mexico was the world's most important money for centuries. I should point out that the U.S. silver dollar, as defined in the Constitution, is based precisely on the characteristics of the "Ocho Reales" coin minted in Mexico.
The memory of our silver coinage is still with us. It was a popular coinage for everyday use, unlike the gold coin that was reserved for more important transactions. The gold coin disappeared anyway, after U.S. pressure following the Spanish-American War forced Mexico into the monometallic use of gold.
The Mexican audiences that I have addressed in the last nine years have enthusiastically received my idea regarding the introduction of silver into circulation. It is too early to say whether or not my plan will come to fruition, but there are hopeful signs.
I believe that the only road to a monetary system that permits the survival of industrial civilization is one that retraces the steps that carried us to our present state.
Paper money was introduced after real money already existed. For a time, paper, gold and silver money circulated together, side by side. Overextending and mismatching credit finally resulted in the creation of such large amounts of paper money that real money became an obstacle to further creation of paper money.
I believe that we must go back the way we came, by reintroducing real money to circulate in parallel with paper money.
I cannot imagine any country in the world - or any group of countries - reforming paper money and the banking systems as we know them and reinstituting gold or silver coinage and bills redeemable for metal at sight.
I do not believe that the world's monetary and financial system can be reformed; any attempt at reform would decimate the world's economic activity instantly. There is no alternative: We have to let the world's monetary and financial system proceed to its own destruction; we cannot "go back to gold."
What we must therefore strive for, as much as possible, is the reintroduction of silver or gold - or even both - into parallel circulation with the fiat paper money we presently use everywhere. Eventually, the world fiat money system will destroy itself through its inherent defects.
Humanity has selected gold and silver as money. No other metals or objects have served humanity so well. Precious metals will never be supplanted by fiat money. The era of fiat money in which we find ourselves living is an aberration in human history and will soon pass.
Once silver and gold are in circulation with paper money, a number of positive changes will begin to emerge. These results will further enhance the attraction of precious metals as money, reinforcing the movement.
Slowly, the world should begin to regain its monetary and financial composure, after the paper orgy of the past hundred years, with paper issue tamed and civilized by the presence of gold or silver circulating in parallel with it.
Is there a political will to implement my plan anywhere in the world? That I do not know.
However, I do have the conviction that the plan I propose will work, and that silver in Mexico, or gold in the United States or Europe or anywhere else, can be brought into circulation in parallel with paper money.
I believe my plan offers a viable way to "get there from here". It does not address the reform of the present worldwide system of fiduciary money. It outflanks the problem by resorting to the introduction into circulation of real money, in parallel with fiduciary media.
It is my fond hope that other minds interested in the vital subject of sound money may find some inspiration in what I present, and that better minds than mine may wish to focus their political efforts and monetary research along the lines I am sketching.
Precious metals are painted as "antiquated", and have been superseded by technology and modern finance. Those of us who insist on gold currency are derisively labeled "goldbugs"; however, as soon as we are able to put silver or gold into circulation with paper, all those arguments crash. As with all things that are to work naturally and automatically among millions of human beings, simplicity is essential.
The plan I propose is quite simple.
1. The 1-ounce troy pure silver Libertad coin minted by the Mexican Mint will be selected as the coin to circulate in parallel with paper (fiduciary) pesos. This coin will have no nominal value engraved upon it. This is an essential characteristic of any coin that is to circulate in parallel with paper money.
2. The Mexican central bank will issue a daily quote on the full legal tender value of the 1-ounce Libertad coin, expressed in fiduciary pesos. At its quoted legal tender value, the coin is good for all types of payments, without discount of any sort.
3. The Mexican central bank will not reduce any quoted value of the Libertad ounce in fiduciary pesos, in any future quote. Successive quotes may stipulate a higher value in fiduciary pesos or may remain unchanged for a period of time, but quotes will never be lower.
Such is my plan for the introduction of silver into circulation in Mexico.
Regards,
Hugo Salinas Price for The Daily Reckoning
Editor's note: Hugo Salinas Price is president of the Mexican Civic Association Pro Silver. Since the peso crisis of 1995, Salinas Price and other outspoken peers have dedicated themselves to spreading the word about real money.
For 35 years, Salinas Price was CEO of Elektra. Under his leadership, Elektra grew from being a small electronics store into a publicly traded behemoth with over 600 stores nationwide.
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-- Posted Tuesday, September 14 2004
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