Why did it go out of circulation.

How can we reintroduce it into circulation.

The silver coin in Mexico

Hugo Salinas PriceAugust, 2005.

• Mexico has been famous for its silver coinage for centuries.

• The Central Bank of Mexico has coined various ‘silver pesos’ since its creation in 1925, up until the present.

• A constant political effort to use silver in Mexican peso.

• The flaw: engraving a nominal value on the coin.

Background

Silver peso 1920–1945

Silver pesos 1947–1954

Silver peso 1957–1967

• The introduction into circulation of a silver coin with no engraved nominal value: the ‘Libertad’.

• A fluctuating value –based on its silver content.

• It is a legal tender coin.

Monetary Reform of 1979

‘Libertad’

1 ounce of pure silver, issued by Mexican Mint.

The ‘Libertad’ with no engraved nominal value has never reached the ‘Point of Fusion’

• In spite of devaluations, it still exists.

• There are over 20 million saved by the Mexican people.

However, it was not possible to use this coin as planned, as a means of payment

• Because of its fluctuating legal tender value, the public suffered losses when using the coin as money, when legal tender value fell.

Conclusions

• There has been a constant effort to use silver coinage.

• The mistake: an engraved nominal value, for these coins all reached the ‘Point of Fusion’ (due to devaluation or inflation or a rise in the price of silver).

• The ‘Libertad’ ounce: a fluctuating legal tender value blocked its use as a means of payment.

1A coin with a quoted nominal value

• A ‘quoted’ nominal value – not engraved value.

• It will never reach a ‘Point of Fusion’.

• Seigniorage for the Central Bank will allways be positive.

The solution

The solution … (cont’d)

An official quote from the Central Bank

• This quote will be its legal tender value in Mexican pesos.

• Both quoted and engraved nominal values fulfill the same function: to comunicate the value.

• The quoted value can be made public by the Press, Radio, Television, the Interbank Net and the Internet.

2

3“The value of the ‘Libertad’ ounce must increase, when the price of silver in pesos goes up, but it must retain its last quoted legal tender value, in case of a fall in the peso price of silver”.

Commerce will accept this coin in payment, without registering losses.

The legal tender value, once quoted, must not be reduced.

The solution … (cont’d)

Example of quotation

The graph shows us:

‘Libertad’ would never have reached its ‘Point of Fusion’ and therefore, it would have remained in circulation.

The Central Bank would have received a constant seigniorage.

Commerce would have accepted it as means of payment, since its legal tender value would never have been reduced.

Sources:

Historical price of silver: www.kitco.com

Historical exchange rate of the peso: Banco de México.

Historic experience confirms that, THE OUNCE, LIKE THE 0.720

PESO, MUST NOT BE SUBJECT TO FALLS IN ITS QUOTE.

The quote line must be HORIZONTAL

• The Mexican monetary unit will remain the fiat peso.

• The ‘Libertad’, when monetized, will acquire a quoted legal tender value in Mexican pesos.

• When a ‘Libertad’ is deposited in a bank for credit to an account, the credit will be in Mexican pesos at the quoted legal tender value.

Notes

• There will be no separate bank accounts for ‘Libertad’ coins.

• The Mexican Central Bank will mint such quantities of ‘Libertad’, as it deems convenient.

• Those who wish to acquire ‘Libertad’ coins may or may not find them available at their bank.

Notes … (cont’d)

Our technique will also function for the reintroduction into European

circulation of a gold coin.

• No engraved nominal value.

• A quoted nominal legal tender value in Euros, which can float upwards.

• No quote below the last quote, in case of a fall in the value of gold in Euros.

Utilizing this technique, the gold coin would circulate permanently in parallel with the Euro.

The ‘Gold Ecu’

We suggest a gold coin to be called the ‘Ecu’, with same characteristics as the French, Italian, Swiss and Belgian coins issued under the 1871 agreement between these nations.

The Gold ‘Ecu’France

20 francs

Switzerland

20 francs

Italy

20 lire

Belgium

20 francs

All these 1871 coins had the same:

Size: diameter 21 mm.

Weight: 6.45 grammes

Fineness: .900

The ‘Gold Ecu’ … (cont’d)

Size: Diameter 21 mm.

Weight: 6.45 grammes

Gold content: 5.81 grammes pure gold

Fineness: .900

The ‘Gold Ecu’ … (cont’d)

Suggested method for Quote:

(International price of gold expressed in Euros) / (.9) for 10% seigniorage, rounded to the nearest multiple of 5.

Sources:

Historical price of gold: www.kitco.com

Historical exchange rate of the euros: www.oanda.com

• A gold ‘Ecu’ can circulate permanently in parallel with Euros.

• It would contribute to social and political cohesion among the nations of the European Union.

• Its efficiency as a symbol of European Union is unsurpassable.

“Europe faces the future confidently, proudly recognizing its historic achievements and values for

the benefit of mankind. The gold signifies the humane dimension of the European Union”.

The ‘Gold Ecu’ … (cont’d)

The message transmitted by the coin:The message transmitted by the coin:

• The ‘Gold Ecu’ could be placed in circulation by using superfluous reserves to purchase gold.

• As the strongest buyer, the EMU could raise the price of gold gradually.

• ‘Gold Ecu’ would provide an excellent means of savings and investment for Europeans.

• ‘Gold Ecu’ would give the ECB a means of regulating the money supply, as gold purchases by the public would absorb Euros in circulation.

• This is precisely the policy Richard Lehmann (Forbes.com, July 27, 2005) recommends for China.

The ‘Gold Ecu’ … (cont’d)

The Silver Bill in the Mexican Congress

• This project has been under discussion in the Congress since March 2003.

• Last April 5th, seven congressmen from all parties officialy presented a Bill for Reform before the Congress, filling the requirements outlined here.

• At present, the Bill is being discussed in Committee of the House of Representatives.

Hugo Salinas Price, José Julio González Garza and Sergio Sarmiento at the Congress.

“We hope to have good news for Mexicans from the Congress, that we shall have silver money, the ‘Libertad’ ounce, hard, strong and solid …”

Fernando Guzmán Pérez Peláez

PAN Federal Congressman

“It will generate more savings and each Mexican will be able to own this instrument, a means of defense against unforeseen (events) …”

Diego Fernández de Cevallos

PAN Federal Congressman

“We are going to support this Bill totally, the parties are in agreement in this because it is a noble Bill, very healthy and it is not costly … we are going to generate employment, we are going to benefit the national economy, we are going to have, once again, a money that is our own …”

Martha Lucía Micher Camarena

PRD Federal Congressman

“This is a very useful opportunity socially, with economic support, within reach of all economic sectors –it is a theme that draws the interest of different parties ...”

Enrique Burgos García

PRI Federal Congressman

Congressional Support

“The state of Zacatecas, as the number 1 producer of silver at national level, would be greatly benefited in its economy and it would not only generate wealth, but jobs which would stop the growth of emigration to the U.S. …”

Rafael Candelas Salinas

PRD Federal Congressman

“Mexico deserves the most beautiful coin in the world and the most valuable … besides, there is a dollar crisis coming, and we must be prepared; this silver coin can very well be the lifesaver for the Mexican economy …”.

José Julio González Garza

PAN Federal Congressman

Fauzi Hamdán Amad

PAN Federal Congressman

Leonardo Álvarez Romo

PVEM Federal Congressman

“A very nationalist measure that will allow our silver, a non-renewable national resource, to remain among Mexicans …”

“In order to have value, money must be a measure of something valuable and real to back it up. Silver does not devalue because it does not lose its value over time …”

Congressional Support … (cont’d)

a During the present 59th Mexican Congress, 343 Congressmen of the main parties, suscribed a Statement of Agreement in support of the Bill.

Statement of Agreement

Partido Acción Nacional

Partido de la Revolución Democrática

Partido Verde Ecologista de México

Partido Revolucionario Institucional

The 31 Governors of all the States of the Mexican Republic sent a communiqué to the House of Representatives, in which they expressed their unanimous approval of the Bill.

Governors of Mexican States

176 Mexican newspaper writers put their signatures to full page declarations by the Journalist’s Club in the main newspapers of Mexico City, also in support of the monetization of the ‘Libertad’ silver ounce .

Mexican Newspaper Writers

Mexicans want the ‘Libertad’ monetized

%96

A poll by national T.V. Azteca, Mexico’s #2 television chain, revealed that 96% of viewers approved of the monetization of the silver ounce.

A persistent national effort may become a reality

1920 – 1945 Mexican silver peso .720 fine (went out of circulation)

1946 – 1967 Silver pesos with various silver contents (went out of circulation)

1979 Silver ounce with no nominal value engraved (could not be used as a means of payment)

“ Silver ‘Morelos’ $100 peso coin (went out of circulation)

1993 $10, 20 and 50 pesos coins with silver (went out of circulation)

2003 ‘Coins of the Mexican States’. Nominal engraved value $100

pesos, with ½ Troy oz. of silver (This coin will go out of circulation when the price of ½ Troy oz. of silver is over $100 pesos).

2005 The ‘Libertad’ silver ounce, no nominal engraved value, quoted by the Banco de México

It would remain in circulation indefinitely because its value would be adjusted upward according to the peso price of silver, and it would be accepted as a means of payment because its quoted legal tender value could not be reduced.

Lic. José López Portillo

President of Mexico

1976-1982

Dr. Guillermo Ortíz Martínez

Governor of the Banco de México

Hugo Salinas Price

President, Asociación Cívica Mexicana Pro Plata, A.C.

Address: Av. Insurgentes Sur No. 3579 PH, Col. Tlalpan La Joya,

México, D.F. C.P. 14000. Phone: (011-52-55) 1720-7918.

Fax: (011-52-55) 1720-7916. e-mail: plata@plata.com.mx

www.plata.com.mx