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Sprott Money Ask The Expert – Hugo Salinas Price

In this exclusive interview, Hugo Salinas Price share his views on precious metals, provides some historical background on gold and silver money, the manipulation of the precious metals markets, the inevitable collapse of the fiat money, and more…




Announcer: You’re listening to Ask The Expert on Sprott Money News.

Geoff: Hello and welcome back to this month’s Ask The Expert, here on Sprott Money News. I’m your host Geoff Rutherford and on the line with me today we have Hugo Salinas Price. Hugo Salinas Price is the Founder of Mexico’s Elektra retail chain. Elektra began as a workshop assembling electronic appliances for the Salenas Y Rochas Chain, a small regional retailer of appliances. He is retired from the retail business, leaving it in the hands of his son. However Hugo is currently President of the Mexican Civic Association Pro Silver, A.C. where for a number a years he has worked tirelessly to get Mexico to adopt a silver coin as legal currency. He has drawn worldwide attention to his plight with the Mexican government and has become a stalwart in expanding the awareness of gold and silver as real money. And with that we’d like to welcome Mr. Hugo Salinas Price. Hello Hugo, thank you for joining us today, sir.

Hugo: Thank you Geoffrey I’m glad to be with you this morning. I appreciate your comments and I stand ready to answer any questions you might have.

Geoff: Excellent, Hugo. So Hugo I think it’s important for our listeners to understand the historical context of what you’ve been trying to do in Mexico in regards to returning to a silver standard in Mexico. In your own words could you describe what you’ve been trying to achieve through the Mexican Association Pro Silver, A.C.?

Hugo: I’m delighted to do so. First I should make it clear that I was not working to put Mexico on a silver standard, no. My project was not that ambitious. I was working mainly to put a silver coin into circulation as money together with our paper and digital moneys that we have. This is an original idea of my own and I’m still rather proud of it. Because in monetary affairs we haven’t had a single original idea, well, I don’t know, for perhaps 100 years, or more. And I will explain why this idea of mine, where its originality resides.

You see, in the middle of the 1900s, about 1945, ’50 or so, there was a lot of silver money in circulation in the world. A great many countries used silver to use for their coinage. And the silver went out of circulation and disappeared and was melted down. What happened? Well, you see the silver coins all had a monetary value engraved upon them. And, for instance, in the United States you had 50 cent pieces, 25 cent pieces, quarters, and dimes, and these were silver coins. Now they went out of circulation in the ’60s. What happened? Well, the price of silver went up to such an extent, it went up above $1.29, which I won’t explain exactly that was an important figure, but that’s still the fact. When silver went over $1.29 an ounce then the silver in the coins was worth more than 50 cents, in the 50 cent pieces, it was worth more than a quarter, in the quarter dollar, and it was worth than a dime in the dime coin.

So once the silver was worth more as silver than as money it couldn’t be used as money, it couldn’t circulate anymore. Those coins were either taken back by the government and then melted down or else they went into private hordes because people would not spend a coin for 10 cents value when its value was 15 cents. I hope I’m clear, or they wouldn’t hand over a 25 cent coin if the silver in it was worth 40 cents. And they wouldn’t hand over 50 cent coin if the silver in it was worth 75 cents. They’d put it away because it was worth more as silver than as money. That’s why silver went out of circulation in Mexico, in the United States and all over the world.

So I thought about this many evenings when smoking my cigar, how the heck to put silver back into circulation when the price of silver continues to rise and rise. When I was thinking about these things silver was 3.50, and now it’s around 16-something because it’s been held down or $17, it’s ridiculously cheap. It will continue to go up in due course. But in order to put silver into the hands of the public as money you would have to have a coin that would have a value as money but not engraved. In other words you have to have a quote like you have on a stock. A stock has a floating value; it goes up and down according to the market. But in the case of money you would have a quote given to the coin by the central bank, or by the treasury, preferably, that would never fall. The quote would not fall, but it would rise with rises in the value of silver. Thus the coin would always be usable as money in any circumstance. That would mean that the coin becomes much more desirable by people, because at present even with the record sales of silver in the United States, people are saving these coins but they have no monetary value determined. So if you want to use them as money, you can’t. Suppose you have an accident or you need to go to the supermarket to buy something. You can’t pay for it with silver because it has no monetary value ascribed to it.

So that was my plan, was making the savings of people to be usable as money in any emergency. And why do I say emergency? Well, because of Gresham’s law, people will not be using these silver money coins to pay payments unless they are in very difficult circumstances because people will always keep better money hoarded, or saved, and use the less valuable and the money that is less esteemed, that is the money they will use to make payments with, if they can. But by turning silver coin into money with a floating value which can only rise then you have an enormous incentive for people to save in silver. Because their savings can be immediately used as money in any emergency and will grow in value automatically over time as the price of silver continues to rise due to inflation.

So that is, briefly, I hope I made myself clear Geoffrey that was the essence of the plan which I proposed. But I met with obstacles because, of course, the central bankers hate real money. I mean it’s built into their system. This is what they learned as students in school and then in high school and later on they were indoctrinated and trained at the proper universities in the use of paper money and a disregard, or disrespect, or outright hatred for real money. Because with paper you can manipulate the population. And these people are power-mad. And they think that they can run a country scientifically by manipulating all the necessary levers and they can produce prosperity automatically and satisfy the population and run things. And this is absolutely a mistaken notion. It feeds on the desire for power and it does not produce good results. Completely ruins everything. It throws everything out of kilter, and that’s where we are today. Everything is out of joint and I think that we are in for a big and sudden collapse as things finally cannot hold together.

Geoff: Very interesting. Very interesting Hugo. It’s odd that oftentimes when people try to do the right thing that they encounter the sort of resistance that they encounter. I guess the first question right now, in regards to your plight, is how close are you to the reinstitution of the silver coinage in Mexico, and if you are, or if you were successful, how rapidly might this effect world currencies, if it did come to pass?

Hugo: Let’s take one thing at a time.

Geoff: Sure.

Hugo: The issue over coinage going on right now, I have an interest in a bank here in Mexico, which has 2000 branches, and each branch sells silver coins. During the last month or so we’ve been having trouble because the central bank is the one that controls minting. The national mint is under control of the central bank. And they have had a problem because the peso has been devaluing and they have suffered some losses, I think, and so they have thought over how to market their silver coins and they’re taking a good long time to decide. Finally they are resuming the supply some time before the end of this month. But the minting of silver coins is in the hands of the Mexican mint.

I’d like to point out something that, perhaps, your listeners do not know. And that is from 1535, when the Mexican mint was established in Mexico City, until 1907, when my father was born, Mexico used essentially the same coin as their money, the Mexican peso. It was called by a different name. It was called a piece of eight. The Spanish piece of eight. Which was a model for the U.S. silver dollar, by the way. But we used those coins as money and when my father was born in 1907 the midwife was paid with silver pesos which had the same content of silver as the original pieces of eight of 1535. Very close to, not exactly, but very close to the same weight. So that is really a remarkable achievement of almost 400 years of monetary stability. And then we have a revolution and since then things have never been the same, never been the same. Never been the same.

So now to your second question.

Geoff: Well it was more of a second part to the first question. What I was asking is if in fact you were successful in your goal through the Mexican Association Pro Silver, A.C., how rapidly would this effect other world currencies?

Hugo: Oh, I think that if any one country decides to do this it will have an immediate catalyzing effect. It will precipitate, let’s say, silver into money very rapidly, because the thing is just waiting for one country to do this and then all the others are going to follow suit, as soon as they see the beneficent effects, I would imagine. Are governments really interested in beneficent effects? Sometimes I doubt it. But I think that the example would really propagate because it brings so many advantages. It brings so much satisfaction to people. Satisfying the population means putting out fires. You’re putting out fires of dissatisfaction when you give people silver money.

I’ve been to Malaysia, the Arab countries, because of their religion, Islamic religion, they’re not really opposed to gold and silver, that is part of their religion. The part of their religion is gold, of a gold coin, which is called a dinar, and a silver coin which is called a dirham. So the Islamic countries might well go over to monetizing a silver coin. But I have suggested in Malaysia, I suggested to them, that they use one-tenth of an ounce, which is the weight of three grams, which is about the weight of the Arab dirham, which was used all over North Africa in the middle ages and circulated in Europe, even. That silver coin circulated widely for a long time.

So the coin does not need to be an ounce. It could be half an ounce or it could be a quarter, or even a tenth of an ounce. I think for China, for instance, they should monetize their silver because traditionally up until the ’30s they were a country using silver as money. That was their money, silver coins. So they could monetize a one-tenth of an ounce a silver coin, which would be slightly larger than a dime, let’s say. Since there are so many Chinese that would be the ideal size for them, not a larger coin, such as a heavy one ounce coin. And that would also be to the great satisfaction of the Chinese.

I think that Russia should do it. Russia’s having problems now. Europe is having problems. If the United States has its way they’ll be having a war in Europe between the Europeans and the Russians. And I’m very worried about that. But I think that President Putin could improve his image with Europe by putting out a Russian silver coin as money. Wow, that would really set the Europeans back on their heels now that they’re having such trouble with their euro, there’s an alternative for their savings because the euro looks set to collapse, what with Greece. And so if Russia would offer Europe a Russian silver coin they’d snap that up right away. Of course the price of silver would rise and so would the monetary value of the coin. So that is more than an economic measure, that’s a geopolitical measure.

The problem is that in many circles monetizing silver is regarded as an economic measure. It’s not really that. It’s a political measure. And ideally the issue of such a coin should come from a government treasury, not from the central bank. The central bank institution is rotten to the core and is bound to disappear, I think. I don’t think it can be sustained past this crisis. And the issue of money is a function of the state. It always has been. And always has been the first thing that any of the great rulers has ever done is to stabilize the monetary system around gold or silver, and that has been forgotten and passed over to these central banks. And so now when the government, for instance, in the U.S. government, they want to talk about auditing the FED, they said the government should not meddle with the FED. How’s that for a contradiction? It’s FED that is doing something that is none of their business, which is issuing money. Issuing money is a function of the state. That’s where the treasury should be, in charge of that. And that’s why I recommend that monetizing silver should be done by the treasury, preferably, not by the central bank, which is essentially hostile.

Geoff: I mean you’ve kind of mentioned, at this point, you’ve mentioned the responsibility of the state. You’ve mentioned Russia, you’ve mentioned China. So given the recent sovereign gold purchases by the BRICs countries, Brazil, Russia, India, China, etc., do you think a new gold-linked monetary system to settle trade imbalances, and for long term savings is on the horizon?

Hugo: I hope so. I hope so. I don’t see how our world can continue the present course. We must return to settlement of trade automatically through gold, because these instabilities cannot endure, nature cannot endure instabilities. Everything that is unstable comes to an end. Nature seeks stability just as it abhors a vacuum, it also abhors instability. Where there’s too many people or too many of a species in a certain area there comes a culling. And we cannot continue on this course. We have to go back to a stable world. It’s not necessary. I mean it’s unavoidable. It’s going to have to happen. The question is will we go back to that stability and what shape will we be when we go back to that stability?

I mean we’re going to have to rebuild the world because so much that has been built. There’s been an enormous waste of resources in the past 70 years and we have to rebuild the world. I have no crystal ball but it’s inevitable that the present instability is going to come to an end and be replaced with stability. The question is in what shape will the world be when we go back to that stability?

Geoff: Now Hugo we all keep hearing that all fiat money will eventually fail and when it does the price of gold and silver will skyrocket. If this is so, will the price of precious metals eventually go into infinity, making gold and silver money, and the U.S. dollar, merely paper?

Hugo: Actually when we go back to gold no one will be talking about the price of gold because, you see, all the paper will have vanished. As long as we have paper around then the central banks can get us talking about the price of gold. But the price of gold will sort of vanish because you can’t buy the gold with any paper. You have to have something. In other words, the price of gold will be many things. Will be how much sugar do you need to offer to get an ounce of gold? How much copper do you need to offer to get an ounce of gold? How much grain do you need to offer to get an ounce of gold? The price of gold will be the amount of things that are needed to buy it.

There are many different prices of all the different things that are used that will be used to obtain gold, but not paper. That’s gone. What will the price of gold be? Forget it. It will have vanished together with paper. What is the price of a dollar in continental dollars?

Geoff: What you’re saying makes perfect sense, Hugo. In other words, once returned to a gold standard gold can no longer be valued in dollars and cents, because a fiat money system no longer exists.

Hugo: The dollar will become a thing of the past. We don’t think in confederate dollars of the south. We don’t think about the prices in them because it’s gone, it’s finished. You can’t use that as a measure of anything. And the same thing is going to happen to the dollar. I mean it’s going to be irrelevant. When gold is money, again, recognized as money, you can’t get it for papers. You have to give something. You have to be a producer of something. You can offer your work or things, but you can’t get it by offering this paper because the paper has gone out of use, it’s become obsolete.

So we forget about the price of gold. So gold will become very, very important. Its purchasing power will increase enormously. That is what we should say, not that the price of gold will go up. We should say that purchasing power of gold will increase enormously. Those who have gold will be able to afford and will be able to make investments which they presently cannot handle. A little gold will go a very long ways in helping you live because the purchasing power will bring you a great deal of all the essentials for daily life. That is the importance of gold, not its price. People will stop thinking about the price because the dollar and paper money, their era has passed, and we’re back to a fundamental and real situation where if you want something you have to give something in return.

Not a paper, not a digit in a computer somewhere that is changed from being in your name to somebody else’s name. No, that’s not a payment; that is a fiction that we are living with, trading digits among us. And by the way, I must include the bitcoin there. But we’re going to have to go back to a period where we pay for things with things. And the thing that is most useful for paying for things is gold, followed by silver. It’s the most marketable commodity. That is why it became money. Gold became money because it’s the most marketable commodity with which you can pay for other things.

Geoff: Well Hugo, I mean one of the questions that come up, and one of the fears, I guess, of people who own precious metals, is looking back to the late ’30s, 1929, late 30, when the US government confiscated people’s gold and silver. So the question is how would you rate the potential risk of confiscation of precious metals in Mexico, as well as in the rest of the world in the current state that we are in right now?

Hugo: No, I think that Mexico went through the Roosevelt period. There was never a period where you couldn’t obtain gold on the street or at the banks. I remember as a young boy that there were sellers of gold on a certain street downtown and you could buy any amount of gold you wanted. It was not illegal, absolutely. So we never have suffered from such a prohibition and I think that it would very, very hard to implement and get any profitable result, because we’re accustomed, here in Mexico, to disregard stupid laws. We just don’t pay attention to them unless we are absolutely forced to we do not pay attention to stupid rules. And that’s why we survive, because we don’t pay attention.

And that’s one of the problems in The States, that people pay too much attention. People are too obedient in the states. But when it comes to taking their gold and silver I think the U.S. government is going to have a hard time getting it out of the hands of the public, very hard. I don’t think that will prosper at all. And here I also do not think that the government would be so foolish as to try to carry out something which it can’t do. So I’m not afraid of those risks. And in the United States, well, you judge your own situation, your own countrymen, but I think that the knowledge of the value of gold and silver, and their importance, to the present owners of those coins, and there are lots of them, evidently, because the sales of the silver ounce in the states have been tremendous in the last few years, that’s not going to be possible to expropriate that. It just is not going to take place.

Geoff: So Hugo, do you think the return of gold into the monetary system is the primary goal of BRICs countries, or is it an emergency plan for the day after the western financial system collapses? Are you optimistic that there’s a peaceful transition? Is this possible?

Hugo: Well no, I don’t think so. I think that governments in power will continue on this road until it becomes absolutely impossible to do so. Nobody wants to upset the apple cart, how should I say it. You know, everybody wants to maintain the status-quo as long as possible. And nobody dares go in and propose something new because that would upset everything that is already in place. So it’s going to take a big crisis to bring us around. And now this firebrand Alexis Tsipras, in Greece, he’s a 24-carat leftist socialist. I mean his idea of how to run a country is guaranteed to be an absolute failure.

But at the present time he’s going around as if he had his torch in his hand into the dynamite warehouse of Europe. And the people in Europe are horrified because this guy is running around with this torch. And what is the torch? The torch is refusal to pay the debts that Greece owes. And that can just bust up the whole of Europe. Because after Greece comes Italy and Spain. And Europe cannot stand that. It will mean the end of the euro. So the end of the euro, which might take place any day, with this mad man running around it’s curious to see Keynesians attacked by the leftists. They’re both varieties of the same controlling type and they’re both now, the Keynesians are as horrified of this leftist. It’s really amusing. And the whole thing may blow up any time, and maybe out of the ruins, maybe something based on gold might arise, maybe. But I think it will take a big crisis.

Geoff: So that being said Hugo, I mean how do you think this will play out, as far as Greece is concerned? Do you think that they will agree to their terms or are we actually looking at the possibility that Greece will leave and likewise the European Union will finally, essentially collapse at that point?

Hugo: Nobody knows how long this leftist, that has promised that he’s going to get rid of the debt, how can he go back on it? Maybe he will cave or maybe he won’t. That’s the big question, is he going to cave or not? Because if he doesn’t that’s the end of the euro. Let’s stay tuned for the next episode, okay?

Geoff: The next question is, is talking about China. And we know in terms of China being the largest consumer of gold in the world and likewise we see a number of things happening that may suggest that China and Russia are working to almost devalue the American currency and likewise remove it out of their holdings. But looking at the Chinese currency, what do you think would happen to gold if China devalues the Yuan by say 25% overnight, in a hypothetical situation? What do you think would happen in that situation?

Hugo: Gosh I don’t have any idea. One thing, countries that are buying gold are preparing for war. That has always been one of the signs of coming war.

Geoff: Really?

Hugo: Yes. Before world war one Russia was buying gold and that was taken note of by the Germans and they considered that that was a sign that they were preparing for war. And the war did materialize later on.

I think that this preparation of buying gold indicates clearly that there is going to be a big disagreement, eventually, between the Russians and the Chinese, and that disagreement might signify a war. And nobody wants to have the enemy’s currency as your currency and your reserves when you’re in a war. You want something that is independent of your enemy, right? And that can only be gold. So this purchase of gold by Russia and China, and other countries, indicates that there is growing doubts about the universality of the dollar. And the universal appreciation of the dollar as currency is now in doubt. That’s why their countries are buying gold, because they see that the dollar is too unstable and it’s not a firm enough basis in case of a crisis. Their countries want to have something on which they can rely on their own resources and that means they must have their reserves of gold. That’s my opinion, anyway.

Geoff: Well Hugo, we’d really like to thank you today for joining us here on Ask The Expert.

Hugo: Thanks Geoff, I hope you find it useful.

Geoff: And to our listeners, thank you for joining us here on Ask The Expert. For Sprott Money News, this is Geoff Rutherford. Have a great day.

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Sprott Money Ltd., its owners and operators, content creators, presenters, and interviewees, offers no financial or investment advice. The content in this material is for information purposes only and is not an offer or solicitation for the sale of any financial product or service. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situation, investment horizon, and their particular needs from a registered financial advisor. Sprott Money Ltd. is not a registered securities or investment dealer. Sprott Money Ltd. products are not insured by the Canada Deposit Insurance Corporation (CDIC) or any other government insurer.




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