Hugo Salinas-Price on the Nature of Money and Why Silver Should Be Legal Mexican Currency

Interview with Scott Smith

The Daily Bell is pleased to present an exclusive interview with Hugo Salinas-Price.

Introduction: Hugo Salinas Price, 75, is a successful, retired businessman who lives in Mexico. He has been a follower of the Austrian School of Economics since his youth. He has written three books in Spanish on how and why silver should be instituted as money in Mexico, in parallel with paper money, and numerous related articles in English and Spanish, posted at his website. His organization, the Mexican Civic Association Pro Silver, is actively lobbying the Mexican Congress to approve legislation, which will institute the pure silver "Libertad" ounce as money.

Daily Bell: What is your campaign in Mexico for sound financial policy?

Hugo Salinas-Price: I actually avoid discussing "sound financial policy" because one can argue about that till the cows come home. During the last fifteen years I have devoted my efforts to one single aim, and that is to achieve the monetization of a silver ounce coin currently minted by our Central Bank. This coin has no engraved monetary value and is called the "Libertad" coin; it can very easily be turned into a monetary coin, that is to say, a coin with a monetary value. As such, anyone owning such a coin could, if he or she wished, be able to pay any bill or debt denominated in Mexican pesos.

The monetary value of this coin would be slightly higher than its bullion value; the monetary value would not fluctuate according to the price of the silver ounce, but its monetary value would be raised if the bullion price of silver rose and closed in on the monetary value. The Central Bank would give the coin its monetary value, according to a formula in the proposed legislation.

If the price of silver fell to $1 dollars an ounce, the monetary value of the coin would remain where it was last pegged. (But it would still be better money than any paper or digital money in the world!)

On the other hand, if silver should go to $50 dollars an ounce, this coin would remain in circulation, useable as money, because then its monetary value would be about $57 dollars, and stay there until a further rise in the value of bullion silver.

The monetized silver ounce would be an excellent refuge for savings and would attract them irresistibly. You don't need a bank account, you don't even have to know how to sign your name, to invest your savings in this simple and inflation-proof way.

This coin would be better money than the US dollar and I expect many Americans would be wanting to own these "Libertad" ounces once monetization is realized.

Daily Bell: Has Mexico always been an unsound economy? Does Mexico now have a stable political structure?

Hugo Salinas-Price: The first question is like asking me "When did you stop beating your wife?"

Seriously, I think the Mexican economy is sounder than the US economy – which isn't saying too much. The Mexican economy is much less complex than the American economy. Think of the Mexican economy as a low, wide pyramid or mound. The American economy is by comparison a skyscraper. Personally, I don't like to occupy hotel rooms above the 12th story, thinking of the possibility of a fire. Think also of all the things that can go wrong for a skyscraper: a power outage, and you and your family are on the 30th floor. No elevators, no water, no refrigerator...you get the idea. The American economy is vulnerable in ways that the Mexican economy is not.

Mexicans have mostly fully-paid housing – the house may be very modest, such that most Americans would not care to live that way, but – it is paid for! Mortgages are not widespread; during recent years there was an increasing use of mortgages but on the whole, the Mexican population lives in housing that is paid for.

Mexican indebtedness is not as great as in the US; because until recently, 70% of the population did not have bank accounts – which given the behavior of banks in general, is a very good thing.

Mexicans, unlike Americans, are used to bearing with hard times. They can "cope" with situations which would drive an American to despair. We do not have a government that prints the World's money, so we haven't been as coddled by all levels of government, as the American people.

About political stability: I don't think American political stability is stronger than ours. We don't have Tea Parties and we don't think about taking up guns and holing up in our houses. Matter of fact, I think I see a Revolution brewing right in the old U.S. of A. But of course, we can always be the object of "Regime Change" by the Powers That Be in Washington, D.C. It's happened before, though most Mexicans are not aware of the fact that our Glorious Revolution of 1910, was a "Regime Change" Operation, carried out covertly by the U.S., because Mexico was getting too prosperous and inviting European Capital into the country, in preference to American Capital. So, it can happen again – any excuse will do. How about: "The Drug War in Mexico threatens American security"? That ought to do the trick.

Daily Bell: Give us some background on yourself. Where did you grow up? Where did you go to school and how did you get interested in business?

Hugo Salinas-Price: I grew up in Mexico City, the eldest of six kids. My father was a Mexican from Monterrey, Mexico. My mother was an American from Bryn Athyn, PA. Our family all spoke both English and Spanish from childhood. We still slip from one language to another when we talk. Most of my friends as a boy were sons of Americans living in Mexico. I went to High School in my mother's home town, which is a religious community, and enjoyed it greatly. I tried three different Universities looking for a career, and dropped out of all three. I was particularly unhappy at the famous Wharton School of Business and Finance, at the U. of Pa.

After three strikes I was out and decided, at the ripe old age of 20, that I better get to work and stop wasting money. So, I got a job from my father. Two years earlier, he had set up a small company manufacturing radios and I got the job of manager. So I started at the top and did what I could to stay there! Well, fortunately we had a bright man as engineer, he was a Mexican who had been interested in electronics since he was boy. One day, this man asked me "Mr. Salinas (no employee of mine has ever called me by my first name) why don't we manufacture TV sets?" I said, "Are you out of your mind? That's a terribly complicated technology, we can hardly make good radios..." But he insisted, "No, we can do it; it's not such a big problem." So I said, "Well, build a sample; if you can build a TV set, I'll give you a new car..."

So we got into TV business, and that saved that tiny company. If we had not done that, in not more than two years we would have gone broke. I didn't realize this until many years later. In 1954 I married; my wife and I fell in love at first sight, she was 15 and I was 18. The very best decision I ever made in my life!

Elektra couldn't sell our sets by selling to retailers – there were a dozen manufacturers offering retailers their goods, with well-known brands; our brand was unknown. So, we went to direct sales.

Once we were in direct sales, we added other household goods to the stuff our salesmen could offer the public. Our salesmen were heroic, they knocked on doors from morning till night, and got us our orders.

In 1959, I began to set up our stores, where salesmen could take their customers to view the merchandise. So that's how we got into retailing. We sold on terms – credit up to 24 months. How to sell on credit – and collect! – was something learned from my father, who learned it from his father. That's what we are still doing today, with about 1,000 stores.

Daily Bell: How big did Elektra get – and was it your biggest achievement in business?

Hugo Salinas-Price: Elektra has gotten rather large – stores in Mexico, Guatemala, Honduras, Salvador, Panama, Peru, Brazil and Argentina. (Argentina is the pits, let me tell you.) Elektra owns a bank, which has a very large deposit base among the same people who are its customers. Very solid bank, I am pleased to say. Our Systems department is vast – one of the largest in Latin America. I started up our Systems in 1968, on a ten-year plan to get the company wholly computerized. This finally happened in 1983. We are totally up-to-date in this technology.

Well, my biggest achievement in business happened in 1987, when I was 55. I didn't know it was that, at the time. What happened was that – I got myself out of the way. Elektra had 59 stores, no debt, was running just fine; my eldest son, who was 32, had been working at Elektra for the past seven years, and he knew everything there was to know about it and was much more active and energetic than I; so one fine day, I just up and resigned, to everyone's great surprise. Cancelled all Powers of Attorney, Bank signatures, the works. Son Richard took over that day and – that was the best business decision I ever made!

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May 24, 2010

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