Daily Use Of Silver Coins

June 20, 2015

I was in Mexico a dozen years ago, trying to interest the three parties’ leaders to institute a Silver Backed Peso. The country was ideally situated at the time, with a National Debt and GDP that were significant but small enough to allow a reasonably large amount of Silver coinage to solve their problems. And, Mexico was – and is – the world leading country in the production of Silver.

My suggestion was simple:

  • Amass a Silver stockpile of a couple of billion ounces
  • Allow purchases to increase the price of the metal – then at the low price of $4.50 an ounce – to perhaps $100 an ounce
  • Use the knowledge of the program to gain price advantage and profits in related markets, such as Silver stocks
  • When the time was right, introduce a Peso Monetary Coin system, letting the rest of the world know that the previous purchases would NOT be unwound as Silver bullion sales – with Silver Coins bearing a specific Peso denomination
  • Continue Silver purchases so long as the Price of Silver was below the foreign exchange value of the Silver-backed Peso

The Silver coins would replace the pre-existing paper currency, with whatever devaluation/revaluation was needed to make the numbers work out. The immense profit would allow Mexico to repay its National Debt in the only existing Hard Money in the world.

Mexico’s Silver industry would get a large boost from the higher metal price, and the Silver Coin system would prevent further central bank debauchery of the Peso. With the debt repaid, interest on that debt would disappear, allowing for a tax cut which would stimulate the Economy further.

There was much more to it, but I think you get the point.

I was fortunate enough to meet with a Director of the Central Bank, with the economic team of one political party’s leadership, and with Senator Fozzie Hamden of the nation’s #2 party.

As it turned out, there was a second proposal for monetizing Silver within Mexico, which already was being considered. This Bill, created and sponsored by Mexican supermarket tycoon, Hugo Salinas Price, was the alternative which eventually was chosen.

Mr. Price’s plan called for a 1oz official Silver Coin, bearing no Peso face value. The coin could be exchanged at banks at a rate which floated (adjusted quarterly, as I recall). The rate could be adjusted in only one direction: toward a higher Peso Price of Silver.

Mexicans were allowed – and encouraged – to use the new Silver Coin in regular commerce.

It was a wonderful idea – except that since Silver hadn’t been used as money in Mexico during the lifetimes of most Mexicans, there was no reason for them to use it as opposed to paper Pesos. Except for bragging rights, the introduction of the 1oz Official Mexican Silver Coin… was a flop.

Mr. Price’s initiative was a bold move, and I offer praise for his efforts. I can only imagine what the outcome would have been had my alternative been accepted instead.

Today, in the US, our political leaders have given us the opportunity to find out. Almost 30 years ago, the Silver Liberty Eagle One Dollar Coin began to be minted by our government. It is One Dollar – legal tender. The wrinkle is that the Silver in each coin is worth around $16 Paper Dollars.

I believe that the only thing preventing its daily use in the US is a mechanism to allow for the difference between Paper and Silver. We already have a choice – with different Dollar prices for Paper or Plastic – at gas stations. We also see a fee charged for trading in your “spare change” coins for Paper, using the CoinStar machines.

I’ve identified 8-10 business pieces which would allow for daily use of Liberty Eagles in US commerce. If I see that it actually can be done, I’ll let you know my progress.

Robert (Bob)  Shapiro is self-taught in Austrian Economics and has consulted briefly for the governments of Mexico, Greece, Portugal and Spain. He has traded Gold & Silver and their stocks since 1970. Bob Shapiro’s blog is http://us-issues.com

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