Silver as an investment

The Silver Catalyst: An Exclusive Interview with Hugo Salinas Price

Be prepared for the next great transfer of wealth. Buy physical silver and storable food.

from Financial Sense
03/12/2012
By John Butler

This month I am pleased to provide readers with the transcript of my recent interview with Hugo Salinas-Price, focusing on his plan for re-introducing circulating silver coinage. For those not familiar with Mr. Salinas-Price, he has been a tireless and eloquent hard-money advocate for decades. However, rather than merely rant at the destabilizing effects of inflationary monetary policies, some years ago he formulated a detailed plan to not only help protect savers from the erosion of wealth through inflation but also to potentially catalyze a return to sound monetary policy in his native Mexico and elsewhere. While ambitious in its potential effects, his plan is nevertheless refreshingly simple and would be quick to implement, making it ideal for any country seeking a way to restore financial stability, protect savings, attract investment and create jobs.

Introducing Mr. Salinas-Price

Prior to his retirement some years ago, Hugo Salinas-Price was a highly successful businessman in Mexico. He took a tiny radio-manufacturing company and turned it into a completely integrated chain of retail stores selling a range of durable consumer goods. Interestingly, one of the ways in which he financed this dramatic expansion was by introducing vendor financing, something which had already become common in the US and a handful of other countries but was entirely new in Mexico. As such, he had much first-hand experience not only with inventory management but also with consumer credit and the associated financial risks.

As is well known, Mexico has suffered its share of credit and monetary crises through the years and Mr. Salinas-Price has had to deal with the associated challenges first-hand. He therefore has much relevant experience to share with those in the US or elsewhere in the developed world who are now facing credit and monetary crises of their own.

This he made clear, employing deeply humorous irony, at a London monetary conference back in early 2011, when he said in his opening remarks: “You know that things have got really bad when you invite a Mexican to lecture you on monetary policy!”

The Silver Catalyst

John Butler (JKB): Thanks, Hugo, for agreeing to this interview to discuss your ideas on silver monetization and sound money generally. To get us started, and before going into the details of your proposal, I think it would be helpful for our readers to have some background on how you arrived at your silver monetization proposal in the first place. Ever since the world moved away from metallic money, there has been an endless series of proposals for how to re-instate it. Was your proposal something that emerged after many years of considering how best to move back toward sound money? Or was it a specific response to a specific set of circumstances in Mexico, which has nevertheless stood the test of time and acquired a universality?

Hugo Salinas-Price (HSP): Since youth I have been keenly interested in economics and hard money. My first purchase of gold coins was when I was about 11 years old, 1943. My father gave me as a gift, a small reimbursement of money he had placed in the Mexican Lottery. He asked what I should like to do with the money, and I said, “I’d like to buy 10 two-peso gold coins”. That gave a total of 15 grams. I still have those coins.

When we had one more financial collapse in the winter of 1994-95, I was retired and had time to figure out just what was wrong with Mexico, and I came down to the conclusion that paper money was inherently unstable as a foundation for an economy; this led me to reconsider silver, which for centuries was Mexico’s currency. (When my father was born, in 1907, the Mexican peso had the same silver content that it had in 1535, when it was called a ‘Piece of Eight’ and used all around the world.)

Starting in 1995, I pondered the problem of how to reinstate use of silver, until in 2003, out of the blue, the idea of how this could be done came to me one evening: There had to be a gradual introduction of silver into circulation, in parallel with paper money, because it would not be possible to change our monetary system from paper to silver, overnight; and the insight on HOW this could be done, came to me, as I say, out of the blue: an official monetary quote of a silver ounce coin which has no engraved value; the quote to rise when silver rises, but to remain unchanged when the price of silver falls. For a full explanation, see www.plata.com.mx section in English. (Yes, it answers the question, “What happens when the price of silver falls?”)

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Thanks to BrotherJohnF