Last week a story began circulating that appears to have begun with a video by Future Money Trends (see here), which was then picked up by the SHTFPlan prepper blog and then picked up by others including Infowars indicating Mexico is looking to back the peso with silver.
While I respect and read/listen to those sources often (and personally know many of them), in this particular case the rumors are completely unfounded, unfortunately. And, I say unfortunately, because if Mexico did back the peso with silver it would become one of the richest countries on Earth in a matter of years (especially if they completely decriminalized all plants - or what most slaves call "drugs").
I was personally shocked when I kept hearing this story being repeated because of my intimate knowledge through a number of sources of the activities of the Bank of Mexico (as I will explain below). So, I was shocked because I had heard no such rumor or inkling whatsoever.
First, I have a personal relationship with the one person who has been pushing for the re-monetization of silver in Mexico for years as a personal crusade, Hugo Salinas Price (see my interview with him on this exact topic in 2011 here).
So I began with an email to friend, and Acapulco near-neighbor, Mr. Salinas Price.
Hugo Salinas Price, founder of Mexico's Elektra retail chain, Azteca Bank and multi-billionaire, told TDV Thursday that there are no concrete plans among Mexican elites and politicians to back the peso with silver. He used some rather candid language to state in no uncertain terms that this latest rumor is nothing but that, a rumor.
He furthermore reminded me that he has never been trying to "back the peso with silver" as he saw that as being an impossibility. Mr. Salinas Price' idea was to have a silver coin issued by the monetary authority with no engraved monetary value, and for that authority to give that coin a monetary value through a quote which will always be superior to the peso value of the silver in the coin; to achieve that, the monetary authority will issue new and higher quotes for the coin, in pesos, as the price of silver in pesos rises. But never diminish the quote, if the price of silver in pesos falls as a viable option for people to be able to save within the current statist monetary/financial system.
He also reminded me of what he said in our last interview that, "Neither the Mexican government nor ANY GOVERNMENT IN THE WORLD will ever swear off of inflating the money supply and expanding credit when it can be done. That's why we need the alternative money, which can be said to be "indexed" to the market price of silver."
He stresses that while some politicians mean well and understand the true value of silver, most will remain silent. "Besides, the Banco de Mexico is effectively a branch - body and soul - of the Fed. So talk of silver with them is like proposing a Black Mass in St. Peter's, Rome," Mr. Salinas Price continued.
Salinas Price also told me that, "If things proceed as they are going, Mexico (from the waist up - ie. the Northern parts of Mexico) is going to be a sort of Puerto Rico within a generation."
In other words, he sees things on the monetary and political front getting worse for Mexico rather than better in the coming years as far as those who care about sound money and liberty are concerned. Although, interestingly, he seems to feel similar to myself that the Northern parts of Mexico may become more "Americanized" but there still may be hope in the South... where Acapulco resides... perhaps insinuating some sort of future secessionist movements.
And, as a final statement, Mr. Salinas Price also reminded me that he thinks bitcoin is total BS. That, though, is just something that we will just have to agree to disagree on but I did promise him that I would include that statement from him.
Now, speaking of bitcoin and cryptocurrencies, however, I then contacted my high level connections with the rapidly growing Mexican bitcoin community who I know have been meeting with Mexico's central bank numerous times on how bitcoin can be adopted into the Mexican economy. In fact, they asked me to come to one of their meetings with the central bank heads but I declined stating that I don't like to consort with criminals.
I spoke with good friend, Jose Rodriguez, CEO and founder of Altis - Altcoin Investment Services - and a partner in the Latin American bitcoin exchange, Unisend, who is a leader in bitcoin advancement in Mexico about his talks with the Mexican Central Bank.
He cautioned that the bank has asked him to keep most of their talks confidential but told me that the Bank of Mexico is actually much more interested in cryptocurrency than it is in backing the peso with silver.
But, before you get your hopes up, they aren't looking at making bitcoin a legal currency in Mexico just yet. They point out the same stupid Keynesian "problems" they see with bitcoin such as the fact that it cannot be controlled by the central bank and manipulated and inflated nor deflated to "help" the economy... or, as Hugo Salinas Price said above, no government nor central bank will swear off inflating the money and credit supply whenever it can be done.
But interestingly they are actively studying bitcoin and have an interest in creating an E-Peso.
The bank is interested in creating the most efficient payment system, but that does not mean they will be adopting the most efficient payment system, bitcoin. The bank instead hopes to build upon and integrate the best of bitcoin and the blockchain, ultimately making the same mistakes that the Royal Canadian Mint did with the now failed MintChip. (i.e., overlooking the fact that bitcoin works because bitcoin is decentralized.)
Interestingly, however, despite their statist, Keynesian misgivings with bitcoin, bank officials believe bitcoin could become increasingly adopted as more major players enter into the space, which the bank envisages would bring more price stability. So, in that there is good news, at this point the Bank of Mexico actually looks at bitcoin in a good light and are interested in seeing if it can add value to the Mexican monetary and banking system... and for that, people like Jose Rodriguez are doing good work and calmly trying to explain to them how bitcoin can help the Mexican economy... and they are listening.
So, although Mexico is one of the main silver producers on the planet, they are in no way moving to back the peso with silver, as Hugo Salinas Price told me today. Furthermore Mexico doesn't even have silver in its reserves, and its gold reserves don't even compare to the nation's fiat currencies holdings. So, unfortunately, a Mexican silver standard is but a pipe dream.
The great majority of Mexico's "reserves" are in the US dollar which, of course, spells eventual disaster for the Mexican peso. And so, if you were considering buying some pesos with the hope that they will soon back it by silver I would advise against that.
What you may want to do is buy gold and silver bullion (and diversify it internationally to protect from political risk). And, if you want to really speculate in gold & silver, look at buying some of the precious metals mining stocks that have never been so undervalued in my decades of watching the sector, as I stated yesterday in "Now Is The Time To Buy Gold Stocks".
We will be featuring a gold and silver junior mining stock next week which is actually well positioned in Southern Mexico to TDV Premium subscribers. That is a much better way to speculate on gold and silver in Mexico than buying the Mexican peso.
The peso, like the dollar, will reach its full instrinsic value at some point likely this decade. For those who don't get what I mean by its "intrinsic value", I mean zero.
Questions or comments? Join the discussion at The Dollar Vigilante.
Anarcho-Capitalist. Libertarian. Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks. Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast. Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media including CNBC, CNN and Fox Business.
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