[A-List] Libertad: The Silver Peso

["Anne Williamson" <annewilliamson@xxxxxxx>]

The Daily Reckoning PRESENTS: Hard Money week - the fight for real money.
Our first essayist in this week's Hard Money series is vying to back the
Mexican peso with a circulating silver coin.

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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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