James Turk interviews Hugo Salinas Price on silver and sound money

GoldMoney founder James Turk interviews Hugo Salinas Price, president of the Mexican Civic Association for Silver, about silver's potential to return as money and about sound money generally in a 22-minute video

Salinas Price: News from the Galaxy

News from the Galaxy

23/March/2010

Hugo Salinas Price

It has been revealed to me that there is life on a planet within our Galaxy. Among the living creatures on this planet are humanoids – that is, beings that bear a great similarity to humans on this Earth, but who do not appear to be intelligent, as we humans are, but rather sub-human in their reasoning faculties.

These humanoids are at present quite busy building large structures such as bridges and tall buildings with concrete, which they invented many years ago, but without the use of reinforcing bars, or rebars, as we call them.

Of course, since we are intelligent, we know what has to be the result of their efforts: continual collapses which cause these poor humanoids great grief and disappointment.

It appears that in the remote past these creatures did use rebars in concrete constructions, but an influential politician whose name is recorded in their history as “Nicson” finally decided that concrete did not require rebars to give it tensile strength, and therefore banned their use.

At the present time their media of communication are filled with discussions on how to prevent concrete structures from collapsing, with consequent disruption of life. The situation is very distressing.

Some commentators in the editorial pages of the well-regarded newspaper “Cement Times” recommend closer supervision of the building of concrete structures; others recommend more transparency regarding building methods, while some recommend that buildings be constructed in such a way as to prop each other up, to avoid collapse. In the meantime, no formula has been found to remedy this plague of collapsing buildings.

A very few of these humanoids are mentioning the fact that when rebars were used, long before Nicson, buildings did not collapse. Scarcely any attention is given to these “rebar bugs”, as they are derisively referred to by the élite of the inhabitants, who are venerated as well-informed and expert authorities in the matter. The rebar-bugs have a spokesman who goes by the name of “Paulum”, but they seem to be fighting a losing battle against the sub-human intelligence of the majority and those wielding political power.

Rebars are regarded by the cement manufacturers’ representatives as old-fashioned and unnecessary, and in fact, as “barbarous relics”; they allege that reverting to use of rebars would hamper the economy, because it would slow down the building industry, which is thriving because buildings are collapsing daily and of course, have to be rebuilt. Besides, they argue that rebars are “too scarce”.

Indeed, it might be suspected that the “Federal Cement Manufacturers’ Association” has an interest in retaining the present mode of rebar-less construction. Their disdain for rebars speaks louder than words of their sub-human nature, for by the simple expedient of allowing the use of rebars, which they have banned completely, they would find an undoubtely efficacious remedy to the parlous situation which prevails on their planet. However, it is apparent that there is no wish to accept the application of this remedial measure on the part of the Federal Cement Manufacturers’ Association, or the “Fed” as they call it.

Such is the travail now prevailing amongst the humanoids of that remote planet. There is nothing to be done; they must be allowed to suffer. Perhaps they may, in the course of millenia, eventually acquire human intelligence.

Salinas Price: It's time to end World War II

It's time to end World War II

Hugo Salinas Price

Oct 29, 2009

The shooting, the bombing and the killing of World War II stopped in August of 1945, and the War was formally over.

The United States and Britain knew the War was won, in 1944.

At that time, a Conference was called among the 44 Allied Powers, to determine the nature of the world's monetary and financial system after the fighting was over. It was held at Bretton Woods, New Hampshire, USA, in July of 1944.

As a result of the Conference, a set of Agreements were signed.

The most important of all the agreements was the one that established that gold should be the money to be used to settle all trade deficits between nations, but in lieu of gold, dollars could be used to settle these deficits; at the option of all Central Banks, these banks could demand gold from the United States Treasury at a redemption rate of $35 dollars for each ounce demanded.

Thus, the United States could pay for its trade deficits either in gold or in dollars. No other nation was allowed to pay for its trade deficits in its own currency; for all other nations, settlement of trade deficits had to be done with gold or with dollars previously acquired in the course of trade with the U.S. or with other nations who had dollars. In other words, dollars - and only dollars - were as good as gold.

General de Gaulle (President of France, 1959 - 1969) has been quoted as saying that this was "an exorbitant privilege". And so it was, a privilege of the victor in World War II.

Under the rules of war, a country at war may loot and plunder its enemy, if it can do so. Booty has always been a great incentive to get soldiers to fight, and World War II was no exception. When a war is over the looting and plunder stops and nations renew commercial relations, exchanging their goods in peaceful international trade.

In forcing on the Bretton Woods Agreements the acceptance of the dollar as a means of settling international debts, along with gold, the US established the will of a victorious power to continue to loot and plunder the whole world.

Formally, World War II was over. But in fact, World War II was not only not over, but the US had implicitly declared war on the whole rest of the world by imposing the dollar as a means of settling trade deficits, along with gold.

By running huge trade deficits which arose out of its expansion of credit and consequent money-printing, the US was able to leverage its gold holdings and send abroad masses of dollars to pay for imports. The exporting countries received dollars - not gold - for their export surpluses to the US. The dollars began to pile up in foreign Central Banks as "Reserves". The exporting countries, not being nuclear powers, were afraid to demand gold in payment of their export surpluses, since such a request would very probably irritate the great power, and nobody wanted to offend the USA.

All this export of dollars in payment of trade deficits finally moved General de Gaulle to demand gold for dollars held by the Banque de France. This annoyed the US government and shortly thereafter, not coincidentally, there was an outbreak of rioting in France which threatened to unseat President de Gaulle, who had offended the US by simply asking for France's gold.

The US, by means of the "dollar as good as gold" provision of the Bretton Woods Agreements, has been looting and plundering the rest of the world, non-stop, since the end of World War II. Very subtly, based on Bretton Woods, the US has continued to act as the triumphant victor in a war; it has never since the end of World War II " [reassumed] among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle" it, as expressed in the Declaration of Independence, 1776.

The US has not assumed an equal station among the powers of the earth, since World War II came to a formal end. It has continued to impose its Imperial Will upon the rest of the world, as vassal states, and has been duly exacting tribute from the rest of the world, by means of its paying its trade deficits with dollars, which are nothing at all since 1971. The US did not truly "normalize" relations, neither with the Axis powers when World War II was declared formally over, nor with the rest of the world.

Commerce is an eminently peaceful activity. The seller forces no one to buy; the buyer forces no one to sell. The means of payment of commerce, since written history began, has been either goods for goods, i.e., barter, or goods for gold - a perfected form of barter. Silver has also worked well, as a means of payment of commerce. But anything else, any innovation, anything decreed to be a means of payment by anybody whatsoever, cannot be anything but an imposition, a violation of the rules of commerce.

The present ruinous condition of the world's finances and its lopsided industrial development has not yet corrected itself. If anything, we are in the "eye of the hurricane" for the moment.

If all governments in the world were to collapse, commerce would not disappear; it would arise out of the disorder, and its money would be gold or silver, or both. Gold and silver are the natural means of payment for humans. Such is the intellectual decline in the world, that those in power have forgotten this; they and their paid lackeys in the financial press and financial media are dreaming when they think that they can come up with some effective but artificial, fiat means of payment, decreed by some governmental body. Any such fiat means of payment will inevitably preserve privileges for some, and impose burdens on others. Commerce cannot thrive under those conditions; it will go into permanent decline, along with our industrial civilization.

"Regionalizing" fiat currencies will only have the result of pitting region against region - as illustrated in Orwell's "1984". This is the fallacy underlying all talk about a "multi-polar world" while ignoring the need for a neutral, real and time-tested medium for exchange of goods.

The world's principal powers should convene and come to an agreement for the establishment of the world's monetary and financial system on the basis of gold as the exclusive medium for settlement of international trade deficits - a neutral, real and objective medium for commerce and finance.

If the governments of individual nations want to allow their banking systems to diddle with fractional banking and inflation, it is their right to do so. But when it comes to settling accounts with other nations, they must come up with the required gold.

Only then will we be able to say that World War II has ended.

###

27 Oct, 2009

Hugo Salinas Price

President

Asociación Cívica Mexicana Pro Plata, A.C.

Mexico City

email: plata@plata.com.mx

website: http://www.plata.com.mx

King World News interviews Hugo Salinas Price

Hugo Salinas Price, president of the Mexican Civic Association for Silver, was interviewed for about 20 minutes Friday by Eric King of King World News.

They discuss the trauma of currency devaluation, the use of the U.S. dollar as a system of imperial taxation on the world, and the necessity of a means of real settlement of international trade, the dollar not really being one, since so many dollars are used only to purchase more U.S. government debt, which leaves open the obligation to pay. They also talked about Salinas Price's plan for remonetizing silver in Mexico, the land of silver.

Please click HERE to listen to the broadcast

Boys will be "boys"...

Causes and effects

Hugo Salinas Price

Jul 18, 2009

Let us imagine that in August of 1971 the governments of the world decreed that as of that date all vehicles of the world should run on water rather than on gasoline. Within 48 hours, at the most, all vehicular traffic in the world would have ceased.

The cause - an absurd decree - would have produced disastrous effects immediately.

In human affairs, which are much more complex, it generally happens that bad decisions do not produce all their bad effects immediately, but only in the course of time.

Today the world is struggling with an unprecedented economic collapse, caused by a mistaken decision taken almost 38 years ago.

The distance of 38 years in time, in a world which is undergoing change at such a rapid pace as ours, is a great distance. Those who can remember the bad decision of August 15, 1971, and who can recall how the world worked before that date, are today at least 63 years of age. They are already either retired or about to retire from active life.

For men who are active today, 1971 is a date that is beyond the horizon of their interest. For those men, what they have seen in their lives seems to them completely normal; they think that life has always been as they have known it. Why should it not continue to be so?

Perhaps this is the reason that all we read in magazines and newspapers and all that we see on TV never mentions the mistaken decision taken on August 15, 1971. Both those who govern and those who are governed cannot establish an intellectual link between a cause,which happened either before they were born or when they were still wearing short pants, and an effect, the present global economic disaster.

What happened on that fateful day?

What happened was the equivalent of decreeing that cars should run on water: for the first time in history, the whole world began using fictitious money, papers that simulated real money. This happened when President Nixon of the United States decreed that as of that date, the dollar - the central currency of the world on which rested all the other currencies - ceased to be redeemable through the delivery of one ounce of gold for each $35 dollars which central banks of the world might present for collection in gold.

The effect of this event has taken 38 years to be felt in all its enormity.

Nature does not care if human beings think or do not think. Nature does not care if humans take note of causes and effects, or if they ignore them. Nature does not care if they are wise or foolish: Nature is pitiless about collecting its due. If you do not sow, you will go hungry. Academic discussions do not influence the inexorable operation of the Laws of Nature.

Cars do not run on water, they run on gasoline. Economies - civilizations themselves - cannot function on simulated money, money that is fraudulent, fictitious and imaginary (in the case of bank money).

Tacitus, the Roman historian, wrote: "The man who is ignorant of that which happened before he was born will always remain a boy."

Only boys, and nothing more, are the great pundits of economics, the great directors of national economies, the great presidents and prime ministers of the Powers, who cannot or will not recognize that everything that has been built in the world since 1971 has had as a foundation nothing more than quicksand.

As long as the use of real money - either gold, or both gold and silver money - is not reestablished in the world, the civilization which we have known is in danger of disappearing.

At the recent meeting of the Heads of State of the "Group of Eight" (G-8) the President of Russia, Dmitry Medvedev, presented a coin which he said was to be the new international currency. He is in the photo below. Note that he is holding a gold coin.

Therefore we have hope that at last, a true Statesman will take the historic decision to reinstate gold as money. The adjustment of the world to this measure will be painful, but the return to real money is indispensable if our world is to endure.

The alternative is too terrible to contemplate

July 2009
Hugo Salinas Price, President
Asociación Cívica Mexicana Pro Plata, A.C.
Mexico City
email: plata@plata.com.mx
website: http://www.plata.com.mx

Hugo Salinas Price: Dorothy's silver slippers...

Hugo Salinas Price, president of the Mexican Civic Association for Silver and the world's foremost advocate of restoring silver's role as a circulating currency, addressed GATA's recent conference in Washington by video. His address, "Dorothy's Silver Slippers," detailed his proposal for the issuance of a circulating silver ounce coin for Mexico -- a coin that, not being imprinted with any particular peso value, would never be at risk of withdrawal from circulation because its melt value had come to exceed its face value.

Salinas Price's address to the GATA conference is 23 minutes long and you can find it here:

Hugo Salinas Price: Dorothy's silver slippers...

Hugo Salinas Price: My Thoughts Today

MY THOUGHTS TODAY

by Hugo Salinas Price
President, Mexican Civic Association Pro Silver
September 21, 2007

Turmoil prevails. Lots of writing on financial and economic themes by worried people. All about "money".

What no one mentions is that what the world is using as money in these times, is not really money at all. What is called money today is only a means of exchange, and the transfer of this so-called "money" does not constitute payment. "Money" today, is NOT a means of payment, which is one of the essential functions of money.

Money has been defined as having three functions:

1. A means of exchange.

2. A means of payment.

3. A store of value.

Of these three functions, only ONE remains: a means of exchange.

Today's money is not a means of payment; ever since mankind used barter - before money existed - there did exist payment: each trader handed over something in exchange for something. That was PAYMENT. Payment is the delivery of some thing, in exchange for some thing.

Today, handing over a dollar, or a yen, or a euro - whatever - is not handing over something, nor even a claim on some thing. Therefore, handing over a dollar - or any so-called money today - is not really payment. It is not the delivery of any thing, nor of a claim on any thing. We are not "paying" in truth, because we do not deliver any thing. We do not use money, only a means of exchange.

World central bank reserves are neither a thing nor a claim on anything at all. Therefore, they are not a store of value; the falling exchange value of the dollar is a verification of this: that no money today can be a store of value. A non-thing cannot store value.

The Central Bankers of the world do not know what to do about their ever-increasing reserves; if any of them thought five minutes about money, they would understand that they are being very silly and playing games. If the CB reserves were gold - as they used to be - there would be no worry at all. Because gold is a tangible thing, but a dollar or a pound or a euro or a yen, or any other "monetary unit" is not a thing, it is only an abstract unit, a number.

Christian Noyer, on the ECB economic council and head of the Banque de France, does well to advise against "excessive accumulation of reserves"! Of course, it is always adviseable not to accumulate too much of nothing. "You got plenty o'nuthin' ", Christi ole boy! (And nuthin's plenty for you?)

Big shots and prestigious writers are talking and talking, and worrying and writing about "money", when what we are using all over the world, is not money! The best and brightest brains WILL NOT see that the world is not using money at all.

This blindness that prevails in the world is of vast philosophical importance. We are living in a deluded world and the outcome of this delusion is going to be nothing less than apocalyptic in its overwhelming, destructive consequences for mankind.

Hugo Salinas Price: A perpetual 'war on gold'?

Hugo Salinas Price, president of the Mexican Civic Association for Silver and longtime friend and supporter of GATA, speculates in a new essay, "A Perpetual 'War on Gold'?," about how governments could keep their gold-price suppression scheme going even after their gold reserves are exhausted.

It's by surreptitiously acquiring major gold producers and operating them at a loss, which would be very small by government and general market standards and easily could be hidden by the government. (The U.S. government and a major Canadian mining company may have thought this one up first.)

Salinas Price's essay is a bit of a downer but in this business it's better to get and stay down than to stand up with a big smile on your face, wide open for the next central bank intervention.

A perpetual 'war on gold'?

Originally posted at http://www.plata.com.mx/plata/ on September 15^th, 2007

The method by which the price of gold is held back is through unlimited short selling in the futures market by parties acting for the governments interested in keeping the price down or under control, and by feeding into the market such amounts of gold as may be required by the market for physical gold. These amounts are relatively much smaller than the futures market transactions, where speculators participate mainly with the interest of realizing dollar profits, and not by taking delivery of physical gold.

We have been reading for many years now, about the likelihood that the Central Banks have been providing this gold for physical delivery, and about the ever-diminishing amount of gold which the Central Banks have available for sale into the market. We are assured that the Central Banks will reach a point at which they will refuse to sell more gold, either because they will judge it imprudent to part with their remaining reserves, or because they simply have no more to sell.

There exists a method which the Central Banks might use and which would allow them to carry on this “War Against Gold” for much longer than we might expect, and this method is to take control of the most important gold producers in the world, by buying a majority stockholding in each of them. Compared with figures on spending which we see every day, and gigantic fiscal deficits, such purchases would require only a comparatively tiny amount of dollars or euros.

Such gold producers would then become para-statal entities, government- owned entities whose profit and loss statements would be much less important than their contribution to a government policy, as is the case in a great many other para-statal entities which operate in other fields. In Capitalist countries governments are not supposed to run companies, but these days governments can do pretty much as they wish. “Anything Goes!”

These para-statal entities would then be milked of their gold, which they would be obliged to sell at preferential, below-market prices to their majority stockholder, through discreetly disguised operations. Upon perceiving this, the remaining minority stockholders would bail out. This policy of the main gold producers would affect the whole industry. The rest of the privately-owned gold mining industry would have a hard time staying in business against loss-making government-owned major producers; rising costs and stagnant prices would seal their doom. One by one, they would be picked up by the government-owned majors.

The government-owned gold producers would be able to run perpetual losses, made up by subsidies from their government owners out of the respective government budgets. This perpetual “War on Gold” would be relatively cheap and the cost easily hidden in the fiscal budgets, and provide the enormous advantage of retaining the reserve currency status for the dollar and the euro. It could go on for much longer than we probably expect. The cost/benefit ratio of this “War on Gold” would be highly in favor of the War.

We know that prices are always set “at the margin”. The cheapest seller always sets the price, both in the futures market and the physical market. So, all gold producers are forced to sell at the price set by the lowest, loss-making government-owned gold producers, at least as long as these last can come up with the physical for sale. Upward spikes in prices can be hammered with cheap physical sales, sold at strategic moments calculated to put the underlying trend into constant doubt, and introducing a volatility which can be exploited by the media to frighten prospective purchasers.

How would this “War on Gold” ever come to an end?

The end would come with market demand for cheap physical gold overwhelming all the amounts of newly-mined gold coming from government-owned mining industry and remaining private mining industry.

This demand might be fought by means of a control of the trading of gold, hosing down the attraction of gold through banking systems which would refuse to trade privately-owned gold or otherwise cooperate in hampering such trading. This would reduce the attractiveness of gold, as prospective purchasers always think of the possibility of mobilizing their gold at some point, and obstacles to doing so would make them think twice about purchasing it.

Only a great crisis would impel humanity into gold at all costs. The present crisis in the financial markets of the world is probably only a rehearsal for such a great crisis. This present crisis will probably be papered over successfully and within a few months or years, at most, the normal abnormality of exclusively fiat money in the world will return and confidence will once again be restored.

However, the great crisis which will restore gold to its proper place in human dealings is inevitable, for the reasons which Ludwig Von Mises pointed out so many years ago: fiat money leads to malinvestment, and the longer that credit expansion and the increase of fiat money in circulation goes on, the greater the corresponding malinvestment. One day, in the future, there will be a huge collapse as the worldwide malinvestment is so great, that it will not be possible to satisfy pressing human needs.

That great crisis may be triggered at some point by a nuclear world war, or by some event of a financial nature which we cannot foresee. That the great crisis will come, is completely inevitable. It will surely come together with bloody revolutions in human affairs.

Through the ownership of loss-making producers, the “War on Gold” could go forward for many years yet. The “War on Gold” is not truly a war on a metallic substance; in the final analysis, it is a war on the psychological health of mankind; another generation subjected to the maddening psychological effects of endless credit and fiat money creation upon humanity will leave our civilization – what is left of it – completely destroyed.

I must add that I earnestly hope that I am quite mistaken with regard to the possibility of a Perpetual War on Gold.

¿Dónde está el oro?

Where's the gold?
By Hugo Salinas Price

IMF DATA ON WORLD GOLD
(Including IMF gold)

Gold Reserves of all reporting Central Banks of the world in 1948, amounted to 970 million ounces, or 30,170 metric tonnes.

Gold Reserves peaked in 1966, at 1,230 million ounces, or 38,257 metric tones.

Gold Reserves declined to a minimum low of 889 million ounces, or 27,651 metric tonnes in 2003.

Gold Reserves increased once again, to 919 million ounces, or 28,583 metric tonnes, in January 2007.

USGS WORLD GOLD STOCK AND CB STOCK

www.goldsheetlinks.com and IMF DATA

Metric tonnes

World gold stock 1966: 76,000
CB and IMF gold stock 1966: 38,257
Gold in private hands 1966: 37,743
% of world gold in private hands 1966: 49.66%



World gold stock 2007: 157,000*
CB and IMF gold stock 2007: 28,583
Gold in private hands 2007: 128,417
% of world gold in private hands 2007: 81.8%

* 152,000 in 2005, plus approx. 2,500 yearly production.

From the tables we gather the following:

Since the Central Banks of the world began to sell off their gold reserves in 1966, when their stocks peaked at 38,257 tonnes, private individuals have added to their stocks, which were in 1966 estimated at 37,743 tonnes, as follows:

Private purchases of gold 1966-2007:

9,674 tonnes - net sale of gold by CBs 1966-2007

81,000 tonnes – every single ounce mined since 1966 to date, except for 933 tonnes reacquired by the CBs 2003-2007. (The CBs were no longer unanimous with regard to selling off their gold, in the period 2003-2007; the CBs as a group made net repurchases of 933 tonnes of gold in that period.)

A grand total of 90,674 metric tonnes of gold have been bought up by private individuals since 1966!

Will the world gold market – humanity, who has been saving gold forever – change its mind about gold as a wise investment? Will fiddling with the price of gold in New York, make the world change its mind about the wisdom of owning gold? As the world is swimming in fiat money creation, will gold savers change their minds and stop buying gold? Will hammering the price make the world gold market change its mind about gold, or will it just make gold cheaper to acquire for the millions that want to own it?

World stocks of gold are increasing at a rate of about 1.6% a year. Fiat money is growing by leaps and bounds, all around the world. Can the Central Bankers of the world hope to contain the price of gold, while the world’s creation of new money goes on at a frantic pace of about 12% a year – perhaps more?

CB and IMF reported share of world gold stocks has fallen from 50.34% in 1966 to 18.2% today; however, careful studies estimate undisclosed Central Bank loans of gold of up to 15,000 tonnes, which the borrowers (“bullion banks”) sold to private individuals. If CBs have actually lost 15,000 tonnes of gold in their useless effort to contain its price, then roughly speaking we would have:

Ownership of world gold:

CBs and IMF: 8.65 % of world gold stock

Private hands: 91.35% of world gold stock.

A dark shadow lies over the reported gold stocks of 28,853 tonnes as of 2007. These include 8,117 tonnes of US gold which the Treasury says are in “Deep Storage”. A most unusual and evasive categorization of gold! There are doubts regarding CB gold. Do they have what they say they have? Is there any gold at all left in US gold reserves?

Let’s put it this way: who has been judging correctly with regard to the wisdom of owning gold - a few dozen Central Bankers and Treasury chiefs, or millions of human beings around the globe? The collective wisdom of mankind has always held gold in high regard; surely it will continue to do so until the end of time. The few dozen arrogant men who think that this collective wisdom can and should be wiped out, are fighting the wishes of humanity and will have to fail in their efforts, simply because the IMF figures tell us that if they insist on being stubborn about not allowing the price of gold to rise and persisting in the sale of Central Bank gold, they will end up with no gold to sell.

Note 1: This article was inspired by Antal E. Fekete’s draft of his paper “THE DOLLAR: AN AGONIZING REAPPRAISAL – GOLD VANISHING INTO PRIVATE HOARDS”. I hope Prof. Fekete’s interesting paper is published soon.
Note 2: We have used figures regarding total gold stocks, yearly production, CB and IMF total holdings, and private holdings which are necessarily approximate. We have done our best to gather information provided to the IMF by CBs, but some banks do not report. However, by and large, the trends are clear and we stand by our comments in this article.

Hugo Salinas Price, President
Asociación Cívica Mexicana Pro Plata, A.C.
Mexico City
email: 254hsp@elektra.com.mx
website: http://www.plata.com.mx

Hugo Salinas Price: The silver bridge

Posted at the Silver Owl
Hugo Salinas Price: The silver bridge

A fairy tale world

In a new essay Hugo Salinas Price -founder of the Mexican Civic Association for Silver, foremost advocate of returning silver coinage to use as savings and currency in Mexico- reflects on the distinction between money and payment. He concludes that the world, using largely the U.S. dollar as a means of exchange, is actually functioning without money, the dollar having become largely imaginary.
Central banks, Salinas Price writes, are becoming dimly aware of this. You may want to act on it before they do.

A fairy tale world

By Hugo Salinas Price

The World is exchanging goods and services by various national means of exchange. We are using those same means of exchange as a vehicle for savings. We are denominating credit contracts in any one of various national means of exchange. The predominant means of exchange is the US dollar.

However, a means of exchange voluntarily accepted as such, by those who participate in exchanging goods and services, by those who use it as a vehicle for savings and by those who denominate credit contracts in it, is not per se money.

Money must, sine qua non, function not only as a means of exchange, but also as a means of payment.

The world, as of February 2007, does not possess a means of payment. In economic terms, payment is the exchange of something for something. In today’s world, when units of what is called money are tendered in payment of a purchase, or in settlement of a balance after an exchange, or in settlement of debt, there has been in reality and economically no such payment. We are in these cases using the term “payment” merely as a legal convention and a leftover from a previous era, when payment did in fact exist and govern all economic activities.

Money, properly speaking, must be definable! The dollar cannot be defined: so said Alan Greenspan himself, the Pope of Central Bankers, in reference to the dollar, which is the reserve currency of the world and which “backs” all other currencies. When something is not definable, it has no physical existence. A thing that has no physical existence is imaginary. An imaginary thing such as money is today, is as different from real, actual money, as an imaginary loaf of bread is different from a loaf of bread in one’s hand.

A money payment must involve a tendering of tangible money, gold or silver, or of a credit instrument which is recognized as entitling the owner to the undoubted right to immediate redemption of that instrument, in gold or silver.

Humanity is unaware of the stupendously important fact that it lives in a world without money. This lack of awareness is perhaps the most singular feature of our contemporary world, upon which historians – if the world does survive this episode and produce historians at some future date – will remark with amazement: “How was it possible that billions of humans could delude themselves into acting as if what they used for payments, credit contracts and savings, was actually money?”

About 1997 I began to look for data concerning the amount of “reserves”, excluding gold, held by the world’s Central Banks. In other words, the amount of imaginary money they were holding, otherwise called “paper money”. In 1997, those “reserves” totaled $1,300,000,000,000 ($1.3 Trillion) dollars. Not all those “reserves” are dollars, but most of them are.

Back then, not many people were paying attention to that datum. Since then, it has received increasing attention, which is not surprising, for the “reserves” are piling up and showing numbers that are clearly “going ballistic”. As of January 2007, world Central Bank “reserves” were hitting $5 trillion dollars, an increase of 385% in ten years. The last increase of $1 Trillion only took five months, from August 2006 to January 2007. (“Bloomberg”)

Before 1971, Central Bank reserves were mainly gold, plus component of foreign exchange redeemable in gold. Reserves could only grow very slowly. Imbalances in trade were shunned because the settlement of deficits had to be made in gold or dollars exchangeable for gold. International trade was stable. Imports could not affect the economies of importing countries as much as they do today, with “globalization”. Therefore, local productive activities were stable. Jobs were generated through reinvestment in productive activities.

The present situation is chaotic, because the creation of reserves of fictitious, imaginary “money” originates mainly in Dollars which are spewed forth by the out-of-control US economy, plus other fictitious moneys like the Euro born in the European Union, the Yen born in Japan, the Pound born in the UK, all of which are held by other countries as “reserves”.

Since today “money” is imaginary, fictitious, imports no longer have any limit, for it actually costs nothing to “pay” when “money” is imaginary. Thus, “globalization” based on the unlimited creation of fictitious money is a totally false globalization unsupported by economic facts.

The more important Central Banks are becoming skittish about the enormous amounts of “reserves” which they are accumulating. The Central Bankers are bureaucrats, but they are sensing that these enormous holdings are rather worrisome; however they do not know what to do about them. The fact is, they have been had. Their “reserves” are simply numerical and lack any substance. They are imaginary and as useless as castles in the air, unless they can manage to get rid of them by passing them on to some unsuspecting seller of tangible goods.

China is now going around the world – especially Africa – looking for opportunities to buy raw materials (a Chinese delegation will be present at the First International Mining Forum in Mexico, the middle of March). For the same reason, the Central Banks that subscribed the Washington Agreement (to sell no more than a certain amount of gold each year) have since 2006 lost their former appetite for gold sales and they are not covering their allotted sales quotas. It appears that they have finally realized that the reserves that are actually worth something are the gold reserves, and not the “foreign currency” bond holdings which they were so eager to hold because they “provided earnings”.

However, if they start to unload their imaginary holdings, the exchange value of the holdings will begin to fall. So they are in a dilemma, a choice between two distasteful alternatives: “Shall we hold on to the imaginary money and wait and see what happens, or shall we begin to unload it and risk collapsing the value of the larger part remaining with us?”

Up till now, the Central Bankers have been doing what bureaucrats usually do when they are faced with a difficult choice: nothing. They are waiting to see what happens.

More than half of the world’s Central Bank “reserves” are held by the Central Banks of China, Japan, South Korea and Southeast Asia. These Central Banks ended up with these huge “reserves” because they accepted a means of exchange - which was no more than imaginary money, digits on computer discs - as if it was payment. In other words, they believed a fairy tale, like the one where Jack trades his cow for a handful of colored beans.

So, we are living in a fairy tale world, where money is not money at all. Alas, reality cannot be fooled by means of fairy tales. How we shall fare, when the dream has vanished into thin air and the last fool has had to recognize the difference between a payment and a fairy tale?

"Silver in the Vault"

A New Service For Silver Savers In Mexico


Hugo Salinas Price
www.plata.com.mx

Banco Azteca, which has about 1,000 branches throughout Mexico, is about to launch a new service for those who like to save silver. It is the first bank in Mexico to offer this service; other banks are expected to follow suit, sooner or later.

The new service is called "Silver in the Vault". This service will provide savers with a safe place to store their one ounce silver "Libertad" coins, which Banco Azteca has been selling for some time now, having taken over the sale of these coins from its parent company, Grupo Elektra, which operates stores that retail durable household goods.

Only "Libertad" one ounce coins will be accepted for "Silver in the Vault". The coins in the Banco Azteca vault will remain the exclusive property of the depositor and the custody is the responsibility of the Bank.

The service will entail a small charge, payable quarterly.

Buyers of silver will be able to buy silver from Banco Azteca and place the silver coins in the Vault, all on-line, with a charge to their Banco Azteca account. They may also take delivery of their coins, at any time.

Sellers may also sell their coins to Banco Azteca, on-line, with a credit to their account.

Buyers may also continue to purchase their silver coins at the teller windows of Banco Azteca and take immediate physical possession of them, and sellers may also bring their coins to the tellers, for immediate sale.

Those who already own coins may bring them to the Bank for deposit in "Silver in the Vault" accounts.

Since the "Libertad" coin is legal tender, albeit with restrictions which impede its use as money, the purchase and sale of these coins causes no Value Added Tax, which exists in Mexico.

All the details will be made public very shortly and this service should be in operation throughout Mexico in the course of the month of February, after an initial pilot run and gradual introduction to all branches.

This service is available only to Mexican residents.

*****

This is an important preparatory step to the possible monetization of the "Libertad" ounce, which is the objective of the Mexican Civic Association Pro Silver. A Bill to this effect will shortly be presented in the Mexican Congress. There is vast popular support for this Bill; the only opponent, the Central Bank, may be hard pressed to defeat its approval.

Once monetized, the "Libertad" ounces held in the custody of Banco Azteca would acquire an ascertained monetary value, closely based on the value of silver; the monetary value would rise as the price of silver in pesos rises, but not be reduced in the event of a fall in the price of silver. (At present, the value of the "Libertad" ounce fluctuates in accord with the international price of silver.)

After monetization, these custody accounts in Banco Azteca would immediately serve as unquestionable collateral for instant loans by the Bank, at low interest rates. The silver would remain the property of the borrower (who has borrowed fiat pesos) but blocked in guarantee against the payment of the loan. Once the loan is paid back, the owner of the silver can once again dispose of it.

The monetization of the silver ounce would provide a great incentive to saving, without the need to entice the saver to save by means of paying interest on his banked funds, which are actually a loan to the bank holding the depositor's funds.

This would ensure that the population of Mexico would always have at hand at least a small amount of real, tangible money savings outside the scope of the banking system which, like banking systems throughout the world, is vulnerable to unexpected financial events.

The monetization of the silver ounce would thus place silver permanently in circulation in Mexico, in parallel with paper money and bank deposits. The fiat peso would remain the official currency of the country.

Hugo Salinas Price, President
Asociación Cívica Mexicana Pro Plata, A.C.
Mexico City.