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Peter Brimelow: Will gold sector miss the party?
8:21p ET Sunday, March 13, 2005
Dear Friend of GATA and Gold:
The Reuters story appended here affirms the progress
being made in Mexico by GATA supporter Hugo Salinas
Price toward remonetizing silver, of which Mexico is
the world's largest producer. Price will address
GATA's Gold Rush 21 conference in Dawson City, Yukon,
in August.
You may particularly enjoy the comment quoted from
an average "woman in the street" at the bottom of the
story: "I can tell you one thing for sure: I don't
always stop to pick up a peso if I drop it, but I
certainly wouldn't leave a silver ounce lying in the
street."
Like South Africa, Mexico is a rich country that, at
the urging of the Western central banks, insists on
being poor. Salinas Price is showing his country
the way back to independence, a second Mexican
revolution.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Mexico Mulls Silver Lining Against Currency Crash
By Pav Jordan
Reuters
Sunday, March 13, 2005
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7885125
MEXICO CITY -- An influential Mexican businessman wants to
reintroduce silver coins as legal currency -- as in Mexico's 16th-
century heyday -- and, farfetched as it may sound, the idea is
winning support.
The Senate has already passed the initiative and the lower house is
expected to vote soon on the bill, which has struck a nerve in a
country where decades of financial crisis have fomented a deep
distrust of paper currency.
The central bank opposes the plan as anachronistic.
Hugo Salinas Price, founder of the specialty retailer Elektra, says
silver could be the shield to protect Mexicans' savings from another
currency collapse.
"The idea was born from the need to protect the currency," said
Price, whose son, Ricardo Salinas, is chief executive of Mexico's
No. 2 broadcaster, TV Azteca.
Mexico's peso is stable now and has actually strengthened of late,
but fear of currency collapse is etched deep in the Mexican psyche
after previous financial crises.
Mexico was a top supplier of silver coins during the colonial era,
when they were significant components of the Spanish and British
treasuries. The minting of coins in the New World began in 1535 in
Mexico City.
According to Price and advocate lawmakers interviewed by Reuters,
the new coins would be valued according to the price of silver as a
commodity, with the central bank, Banco de Mexico, managing coinage
and charging a 10 percent seigniorage.
The 1-ounce silver coin, called the Libertad (Liberty), would have
no nominal value engraved upon it and would circulate alongside the
conventional peso currency. Its worth would be stated daily in a
central bank quote.
Silver traded at about $7.50 an ounce on Friday in New York. The
peso was valued at about 11 per U.S. dollar.
Price said the Libertad would be protected from losing value because
losses on commodity markets would be compensated for by central bank
valuations.
Representatives of the central bank could not be reached to comment,
but it has rejected the idea in arguments to legislators, citing
concerns ranging from counterfeiting to minting costs.
Independent economists also argue against monetizing silver, saying
it has no place in a modern world of interconnected and open
economies.
Rafael Urquia, an analyst with Banamex Accival brokerage in Mexico
City, said the plan would limit the flexibility of monetary policy.
"I am inclined to think that this will not pass (Congress)," Urquia
said in a recent interview. "I would like to think that the
legislators sitting on economic committees have some common sense."
Opponents also cite the costs of adapting the currency system to
incorporate silver coins, and list the subsequent transaction costs
and even minting costs as other concerns.
"This idea of a hybrid currency seeks the best of both worlds -- and
I think that would be difficult," Urquia said.
Still, the 1994-95 financial meltdown known as the "Tequila crisis"
is just the most recent example of why some Mexicans are eager for
an alternative safe haven for their money.
Despite recent advances, Mexico still has one of Latin America's
lowest rates of savings and bank credit.
Most past crises have coincided with presidential elections, and the
tight three-way race for the 2006 vote has generated worries that
the peso could be in for a steep decline.
Still, Mexico produced some 3 million ounces of silver in 2004 and
state governors and legislators say the plan could give a boost to
the economies of states producing silver.
"We see this as a viable initiative," said Fernando Guzman, a
federal deputy with the governing National Action Party. "It would
bring a new vitality to the state economies."
Proponents of silver money cite Gresham's law -- named after the
financial agent of England's Queen Elizabeth I, Sir Thomas Gresham
(1519-1579) -- to support arguments that people tend to save
currencies with intrinsic values when they are traded alongside
fiduciary monies.
"I can tell you one thing for sure: I don't always stop to pick up a
peso if I drop it," said Violeta de la Torre, an office
administrator. "But I certainly wouldn't leave a silver ounce lying
in the street."
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----------------------------------------------------
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----------------------------------------------------
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