Mexican Congressmen Propose Monetization of Silver Libertad Coin
A group of Congressmen in Mexico’s Chamber of Deputies recently held a forum to propose the monetization of the Mexican Silver Libertad one ounce silver coin. The monetization of silver in Mexico has been a favorite project of Mexican businessman Hugo Salinas Price for years, and the idea continues to enjoy support among some members of Mexico’s political class.
Supporters of silver monetization within Mexico claim that a silver monetary unit would help many Mexicans to save money. Looking at the history of Mexican coinage from the legendary pieces of eight to the present day is to witness the continued debasement of the monetary unit. Whereas the Mexican peso used to be a circulating silver coin, today it is a small coin made of steel and bronze, with a value of around 5 US cents.
Because of the devaluation of currency throughout Mexico’s history, many Mexicans do not save money. Only 15% of the population saves money in a “formal” manner that most Americans take for granted, such as depositing money in a bank account or investing in securities or in a retirement account. 32% of Mexicans save informally, keeping their money at home or finding other ways to invest outside the financial system.
The proponents of silver monetization propose to monetize silver in a similar manner to that proposed in Ron Paul’s Gold Commission minority report, The Case for Gold, in that it would not have a peso value stamped on it. The silver Libertad coin would continue to be minted as a one-ounce bullion coin, but its exchange value would fluctuate based on the value of silver or the devaluation of the peso.
The practicality of that scheme is debatable, as a fluctuating peso value would cause problems with economic calculation. However, if Mexicans were to adopt silver coins and be able to reject the paper peso, using a unit of silver as their unit of account, it could lead to a sounder and more stable currency.
As the world’s top producer of silver, monetization of silver would undoubtedly benefit Mexican industry. But the increased demand for silver would also lead to increased silver prices worldwide, benefitting American silver investors. Let’s hope for the sake of everyone that Mexico’s silver supporters are successful in their endeavors.