A Brief Explanation of:
The Project To Monetize the One Ounce Silver "Libertad"
Coin
Hugo Salinas Price
Oct 27, 2006
A presentation to the monthly meeting of the "Círculo
de Estudios México" ("Circle for Mexican Studies")
on October 2, 2006, chaired by its founder, former President
Miguel de la Madrid Hurtado (1982-1988)
1. We are not the first to insist upon the monetization
of the silver ounce. President José López Portillo
intended to do this, in 1979; he wished to turn the silver ounce
into money for an amount equivalent to its quote by the Banco
de México (the Mexican Central Bank) and with that in
mind he drew up the corresponding legislation which he proposed
and which Congress approved in December 1979. During the space
of two years, the population attempted to use this monetized
silver coin as money in transactions, but the effort had to be
suspended in December of 1981 for the simple reason that the
legislation was defective.
2. According to the legislation of López
Portillo, the silver ounce rose in monetary value when the price
of silver rose and it received a correspondingly higher quote
from the Central Bank. This condition, that the quoted value
of the silver ounce should rise when the price of silver rises,
is incorporated in the new legislation proposed by the Mexican
Civic Association Pro Silver, and simply takes up what was previously
proposed by the López Portillo legislation. We are proposing
nothing new here.
3. The error that determined the failure of the
attempt on the part of president López Portillo to monetize
the silver ounce was that any coin that is to be used as money,
must have a nominal value which cannot be reduced. All
the coins we use, as well as all the bills we use, bear either
an engraved or a printed value, and this value can never be reduced.
A legal stipulation in the sense that the value cannot be reduced
would be, in the case of these coins and bills, utterly redundant;
the Law does not require this stipulation because it is impossible
to reduce the engraved or printed value of coins and bills. However,
in the case of a coin with no nominal engraved value which is
to be turned into money - as was the intention of López
Portillo - we must have explicit legislation, so that
this condition which is implicit in our present coins
and bills, may be stated explicitly in the case of the
"Libertad" silver ounce. This explicit statement in
the legislation is indispensable in order to fulfill the desire
of López Portillo to turn the silver ounce into money.
It was the absence of this stipulation which led to the failure
of López Portillo's effort. That the quote of the silver
coin shall not be reduced in value is a principle which already
operates, necessarily, with all coins and bills which we use
as money. There is nothing new in the principle. The only novelty
in our project is that, in the case of the monetization of the
"Libertad" silver ounce, that nominal value shall be
virtually engraved and not physically engraved as is the case
at present with our copper-nickel coins.
4. With regard to the re-valuation of silver on
the part of the Central Bank, the Central Bank has in fact been
re-valuing silver from the period 1947 to 1967 and beyond. If
we look at the attached graph, we shall see that it is evident
that each new minting of peso coins after the one peso 0.720
coin (1920-1945) incorporated a re-valuation of silver, which
took the form of a reduction in the quantity of silver in
the Mexican one peso coin. This entailed an expensive process
of retiring all the previous coinage from circulation, which
was demonetized because it had reached the "melting point",
and of minting new pesos which incorporated the new, higher value
of silver. The monetization of the silver ounce which is proposed
by the Mexican Civic Association Pro Silver requires a re-valuation
of silver when its price rises. The principle is not new, but
up to this date, it has required new coinage. With the
proposed legislation, no new coinage will be required. The same
coin, revalued from time to time, with a quoted nominal value
which cannot be reduced, will remain in circulation permanently.
5. A silver coin in permanent circulation as money,
whose value rises with the price of the silver it contains, is
of incalculable political and social value. Such a coin becomes
a permanent institution, tangible and visible, which gives
continuity and solidity to the sense of nationality. By avoiding
the re-minting of coinage, which the previous use of silver in
our coins required - and which implied the demonetization of
national savings every time this was carried out - the same coin,
the "Libertad" ounce, with a growing value, becomes
an ideal vehicle for savings; a vehicle immune to monetary inflation
and to the financial woes that may overtake the nation.
6. This coin favors savings in the most effective
way possible, because it offers the saver something that is worth
saving. This form of saving does not require high interest
rates. Whatever silver is minted will go to savings as long as
money in circulation continues to grow. Only when money in circulation
stops growing - a hypothetical situation far over the horizon
at present - would these coins emerge from savings to circulate
alongside paper money in commercial operations.
7. Those saving the silver ounce turned into money,
will immediately have the option of financing their projects
with their saved silver. Silver in custody accounts will immediately
and unquestionably be accepted as prime quality collateral by
the banking system for loans in pesos at the lowest possible
rates - similar, perhaps, to the rates which prevail on government
securities.
8. As we have shown, the project for the monetization
of the "Libertad" silver ounce includes nothing new
in principle and it is actually only an adaptation to modern
conditions of principles which have always operated with regard
to coinage: the re-valuation of the silver in the coin
and the stability of the nominal, "quoted" value,
by means of a quote which cannot be reduced, which thus gives
the coin a virtual "engraved" value, instead
of the physically engraved or printed value which is displayed
by our present coins and bills.
Una explicación breve del proyecto
para monetizar la onza de plata 'Libertad'
 Hugo Salinas Price, President
Asociación Cívica Mexicana Pro Plata, A.C.
email: 254hsp@elektra.com.mx
website:
http://www.plata.com.mx
321gold Inc
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