Mexican Congress Debates Monetization Of The "Libertad" Silver Ounce

Tyler Durden's picture

Authored by Mike Shedlock via MishTalk.com,

Guillermo Barba shares his post on a debate in the Mexican Congress to monetize the ‘Libertad’ silver ounce coin. The original article is in Spanish.

What follows below is Barba’s post in English, as it appeared on Hugo Salinas Price’s Plata website.

The Mexican Congress Debates the Monetization of the ‘Libertad’ Silver Ounce

By Guillermo Barba

On September 13th I participated in the Forum for “The Promotion of Savings by Mexicans” organized by the group “Legislators in Favor of Savings by the People” who are members of the Chamber of Deputies (i.e. “Congressmen”) in the Mexican Federal Congress; the group is led by Congressman Francisco Javier Pinto. The fact that this meeting took place at the seat of one the Legislative Houses of the Mexican Republic is extraordinary news, because there are few things so important for the development of the national economy and the economy of Mexican families, as savings.

According to the poll taken by the “National Poll Regarding Financial Participation in 2015”, 32% of the population saves informally, that is to say, by “stuffing money under the mattress” and other invented measures, and only 15% saves in a formal manner, for example, by depositing money in a bank account, or by purchasing Government Treasury Certificates (“CETES”) or by voluntary contributions to their official retirement account (“AFORES”).

These options are preferable than just saving pesos, though they are not winners, nor do they allow Mexicans to retain the purchasing power of their savings: they are only alternatives that provide less loss of purchasing power.

It is just for this reason that it is imperative to go further. At the Forum we insisted on the proposal to give a stable value to the Mexican silver coin. I’ll explain in few words.

The central feature of the proposal is that the Central Bank of Mexico (Banxico) shall determine a value in pesos for the “Libertad” silver ounce; and that this value shall be slightly higher (by a percentage that would be defined in the corresponding Law) than the price of silver in the international market, in order to provide Banxico with an assured profit in minting and placing these coins in monetary circulation.

Today, for example, at the present rate of exchange and the present price of silver, the Mexican silver ounce is worth $320 pesos. Now suppose the Proposal requires an overprice of 10%. In that case, Banxico’s monetary quote for the “Libertad” silver ounce would be for $352 pesos.

If the price of silver should plunge tomorrow to $250 pesos to the ounce, for example, the Mexican central bank would keep the monetary value of the “Libertad” ounce stable. In that way, the saver would not loose and the silver coin would remain “in circulation”. (Actually, the public will scarcely use the silver “Libertad” ounce as money, due to Gresham’s Law; practically all ounces will be held as savings for the long term or for emergencies, and the public will choose to keep on spending fiat money for daily needs, because it is money of no quality at all).

As a matter of fact, all the coins we carry around in our pockets are also worth less as plain metal, than their stamped nominal monetary value, and when their metal is worth more than the stamped value on the coins, they go out of circulation and are replaced by cheaper coins. (Why do you think we no longer see coins for 5, 10 or 20 centavos (cents) anymore, and you hardly ever see the yellow 50 centavo coins?).

On the other hand, if the price of silver should shoot upward, Banxico would have to issue new, higher quotes for the “Libertad” silver ounce (according to the formula to be established by Law). In this way, again, the coin will remain “in circulation”, and since it has no nominal price stamped on it, it will avoid ending up – like all the old silver coins that had stamped values – at the refineries.

Most of those old silver coins, once their content was worth more than the peso stamped value on their faces, ended up in the refineries. The holders of the coins sold their coins at a profit, for their silver content.

This won’t happen with the “Libertad” silver ounce, whose value will be adjusted upward, and benefit the saver, who will thus retain his purchasing power no matter what may happen with inflation. Thanks to owning silver “Libertad” ounces, the public’s savings will float on the ocean of currency through the years.

The great peace of mind for the investor, great or small, will encourage savings and financial responsibility better than any other policy of public stimulus.

This is not the first time that this proposal comes before the Mexican Congress, but we pray that this time it becomes a reality. We hope so. It’s for Mexico, the world’s Número Uno producer of silver!

Guillermo Barba

Mish Comments

This is a follow-up to a post by Hugo Salinas Price from a couple days ago. I knew this proposal was under discussion at the time but I did not have a translation.

Those interested in an excellent historical synopsis should consider A Silver Coin for Mexico: History Lesson and a Stellar Proposal

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Nobodys Home's picture

Nope. Only .999% of the time.

StackShinyStuff's picture

The odds are stacked against this being successful

The_Juggernaut's picture

Have the Mexican citizens stack gold and silver at home, but don't allow them the means to defend themselves from robbers.  There's a recipe for success.

greenskeeper carl's picture

They can gets permits for some types of firearms down there, but it is a long and odious process, so you are mostly correct.

 

Why does the central bank need to set a price for silver or gold? Just allow them to float, this sounds like price manipulation under the guise of doing the opposite.

 

But, as H_H said above, I love the Mexican Libertad. One of the most beautiful coins in circulation, IMO. It doesn't have the queen of england on them, for starters. With my children's birthday and christmas money from relatives, I try to get them at least one of every silver coin put out from across the world every year, and the Libertad is always near the top of my list. A beautiful coin that doesn't fund the US treasury, AND it doesn't have one side tainted by the queen of england on it. Only problem is, I liked them so much I always kept them on me, even when I was going ocean kayaking. It was a sad day.

The_Juggernaut's picture

What good is a permit when there's only one gun store in the whole country?  IF there's only one gun store to serve millions of people, what does that tell you about the number of permits being issued?

 

Cool looking coin, though.  Don't seem to be able to find them at a premium as low as I can get Eagles for so don't know if I'd buy more than one.

RU4Au's picture

I really like the coin and since the average skin tone in this country is darkening I thought it would be good to diversify into another coin easily recognized by that part of the population.  I just can't figure out why the premium is so high. I bought more Maples instead.

ConfederateH's picture

I like the French Marianna's and Swiss Vreneli for this reason.  No hag or despot, near numismatic value, and an official value (making it officially money).

Kafir Goyim's picture

People here on ZH are too cynical.  This is a good thing.  It provides a price ratchet to protect savers who save in Libertads.  If the price of silver goes down, they lose nothing.  If the price of silver goes up, they get to go along for the ride.  The Mexican government is completely derisking the investment in silver.

Why would they do this?  Because they see the writing on the wall as much as anybody, and the more silver in people's pockets, the fewer government people hanging from lampposts, when the fiat ponzi ends.

Also, this encourages silver to stay in Mexico, allowing the people and not just the mining companies to benefit from the rise in silver.

Additionally, since Mexico is the major silver producer, it is to their advantage to help the price of silver to rise.  If there exists in the world a riskless investment, people will flock to it, and Mexico will sell more silver at a higher price.  

Finally, Mexico will enjoy the seigniorage of coining all those libertads that will flood all over the world.  Hell, the libertad could become the new world reserve currency, just like the Peso de Ocho (Piece of Eight) was the reserve currency in 1700.  That silver also came from Mexico, by the way. 

greenskeeper carl's picture

Im aware of all that, which is why I said you are 'mostly correct' regarding the ability of mexicans to own guns legally. Yes, the premiums are pretty high. I don't buy all that many of them, I just like them a lot.

Ahmeexnal's picture

"Don't ask, don't tell" applies to many things, including gun ownership.

ConfederateH's picture

The "official" value of the coin is set by the state and it is acceptable as legal tender.  At the grocery store you would get 352 pesos for the coin and they would be forced legally to accept it.  The government makes 352-320=32 peso's just for minting it.  Its official value does not go down with deflation, but with inflation its value goes up.  The state has incentive to mint the coin and the people have a way to save with a hedge against inflation.

greenskeeper carl's picture

Good points. I suppose I'm just getting too cynical. I assume that whatever these people are doing, it will involve fuckingthe plebs somehow.

ConfederateH's picture

Pretty much accross the third world one sees a common phenomenon:  half or partially finished houses.

When people living in high inflation countries aquire capital for one reason or another they don't leave it in cash and likely they don't own stocks so often they add on to their houses as a hedge against inflation.

Price's liberdad would give poorer people a way to save and not be robbed by central banks.  That's why its not gonna happen.

OceanX's picture

Yes, your guns have been so sucsessful at keeping your liberty and jobs at home.

greenskeeper carl's picture

In this instance, we were referring to the potential theft of gold and silver if mexicans are going to be encouraged to buy them for a store of value. Thus far, my guns haven't been NEEDED to protect my shit, which is good, because they are all on the bottom of the ocean together, anyways.

UmbilicalMosqueSweeper's picture

For obvious reasons, the ruling class prefers disarmed peeons.  As a member of the elite, or brainwashed peasanty, you conveniently forgot to include an armed person's ability to protect one's property and life against criminals of all classes, including the government. Reclaiming liberty here will eventually be accomplished, in spite of the NWO socialist-communist endeavors to enslave all Americans.  As far as retaining jobs in the USSA goes...forget it!

Falconsixone's picture

Who's the winged chick?

Was she El Presidentque when the Spanish monarchy started raping and killing the poor Aztech jaguar monarchy for gold and silver and Cali brown righteousness?

sparksmass's picture

The poor Aztec's who ruthlessly murdered and enslaved every other tribe in sight?

greenskeeper carl's picture

All past slaughter done by every other people in mankind's bloody history is forgiven or forgotten right up until the point where its white europeans doing it. At that point it is used as a cudgel, forever. Aztecs slaughtering and enslaving every other mexican tribe is OK. The spanish doing it to the aztecs is unforgivable.

grasha87's picture

I have a solution to the problem of the monetary system based on debt which cause recessions. It's called the wallark, and is a currency based on Say's law: https://bunky1787.wordpress.com/2017/09/06/the-wallark-neo-scrip/

Raffie's picture

Silver maples are still a few dollar cheaper then the mexican silver.

hedgeless_horseman's picture

 

That's because the topless woman on the Mexican coin is so much better looking than the old hag on the Canadian coins.

MANvsMACHINE's picture

I want some of that Italian silver.

Implied Violins's picture

Gezzuz... that will make a Tubman bill worth less than zero.

83_vf_1100_c's picture

and I avail myself of said discount. I love Maples in white or yellow. When I want to abuse my weasel I don't pull out my stack, I go to the internet or better grab the wife, assuming she is agreeable at the time. Hint, we went for authentic Mexican food last night in little mexico 20 miles down the road. Trucks with big diameter spoked wheels with (no shit) 2" profile tires. What a moronic fad! Lots of trumpet music blaring from cars. Not one signorita who looked like the Libertad lady. Chunky young women mostly. Wide asses and bellies. False advertising on that coin? Lay a gold Maple next to an AGE and tell me which is the prettier coin.

Mr. Schmilkies's picture

But, the seniorita is mucho prettier than the Queen. 

Proofreder's picture

Hard currency

Soft porn

What's not to like ???

DjangoCat's picture

Silver Maple carries a notional C$5 value.  Does that imply the Government can take it out of circulation at the notional value through confiscation?

el buitre's picture

And silver maples are .9999.  I am currently using Libertades to make my colloidal silver and maples would have less lead and be healthier.

Kafir Goyim's picture

I have thought of using bullion coins to make colloidal silver.     How are you submerging the coins (along with their electrical contact) without ending up with that  electrical contact itself disolving along with the coin, and contaminating the batch?  I was thinking you could use gold plated aligator clips, since gold and graphite are the only things more cathodic than silver, gold won't disolve.  How are you doing it?

UmbilicalMosqueSweeper's picture

Partial submersion, or hammer the coin into a rod.  Either way, don't submerge the contacts in the solution.

Montgomery Burns's picture

Sounds like he's saying that when the price of silver rises, the price in pesos of libertads will rise, but when the price of silver drops, the price in pesos will not change. Did I read that right? Not sure how that will work out.

TheReplacement's picture

What he is saying that there is pretty much zero chance that the CB will enact policies to cause the price of silver in pesos to drop.  This is a one way train trip.

Socratic Dog's picture

Price of silver drops, but Libertad price doesn't....why would anyone buy libertads from that point forward?

If the libertad price (value in pesos) does drop, then we have libertads of different (peso) values circulating.  WTF?

tmosley's picture

>Lets fix the price of silver coins to a fiat number

Genius.

Gilnut's picture

Monitization is simply a tool used to separate a commodity from it's rightful owner voluntarily.  That's what greed gets you.

YUNOSELL's picture

Every other country is already doing it -- the pressure is on for the race to debase

peddling-fiction's picture

The kind of monetization that I like, is to apply a ONE POUND STERLING value to a UK GOLD Sovereign, to be able to move more than USD 10K on you (in theory), when crossing borders. This is all fine and good until they change the rules. Any insight from other "fellow travelers"?

https://en.wikipedia.org/wiki/Sovereign_(British_coin)

DjangoCat's picture

I have wondered about that.  The Canadian  mint 50 dollar gold ounce is considered as C$50 or C$1700 at the border? 

peddling-fiction's picture

In theory it is C$50, but it would be interesting to have a look at their precise wording.

Socratic Dog's picture

This has been discussed here in the past.  Conclusion was that bullion is not a "monetary instrument".  Ben Bernanke himself said so.  So it can only be at face value, C$50.

el buitre's picture

You raise an interesting point, but what is the alternative to fixing the price on a daily basis against the central bank’s fiat and the international price? At the moment, of course, the “international price” of silver is rigged by the naked shorting of future contracts to a small fraction of its real value, much more so than gold at the current 80 to 1 ratio.  I live in southern Mexico, and Hugo Salinas Price is an interesting character.  He is a billionaire and owner of one of the larger of Mexico’s banks, Azteca, as well as a department store chain, Electra, both all over the country and under the same roof.  He is totally bilingual as he was raised partially in PA and is now in his 80’s.  He is a huge advocate for “honest money,” which in the case of Mexico would be silver as it is the world’s largest producer.  Mexico’s 99% were totally screwed when the peso was reset in the 1980’s.  BTW, for those who think that mega inflation of the dollar will get them out of their mortgages, the reset made it very clear in Mexico that the sums owed on mortgages would be recalibrated to the new money and the mortgages became more onerous.  Anyway, Mr. Mosley, what is the alternative to Salinas’ idea?  Go back two hundred years when all money was silver coins?  That would be great, but would never pass the Mexican Congress at this point.  What Salinas is trying to do is to set up a halfway measure that would once again make the word plata synonymous with money and protect Mexican savers.  Unfortunately his bank has a usurious 20% buy/sell spread on Libertades.  But by setting a fiat floor on silver via the central bank, this measure would encourage Mexicans to put their savings into real money as the Indians do with gold.

Gilnut's picture

Or they are simply setting an artificially low price in order to encourage the "plebes' to turn in their silver for paper.  It works both ways, and which way do you honestly think GovCo WANTS it to go?