On the Use of Gold Coins as Money
Hugo Salinas Price
Why don’t humans use gold coins as Money?
The answer is quite simple: because they don’t want to, under present circumstances.
The attachment of humans to gold is remarkable; I suspect there is something metaphysical about gold that attracts human beings. Perhaps gold is part of the natural order of things, part of the Rerum Natura, and the relationship of humans to gold is “built-in” into human nature, like sexual attraction. I won’t insist upon this, but I think about it.
But getting back to the question and the answer I give. The next question is: Why don’t humans choose to use gold coins as money, under the present circumstances?
The answer is equally simple: because we humans value gold so highly (the most significant material gift a man can give a woman he loves is gold in some form) we will use anything else available to make a payment, rather than part with gold.
If you have dollars, you will use dollars instead of gold. If you have euros, you will use euros instead of gold. British pounds, Russian rubles, Chinese yuan, Japanese Yen, and even that unlikely monetary unit, the Zambian kwatcha, any one of these will be used for payments rather than giving up a gold coin.
I read that the Swiss are thinking about allowing gold to have a monetary role. Someone has quipped that this is like wanting to re-hydrate water. The Swiss will achieve exactly nothing with this measure. Do they want to use gold as money? For that to happen, there would have to be no other currency available to the Swiss.
Gold will once again be used as money (it actually is money) when nobody will take anything else in payment or when there isn’t anything but gold (or silver) available with which to make payments. That was the situation back in the 19th Century and before. Gold was used because there was no alternative but silver, and that situation would have continued except for the fact that the ratio of silver to gold was a fixed ratio, and was not allowed to fluctuate with the market.
When the present fiat-money madness in the world has run its course, when no paper of any country can pay for its imports, then imports will be paid in gold. It may be a long wait.
I should add: if people were able to use 100% gold-backed redeemable banknotes as money, people would use those banknotes for payments rather than their gold coins. And they would use fiat-money banknotes for payments rather than tendering their gold-backed redeemable banknotes.
The gold coin beats the gold banknote because a gold coin is a tangible fact but a redeemable banknote is a promise, and a promise can never be equal to a fact, in the eyes of any human. This is why women like engagement rings.
If the ancient representation of gold has always been the Golden Sun, the equally ancient representation of silver has been the Moon, the Silvery Moon.
For practical purposes, we can state that silver has always been the money of the people. It is a precious metal, but it does not enjoy the high regard of gold.
People naturally save silver coins; they will do so all the more if the coins are given monetary status. Mexicans used the silver peso in parallel with paper money until 1946 because they had no alternative: the one-peso banknote did not exist until 1946. Americans used silver half-dollars, quarters and dimes until 1965 because they too, did not have any alternative; in 1965, the rise in the price of silver forced that coinage out of circulation and coins of base metal took their place. In our inflationary times the tendency will be to use paper money for daily transactions and save the monetized silver coins; only rarely will they be used in commerce.
There are now four countries in the world where individuals are trying to convince their governments to monetize a silver coin, which people will use to build savings. In a world which is going bankrupt at an alarming rate, savings not subject to devaluation from inflation are going to make a life-and-death difference to millions of humans.
The plan we espouse is simple: issue a silver coin with no stamped monetary value. Give it a quoted monetary value slightly over the value of the silver contained in the coin. Raise the quote as the price of silver rises.
The plan is terribly simple. Anything that is going to be used by millions has to be simple. Nature does not like complications. Sex is not complicated and that’s why it does its job of producing people. Nature will eventually wipe out all those worldly-wise men and women who are dealing in complicated junk like Interest Rate Derivatives, Collateralized Debt Obligations and all sorts of clever fiat-money nightmares.
We have been proposing the monetization of a silver ounce coin for Mexico since 2003. Our contacts in our new Congress are stronger than ever – we’ve been educating Congressmen for 9 years now, on the subject of the monetized silver coin, and now have many friends in more influential positions in the Mexican Congress. Plus the idea of the silver coin with a quoted value is now familiar to Mexican politicians; it makes sense to them and they find nothing strange about it. We are preparing a Bill, once again. Maybe this time it will be voted into law.
We hope for the best in 2013. Monetizing the silver ‘Libertad’ ounce is a great challenge and a great objective to live for. Which of four countries will be the first to offer its people silver coins as money?