How One Billionaire Became A Gold Bug

Tyler Durden's picture

Submitted by Michael Shedlock via MishTalk.com,

Hugo Salinas-Price, a hard currency advocate, and the founder of Mexico’s Elektra retail chain explains in the following guest post how he became a gold bug.

 

2-peso-gold

How I Became a Gold-Bug by Hugo Salinas Price

My father was Hugo Salinas Rocha -“Salinas” was his father’s surname, and “Rocha” was his mother’s surname; the custom of using both parents’ surnames is universal in Latin America. Father was a successful merchant in Mexico City, and in the 1930’s he ran a store in downtown Mexico City. The store belonged to a company founded by his father, Benjamin Salinas Westrup and to the partner he took into the business, his brother-in-law, Joel Rocha Barocio; the company name used their initials: “SyR” (the “y” means “and” in Spanish).

 

I was born in 1932. As a little boy, I loved to play in my father’s store after school hours, and one afternoon when I was perhaps eight years’ old, one of the salesmen took two gold coins out of his vest pockets (men wore vests in those days). They were the large, 1.2 ounce gold “Centenarios” that had been minted to celebrate the 100th Anniversary of Mexican Independence from Spain in 1810. The salesman balanced the two coins on his forefingers, and placing them near my ear, he gently touched one against the other. The sound was the delightfully pure ringing of gold!

 

A couple of years later, when my father was driving home after the store closed, he pulled out a lottery ticket from his coat and said: “This lottery ticket did not win a prize, but it did win a refund of 100 pesos. I’ll give you the refund. What would you like to buy with the refund?” I unhesitatingly replied: “Buy me some gold coins!” So the next day, a salesman from my father’s store took me on a short walk downtown, from the store to a side-street. Three or four men in suits and wearing hats – men wore hats in public, in the 1940’s – were posted along the sidewalk, and were clicking gold coins in their hands. They were gold-traders, and clicking gold coins was their way of attracting the attention of customers.

 

At that time, the silver pesos we used as money could be exchanged for gold pesos at a rate of five silver pesos for one gold peso. The smallest gold coin was the 2 peso coin, with 1.5 grams of pure gold content, so each one cost ten silver pesos. Thus, on a sidewalk in downtown Mexico City, my gift of 100 silver pesos was exchanged for ten 2 gold peso coins.

 

I went home with my gold coins, and promptly put them in my father’s safe, to which he gave me the combination. They were really the only thing of value in the safe, and from time to time, I used to open the safe to examine the beautiful gold coins. So that’s how I became a gold-bug at age 10.

 

When I was 14, in 1946, I was taken to school to my mother’s home-town in the US. The only person I knew there, was my maternal grandmother, but everyone knew who I was – the son of Norah, the Price girl who married a Mexican in 1931 and went off to Mexico to live. I was at school for three years of high school, and very much enjoyed my time there.

 

During my years at school it never crossed my mind to think that of all the people in that small town, I was very probably the only person – and only a youngster, at that – who had ever seen a gold coin, let alone owned one. Americans are still generally unaware of gold money, since they were deprived of it in 1933 by FDR, and only allowed to own gold again in 1971, thanks to the efforts of the great American Jim Blanchard.

 

What happened to my little stash of ten 2 peso gold coins? I still have them, after all these long years – I am now 84. Slowly but surely, they are growing in value, and they are still obtainable today, in exchange for 1,523 pesos each as of this date. These are really 1,523,000 pesos if we take away the artificial revaluation of our Mexican money in 1993, when every 1000 pesos was converted into 1 “new” peso. So my gold coins went from 10 silver pesos in 1942, to 1,523,000 paper pesos in the course of about 74 years.

The original post is at Hugo’s Plata website, How I Became a Gold-Bug.

I am pleased to have Hugo as a personal friend. His knowledge of history is nothing short of amazing.

Hugo is a tireless promoter of sound currencies, and President of the Mexican Civic Association Pro Silver, A.C. He is on a mission to get Mexico to adopt a silver coin as legal currency.

We wish him success.

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ztoko's picture
The information and the detail were just perfect. koleksi sandal I think that your perspective is deep, it’s just well thought out and really sandal branded fantastic to see someone who knows how to put these thoughts down so well.
Urban Roman's picture

Thought it was going to be an article about Kyle Bass.

Did he ever actually get Texas delivery on that gold, by the way?

Delving Eye's picture

Another advertorial for gold bugs.

Son of Captain Nemo's picture

Another advertorial for gold bugs.

vs.

Another advetorial for monetizing/war monger'ing Kikes that "loot"!

Fixed it!

ilion's picture

The best story on Zerohedge for the last 10 years! Bravo!

xythras's picture
xythras (not verified) ilion Oct 25, 2016 1:40 PM

So he has $822.65 in gold coins (according to XE.com)  

LOL

cowdiddly's picture

First two I bought were $42 each. I though it was little high at the time.

TrumpXVI's picture

The Mexican gold Peso is a stunning, beautiful coin. I have a 50 Peso; 1.2 oro puro coin.  It is impressive.

Latitude25's picture

My lcs had 50 peso coins for $15 over spot a few months ago.  Sadly no more.

pound the vix's picture

For those of you wondering 1,523,000 peso = $86,000

sampo's picture

For 10 Silver Pesos, that sounds about the right scale of correction, once we're done with this paper charade.

withglee's picture

Does that include the 1/1000 devaluation in 1992?

I have some 1975 peso currency that is now 1/10,000th what it was worth when I was in Mexico and used it in trade. Worked great for the week I was there. As I recall, the 230 of those 1975 pesos I have now was worth about $35 then (about 7 HULs). I just stuck them in my drawwer. If they were from a "proper" MOE process they would still be worth about 7 HULs ... instead of 0.0007 HULS ... about the size hole you would get by scraping your heel in the dirt one time.

Why we put up with these ridiculous improper MOE processes is beyond me.

And don't recommend gold as an alternative. It would have just strangled trade completely over that same period ... and during the week I was trading in Mexico.

Big Boss Man's picture

I felt I was overcharged in 1986 when I bought a 1 Oz gold Eagle for $450.00.

withglee's picture

I felt I was overcharged in 1986 when I bought a 1 Oz gold Eagle for $450.00.

How do you think the guy who bought one in 1980 felt ... having paid nearly twice that much and never seeing it go up once. And how did you feel in 2,000, 14 years later when it was $300? Now if you bought in 2002 you look like a real genius. That's when I thought we were going into hyper-inflation. But lo and behold, someone grabbed the reigns in 2010 and showed many of us that we didn't have a clue.

Actually, I still remember some guys saying they bought the really good stuff ... in 1980 ... that $800 stuff.

Gold is a pitiful bad joke!

prefan4200's picture

"...1,523,000 paper pesos..."  ....Paper?  Uh oh...

Jonas Parker's picture

I remember buying 1/10th ozt gold coins back in the early 1980's for $30 each. Wish I'd bought more (lots more) now...

withglee's picture

Wish I'd bought more (lots more) now...

So you could sit on them too ... like a hen sits on an egg? If you're never going to give them up, what difference does it make?

Latitude25's picture

And what if I told you that yes I do plan to give them up under the right conditions?

withglee's picture

And what if I told you that yes I do plan to give them up under the right conditions?

I would predict those right conditions will never occur. You are in love with your gold and you won't part with it.

I am in love with my land but it sustains me. I can "eat" it ... the fruits of it anyway. I can build with it ...  "the fruits of it anyway". I can insulate myself from annoying people ... they can't even see me for the trees. And I'm totally off the grid and pay less than $50 per acre per year taxes ... and pay no insurance and no interest.

Compare that to gold (of which I have about an equal amount). It is a perpetual annoyance to me. Plus, it's in a foreign vault so I have to pay import duty just to get my hands on it.

Enjoy your gold. Want some of mine? Willing to pay the transaction cost to have it? Willing to trade it for a rural acreage in a low tax low services county ... at the equivalent number of HULs I acquired it (it trades for far few HULs now)?

I'd trade in a minute. Put your money where you mouth is.

Beowulf55's picture

...and when you can't pay the tax man when hyper-inflation comes along?  What happens then?

withglee's picture

...and when you can't pay the tax man when hyper-inflation comes along?  What happens then?

Read "When Money Dies" by Ferguson.

That tax man in the time of hyper-inflation has far more things on his plate ahead of collecting taxes from me ... his own survival, for instance.

Everyone, not just me, will great him with a bucket of tar in one hand and a bucket of feathers in the other ... and now wearing his new suit of clothes, all will tell him to go pound sand.

withglee's picture

my gold coins went from 10 silver pesos in 1942, to 1,523,000 paper pesos in the course of about 74 years."

... but won't trade for the same size hole in the ground. In fact, he has no idea what size hole in the ground they would trade for in either instance. Thus, gold solves "nothing"! It just adds one more variable to a mechanism that has more degrees of freedom than any freedom loving people ever had.

Latitude25's picture

And if the dollar hyperinflates what do you plan on holding as a physical asset to retain the value of your previous earnimgs?  Don't bother with your moe diatribe again.  A simple list of hard assets will suffice.

Livermore Legend's picture

The Difference between Ignorance and Stupidity is that the Former is Curable through Application and Discipline, while the Latter is a Condition, rarely Cured.

There will be No Hyperinflation in the United States, nor any Collapse of the Dollar. 

As for the Salinas-Pliego Family, from the Time I first warned them their Fortune was Peaking to Now, they are Down about 70%.

To Put that in Perspective, they could have spent $ 1 Million Dollars EVERY SINGLE DAY since that Time to Now, and they would still have $ 10 BILLION more Dollars then they have now. They have been Working for Nothing for many years now, and will continue to - all the way down.

As for their Future, the BEST they can HOPE for is to "Only" end up 90% Down.

Unfortunately, it is more likely that they will be one of the Billionaires who actually don't make it to the Real Bottom ahead.

But they will have lots of Company.

They would be Wise to learn the Lesson from Eike Batista.

When they get tired of Losing, I will be Happy to take the $ 100 Million, assuming "Tocayo" doesn't beat them to the Punch.

As they say in Mexico, this is Business, Not Romance.

As for the Hugo, he is one of the Smartest Men in Mexico, and an Awesome Historian.

One of the best things he ever Wrote is called "The Matrix of Power".

Actually, one of my all time favorites.

But he doesn't understand much about Markets and the Dynamics therein.

The "Potent Director" Delusion by the beheld, and the Illusion by the Minions below, continues to Live On in Markets.

A Mistress cannot Serve Two Masters.

As for Mexico on a Silver Standard:

Assuming Arguendo you would not back One Peso of the entire Economy of $ 1 Trillion with Silver, and yet still have a "Silver Standard", Mexico would still need $ 500 BILLION in Silver Reserves to at least back up the Debt of the Nation.

Otherwise, the Debt is only backed up by "The Promise to Pay" - like every Country in the World.

Mexico doesn't have $ 500 Billion in Silver Reserves, and Never will.

You See, Insolvency is the same whether the Debt Bubble is $ 500 Billion, $ 20 Trillion, or $ 35 Trillion.

No Metal "Standard" Can or will Solve that.

And by the way, I am not the least bit interested in being a "Legend" of any kind, Mentally or Otherwise; only a Billionaire in My Own Right.

Got US Bills ?

 

 

 

 

 

 

 

Latitude25's picture

US bills?  LOL. Eveey fiat currency ever created has eventually gone to zero.  None.  No exceptions.  Good luck.

CatsPaw's picture

"There will be No Hyperinflation in the United States, nor any Collapse of the Dollar."

The difference between information and propaganda is that information can be backed by data.

Empty statements will not change views of anyone.

The only difference between your statement and "Tomorrow Aliens will colonize Earth" is that more people believe your statement to be true. That is sometimes called wisdom of crowds, other times mass stupidity.

Collapse of the "dollar" is no different than the collapse of any currency. It is never triggered by the economical situation of a country or its relative economical situation to other's countries currencies.

It is always the greed of the people that kills it (and historically, humans have always been greedy).

 

Data shows that all currencies have gone to zero (this includes things that have been used as money like sea shells or white pepper). The reason was that people who wanted more money found a way to make too much of it for the sociaty to absorb it compared to the goods that were offered.

Most people forget its not about the quantity of money, its about the relation of quantity of goods vs quantity of money. (If gold was everywhere, it would suck as money).

The dollar will crash when there are no goods/few goods, and there are still alot of dollars (signs already are showing up in some areas where people are starting to use barter instead of dollars, but so far those are isolated events... of course it always starts with isolated events).

 

Also dont forget, many people dont care if they are stupid or ignorant, they like to be that way.

withglee's picture

And if the dollar hyperinflates what do you plan on holding as a physical asset to retain the value of your previous earnimgs?

I have substantial gold and junk silver. It still won't trade for as many HULs as when I acquired it ... so it obviously isn't money. If we have a real calamity, the silver may trade for groceries. The gold for maybe a flight out and some land where I end up. Otherwise, it's worse than useless.

I have lots of cement blocks ... I use them for various projects on my property. They actually still trade for the same number of HULs as when I acquired them ... some 12 years ago. In a calamity they may be trading bait and offer some (momentary) defense.

I have a house I used to live in. It got to where I couldn't afford to live in it at retirement (with enormous increases in taxes and insurance), so I rent it out. Its appreciation has been pretty minimal over the 25 years I have been delivering on my trading promise to acquire it as it is now being encroached on by low income people (i.e. the neighborhood is going south).  I would have completed this trading promise long ago if it hadn't been for the fact that all I've really been doing is collecting taxes, insurance, and interest and passing it along to capitalists. If I sell it (as opposed to trading it), the twerps in government will claim taxes amounting to 3/4ths of the change in price resulting from their counterfeiting operation (i.e. inflation). In other words, I gain zip from owning the house ... same as renting.

Far and away, my best store of wealth has been the property I live on now. It's an unimproved acreage with a minimal shelter. It's in a low tax, low services rural county. It is beginning to appreciate wildly as civilization encroaches. I've scoped out a replacement property 20 miles further into the absence of civilization.

In summary ... buy land in a low services low tax county ... and sit on it.

Buy gold and silver at your peril. It has never been and never will be money. It's just a clumsy, expensive, inefficient, and hard to obtain stand-in for real money ... which is obviously "an in-process promise to complete a trade" in a "proper" MOE process.

If people would ever buy into my MOE "diatribe", things would have been and would be very very much different. If they bought into your "gold is money" religion, I would have been tits up and room temperature from strangulation years ago ... as would be everyone else. Gold makes being called stupid look like a complement.

OneZero's picture

I don't think either of you are wrong, Brother. Buy some land in a safe, low-services county, put a little house with a well and an energy system on it. Then dig yourself a cache and drop in some gold coins. Balance in all things. Place is good, but movement may mean life. Be able to do both.

OneZero's picture

I don't think either of you are wrong, Brother. Buy some land in a safe, low-services county, put a little house with a well and an energy system on it. Then dig yourself a cache and drop in some gold coins. Balance in all things. Place is good, but movement may mean life. Be able to do both.

withglee's picture

with a well and an energy system on it.

Collect rain water and store it in a cistern. You only need a tiny systems to collect and store energy. Just use it where there is no substitute for electricity. I've done that for 12 years. Life is good ... every bit as good as all those years of waste and keeping up with the Jones'

Then dig yourself a cache and drop in some gold coins.

This is just plain stupid. Use that gold to buy land in separate locations. If you ever get a chance to use the gold ... you have no chance at all. When it hits the fan, I really don't expect to be able to trade my gold for passage to a safe place. I feel much more comfortable with my lead.

blargg's picture

I'd like to read more of what you're talking about, so I can understand why you get downvoted so much. Not finding much on the web when I search for "MOE" and "HULs".

withglee's picture

I'd like to read more of what you're talking about, so I can understand why you get downvoted so much. Not finding much on the web when I search for "MOE" and "HULs".

MOE: Medium of Exchange (or Media of Exchange depending on context). Media: Money. Medium: The process money operates in.

HUL: Hours of Unskilled Labor. The very best unit we have for money. The size hole in the ground that a HUL has traded for forever has never changed. It is a perfect unit for money. We all have perspective. We were all HULs at least at one point in our lives. We trade with HULs every single day ... with almost every trade. They are delivered at fast food restaurants, the convenience store, the grocery store, and one "always" mows your yard (usually it's you).

Money is obviously "an in-process promise to complete a trade".

The proof:

Examine trade: (1) Negotiation, (2) Promise to Deliver, (3) Delivery. With simple barter exchange, (2) and (3) happen simultaneously on-the-spot. Gold, currency, coins, etc. fit this case. So do ledger entries. Money, invented by traders for traders, enables (2) and (3) to happen over time and space.

Therefore, money is obviously "an in-process promise to complete a trade" ... and gold is obviously "not" money. It is a completed "delivered" trade.

On the other hand, a "credit" card purchase "always creates money" ... and it is the trader (like you and me) that creates that money ... not the bank that issues the card. They are just the score keeper. When you pay your balance monthly, you have a "proper" MOE process. When you let a portion ride at interest, you are submitting to the capitalists con. A proper MOE process could easily be instituted to compete with the con ... and the con would wither on the vine.

A "proper" MOE process:

Knowing what money obviously is, we also know it is obviously "created by traders making trading promises" ... and that's the "only" way it is created. The process documents the promise and certifies it. Those certificates (be they coins, currency, or numbers in a ledger) then circulate as the most common object of every simple barter exchange.

On delivery, the trader returns certificates of like amount (ideally denominated in HULs) and they are destroyed. No money exists before the trade or after delivery for any given trade. Thus, the supply and demand for the money itself is in perpetual perfect balance ... it "can't" change value ... zero inflation is "guaranteed". And the MOE process has no concern about how the traders value their trade ... it cares nothing about prices or levels of employment. It has no "policy". It is only concerned with putting HULs into circulation and taking them back out in lock step with trader's actions.

In the event the trader fails to deliver on his promise, there is a "DEFAULT". The process "immediately" detects DEFAULTs and mitigates them with INTEREST collections of like amount. This reclaims the orphaned certificates and they are destroyed. The operative relation is: INFLATION = DEFAULT - INTEREST = zero.

The MOE we trust our Treasury and Fed with has most of the components needed by a "proper" process. However, there is "no" linkage between INTEREST and DEFAULTs. There is also no linkage between trading promises in process and money in circulation. That's two unnecessary and undesirable degrees of freedom added by capitalists.

Capitalists have co-opted the traders invention and made everyone believe "interest is the cost of money or the time-value of money". And they take "tribute" on every trade as a result of that con. Further, they institute Governments to protect their operation. They then allow the government to "counterfeit" the money at will. They call it a roll over but just like any other counterfeit, it is money creation with no corresponding promise or intent to deliver.

Examine our monetary system. 100% of what you pay in taxes goes to capitalists as tribute (they call it interest). 100% of the government sustenance comes from inflation (they call it treasuries ... and they continuously roll them over ... and that is counterfeiting).

3/4ths of the fruits of all your labor go to paying interest to capitalists. And then you have the 4% leak known as inflation that goes to government.

It's just that simple. Why in the world do we traders tolerate that nonsense?

I get down votes because here at ZH this is about religion ... not rational logical thinking.

Multi's picture

Solves the problem of storing value.

withglee's picture

Solves the problem of storing value.

Oh really? Explain why the gold I traded for HULs just four years ago trades now for about 1/3 to 1/2 fewer HULs? To me that's a major leak in value.

blargg's picture

Save PMs for long-term value storage through the worst of economic circumstances.

withglee's picture

Save PMs for long-term value storage through the worst of economic circumstances.

Contrast that with raw land in a low tax low services county.

Fizzy Head's picture

All due respect Mr. glee, land and housing in many areas of this country is way over valued due to the reckless and greedy nature of paper money printers,, and your obummer has done nothing to stop that. Gold and silver have been paper manipulated as well.. But it's way undervalued and will show their true colors when people tire of the bankers bullshit.

/rant

withglee's picture

All due respect Mr. glee, land and housing in many areas of this country is way over valued due to the reckless and greedy nature of paper money printers,, and your obummer has done nothing to stop that.

Wrong. The effect caused by "money printers" is universal. Your "over valued" problem is one of supply and demand at the locality of your concern. I use the same money you do. I don't have the problem. I know places where the problem is even less than the one I have. And what do you mean "your obummer"? I voted for myself ... the best person I could personally vote for.

Gold and silver have been paper manipulated as well..

So what? So have stocks in companies? You are obviously a Mises Monk. Those things are not money. They're just stuff. Our money is not being manipulated ... it's being confiscated by capitalists (they incorrectly call it interest) and counterfeited by governments (they call it rollovers of treasuries).

But it's way undervalued and will show their true colors when people tire of the bankers bullshit.

And this reveals the "control freak" attribute of Mises Monks. They "know" when something is undervalued or over valued. Wake up people. The value of something is what traders who exchange it agree it to be. Your value "guess" is irrelevant.

The way to get rid of "bankers (and governments) bullshit" is to institute a "proper" MOE process to complete with theirs. Traders will discontinue their use of the bankers / governments "improper" MOE process and it will die from lack of customers.

It's just that simple.

Uranium Mountain's picture

Interesting the dallor is up to almost 99 today and Gold also up $8.  It's like there is fear in the air.  

vasallo7g's picture

if you look at silver and gold is the same as bitcoin, it looks like once in a while the market wants to bring them down, but they keep raising, its getting harder to keep the fake market

flyingcaveman's picture

He would have been even more better off keeping the 100 silver pesos.