Lecture of the author at the solemn ceremony of his
appointment as Honorary Professor of Northwest Institute of Management of the
Russian Presidential Academy.
Embassy of the Russian Federation
Mexico City
June 27, 2017.
Your Excellency, Ambassador Edward Malayan; Doctor Vladimir Shamakhov,
Director of the Northwest Institute of Management of Russian Presidential
Academy,members of the Honorable Diplomatic Corps here present, and esteemed
audience:
I am greatly privileged to be with all of your today, here in the Embassy
of the Russian Federation in Mexico.
My special thanks for His Excellency, Ambassador Edward Malayan, who has
become a very special friend. I thank him for his interest in my ideas
regarding a silver coin, and especially for his support for my two visits to
his great country, in the course of which I was able to talk with
personalities of the Russian Academy of Sciences, the Central Bank of Russia,
and the University of Moscow, as well as with various intellectuals and
monetary analysts in Moscow and St. Petersburg. Your Excellency, many thanks
for your friendship and assistance!
I received a specially warm welcome in St. Petersburg, on the part of the
authorities, the academics, and the students of the Northwest Institute of
Administration of the Presidential Academy of Russia, and I was able to
present my proposal for the creation of a Russian Silver Ruble. I wish to
thank once again, the Director of the Northwest Institute of Management of
Russian Presidential Academy, Doctor Vladimir Shamakhov, who is with us
today, for his hospitality in that historic city and for coming to Mexico, to
be with us for this event.
In Russia I met Dmitriy Balkovskiy, editor in chief of the website Golden
Front, who had been following my ideas for several years on the Internet. He
was kind enough to translate into Russian my essay titled “The Silver Coin
for Russia”, and that work has proved very useful in making the proposal
available to his countrymen. Doctor Balkovskiy, thank you for your support
and for being with us this evening! In St. Petersburg I also met two very
intelligent and capable young men, who were able to provide me with important
academic contacts, and who are here this evening: Alexei Vovenda and Peter
Koryagin. Peter is indeed highly educated and a piano virtuoso; tomorrow we
shall enjoy a concert with some of his beautiful musical compositions.
My Russian friends, I bid you a warm welcome to Mexico!
In your presence, I wish to express my deep thanks for the honor conferred
upon me by the Northwest Institute of Management of Russian Presidential
Academy, through its Director, Doctor Shamakhov, on the occasion of my being
named Honorary Professor of this very prestigious institution, devoted to the
promotion of the best ideas for Russia, as this gathering has for its title.
The distinction granted to me, inspires me to honor this noble institution
and to proceed with the work I have selected for myself.
As many of you know, I have devoted a part of my business life and my
intellectual attention to the analysis and promotion of economic values that
further the material advancement of society, and among these I consider as
primordial the human right to accumulate savings, at least in part, in real
money of gold or silver.
True freedom and genuine economic progress are only possible with real
money of gold and silver, under the sanction of government and with its
approval.
Today, our world is deprived of real money, and I think this is a very
real tragedy. However, I also think that this situation will have to reverse
itself, and for this reason I have devoted recent years to the promotion of a
silver coin as money in parallel with paper substitutes, through a simple
measure adapted to present conditions. I carried out this promotion first in
Mexico, and then in other countries of the world where the idea generated
interest and where I was invited to explain the monetization of silver.
Thus, the real political possibility of once again being able to use true
silver money, through the mechanism I have proposed, has awakened hope and
attention in Institutions and citizens of Mexico, Peru, Guatemala, Venezuela,
Spain, Greece, United Kingdom, Canada, USA, Malaysia, and now Russia, as
evinced by the title which is so generously being conferred upon me, and
which I consider as a privilege.
In return for this distinction, and as a first contribution to the
intellectual debate in the Institute, I shall have the opportunity to present
for your consideration an essay with the title “Silver and the Great Future
of Mexico”, and to listen to your opinions with regard to it, as well as
other proposals on the part of other guests, who will enrich this seminar. I
am convinced that in the course of these events we shall arrive at important
conclusions and new ideas with which to confront the uncertainty, the
intellectual confusion and the economic anomalies which are affecting our
civilization.
As always, I thank my Mexican friends and colleagues for being here, for
having shared together this crusade for silver and for their suggestions,
which have contributed to my thesis. And I thank as well, and very specially,
my dear family, of whom I am so proud. Thank you all for your steady support
to this work which encourages me each day, to leave behind me a lasting
legacy.
Once again, my thanks to our excellent host and organizer of this event,
His Excellency, Ambassador Edward Malayan, and to Doctor Vladimir Shamakhov
for the distinction granted to me by the Northwest Institute of Management of
Russian Presidential Academy.
I hope this gathering produces favorable results for our two great
nations, Russia and Mexico, for whom I wish great joy and prosperity.
Silver and the Great Future of Mexico
The end of the world’s present monetary system is already taking place.
The clearest symptom is the frantic bellicosity of the US, propelled by the
perception on the part of those who run the US, that the US is losing
influence in the world, and that their deep-seated objective for control of
the whole world is slipping out of their hands. The end of the dollar as the
basis of the international monetary system means the end of the US as we have
known it.
We shall not bother to discuss the future of the American dollar as the
world’s currency. We take it as a fact, that the American monetary unit is
nearing the end of its time-line, at least in terms of being the world’s
money, if not as a money limited in use to the territory of the US.
China and Russia are accumulating important quantities of gold. China is
the world’s largest producer of gold, and it does not sell one gram of its
production on the world markets: it hoards it all, because China understands
that the world’s present monetary system is on its way out.
The burial of the present monetary system may begin in slow stages, as
Russia and China together begin to sell their products to the world, in
exchange for gold. At this time, we don’t know how the transition to gold as
the world’s money is going to take place. Perhaps it will begin when the
Euroasian Bloc attributes a much higher price to gold, as compared with its
present price; or perhaps it will begin with gold denominated in terms of its
present price. But whatever technique is used, the price of gold will have to
register a dramatic rise, towards a figure at least ten times its present
price, and possibly much higher. Actually —and this is rather hard to imagine
at this time— it will not be so much a case of a rising dollar price of gold,
since these two powers will have discarded the dollar, but rather that the
quantity of gold that Russia and China will demand in exchange for their
exports will be falling to small fractions of what they would demand today.
Expressed in a different fashion, closer to reality, it will be the
purchasing power of gold that will rise to a much higher level than it enjoys
at present.
The stabilization of the purchasing power of gold will take place as trade
imbalances around the world are eliminated: both trade deficits and trade
surpluses will shrink to merely transitory phases among the nations of the
world.
Thus, the return to a world that recovers commercial balance between
nations will not be the work of the Pax Americana, that imposes its fiat
currency, but rather the work of the Pax Euroasiatica, that will offer, free
of impositions, the spontaneous adhesion of the world to gold as its money,
as it has been throughout History.
Gold, because of its quality (and not because of its scarce quantity) has
always been the King of Metals. There is little understanding about why it
has occupied its supreme place as money, followed in second place by silver.
Gold has notably been the money that has been used in large transactions,
while silver has been the favorite metal for the great number of smaller
transactions carried out by popular masses. Why has this been so?
This is the reason: among all known substances, gold has been the
substance that loses value to a lesser degree —in fact, almost imperceptibly—
as the quantity of gold offered, increases in commercial transactions. Its
fall in marginal utility is almost imperceptible, regardless of volume. Said
in other words that are perhaps more understandable, gold retains its value
whether we are dealing with an operation that requires the payment of one
ounce of gold, or whether we are dealing with an operation that requires the
payment of 100,000 ounces. The last ounce —the marginal ounce— of the 99,999
ounces delivered, is worth just as much as the first ounce.
Gold is the only substance whose loss of marginal utility is practically
nil. This is why it is the King of Metals, and why it has been the world’s
money for countless centuries. Just as for measuring distances we use
multiples of the metallic meter carefully stored at a controlled temperature
in Paris, France, so gold, because of its quality of enjoying a practically
invariable marginal utility, is the ideal measure with which to express
prices of everything whose value can be quantified; in other words, gold is
the world’s natural “numeraire”.
Silver does not behave in the same way. It is not adequate for large
transactions, because as the quantity of silver offered increases, its
marginal utility decreases to a small extent. As an example: whoever wishes
to purchase gold by tendering silver in exchange, will find that the price in
terms of silver will increase as the quantity of gold to be purchased
increases; this will not be because the price of gold rises, but rather
because the units of silver offered in quantity lose a small part of their
value.
China has hoarded a great quantity of gold in recent years, much more than
it is willing to state, that is only a fraction, according to careful
research, of the total that they are thought to hold. The price of gold in
Shanghai is invariably higher than the dollar price of gold in London. Thus,
the world’s gold is flowing in only one direction, from London to Shanghai,
and it will probably never return to London.
In the meantime, practically all Mexican gold and silver production flows
out of Mexico at ridiculously low prices; these prices are suppressed by
covert operations in the US and London, in order to protect the prestige of
the dollar and to seduce investors with attractive profits that can be
obtained by investing in speculative papers denominated in dollars and other
currencies.
Mexico’s Central Bank, the Bank of Mexico (Banxico), says it owns about
100 tons of gold, but only a small quantity of this gold has been identified
in location and with numbers on its bars of gold; the larger part of
Banxico’s gold reserves are part of aggregates of unallocated gold shared by
various institutions, and it is possible that this gold may already have been
hypothecated one or more times by the institutions that are supposed to be
its guardians.
In 2016, Mexico produced 3.3 million ounces of gold, that is to say,
102.76 tons, and we may speculate that its gold production in the coming
years will hover close to 100 tons a year. As with the case of silver, gold
production would increase strongly with a rise in its price by making lower
grades of gold available for exploitation.
The world production of gold that originates in Mexico is a small
percentage of the total. If Banxico should adopt the policy of China and
retain all the gold produced in Mexico, the subtraction of Mexican gold from
the world markets would be of no consequence, and besides, the advantage for
Banxico in taking such a measure would be only as foresight regarding the
future of gold and the collapse of the dollar, without any present benefit.
An uninteresting proposition.
But let us consider silver.
In the not-distant future, Mexico’s production of gold and silver will be
a key factor that will make possible the continuance of Mexico’s development,
and allow it to survive the inevitable havoc that will accompany the death of
the present monetary system, centered on the American dollar.
In 2015, Mexican mines produced almost 190 million Troy ounces of silver.
At present, mining analysts believe that the world’s production of silver
will begin to slow down in the coming years; however, their calculations are
based on the premise that the financial world will continue to function
without great changes, and do not take into account a future significant
increase in the price of silver. Such an increase in price would promote
greater production of silver, as it would allow miners to make further
investments in mining. Extensive silver-bearing lodes whose silver content
does not make them exploitable at present price would come into production.
For the time being, we can project a silver production on the part of
Mexico at 160 million ounces a year, in order to take into account the
present trend, which is in decline.
Mexico is the world’s largest producer of silver. What would happen if
Mexico, following the example of China, should decide to purchase all the
silver it produces, for the Reserves of Banxico? Or if not all, half? Or a
quarter of Mexican silver production? If Mr. Trump, or the Fed, would take
very badly the purchase of significant quantities of silver by Banxico, the
US would be hardly likely to punish Mexico if it initiated a modest program
to accumulate silver for the Reserves of Banxico, especially taking into
account that the private mega-bank JP Morgan of New York possesses -
according to the conclusions of careful observers of its activities in New
York - amounts of physical silver that are calculated to be between 100 and
200 millions of ounces of silver, and possibly more: a quantity similar to
the annual production of silver on the part of Mexico.
Mexico is the world’s largest producer of silver. The subtraction from the
world’s production of silver, not of 100% of Mexico’s production, but by only
a small amount of it, would lead to a considerable jump in its price, for two
reasons: First, because when a Central Bank adopts such a measure, the
markets attribute great importance to the fact, and Second, because any
subtraction of silver bars from the markets will have disproportionate
repercussions upon its price: the price of silver in NY is controlled through
enormous sales and purchase transactions, but these result in a practically
negligible delivery of physical silver. The movement of physical silver into
investment, compared with the volume of sales and purchases, is minimal, not
to say microscopic (See note 1). Therefore, the subtraction of a relatively
small quantity of physical silver could easily cause a doubling in its price
- not only the price of the silver sold by Mexico in foreign markets, but
also in the value of the silver Reserves held by Banxico, which would be of
total liquidity.
Mexico has every right to defend the price of its silver —a non-renewable
asset— for the benefit of the country’s mining industry, against the
manipulation exerted by the US, that aims at maintaining the depressed price
of silver.
Banxico would purchase silver from the Mexican miners, and would pay them
in Mexican pesos, for the equivalent of the dollar price of the purchased
silver. Since the miners require dollars to fulfill contractual requirements
and to purchase with dollars equipment and other supplies which are imported,
the resulting effect upon the dollar Reserves of Banxico would be a charge, a
reduction in dollar Reserves. Banxico would in effect be exchanging a portion
of its dollar Reserves, for Reserves in silver.
The dollar Reserves of Mexico have been suffering a contraction in value
because of the falling value of the dollar on international markets.
Supposing the value of the dollar to rise once again, the silver in Reserves
might double in value, but the dollar certainly would not double.
Here we insert a brief anecdote about the way in which China entered world
commerce in the XVIth Century.
In the XVIth Century, China was an enormously productive power of all
sorts of goods, much more advanced in productive power than the Europeans who
arrived in China from the West, seeking trade opportunities. The response of
the Chinese emperor to those wishes, was to say that China had all it needed,
and that the Europeans had nothing of interest to offer China. There was no
reason, therefore, for China to consider any commercial interchange.
In 1564, the Spaniard Andres de Urdaneta made a voyage to Philippines from
Barra de Navidad, a port in northwest Mexico, and discovered the way to
return to Acapulco, by sailing from Philippines to the Northeast, where the
ocean current carried him to America; he made landfall at Cape Mendocino,
which he baptized in the name of the Viceroy of Mexico, Antonio de Mendoza.
From then on, the galleons that left for Philppines, first from Barra de
Navidad, and later from Acapulco, carried with them something that was of
great interest to the Chinese merchants in Philippines: Mexican silver! In
exchange for silver they willingly supplied every sort of merchandise desired
by the Spanish for their return voyage to New Spain, as what is now Mexico
was then called.
Thus began the participation of China in world commerce, thanks to Mexican
silver - coined, in fact, by the Mexican Mint of Mexico City, into the famous
“Pieces of Eight” which years later, became the basis of the American dollar
with 371.25 grains of pure silver. If I am not mistaken, the first American
dollars were minted by the Mexican Mint in the early years of the American
Republic, when it did not as yet possess a mint. The Mexican silver peso
enjoyed the status of legal tender in the American West until 1857. And
Mexican silver circulated in China until 1935!
Thanks to silver, and to the commerce with China which it made possible,
Mexico City became, during the years of Spanish Colonial rule, one of the
richest cities of the world.
I think that silver minted by our historic Mexican Mint, now under the
control of Banxico, has a promising future in the world of tomorrow: both in
China, as well as in many other countries that would eagerly wish to own
these coins, and whose exporters would be well disposed to receive them in
payment for their exports to Mexico, especially because when the decease of
the monetary system based on the dollar takes place, our Ounces will acquire
a monetary value that will be multiples of its present value.
The present monetary system of the world, based on the dollar, is on its
death-bed. A fiat currency —such as the dollar— cannot be replaced by another
fiat currency. Therefore, the world will necessarily have to take up gold as
the world’s money; silver will doubtless complement gold as the world’s
money, because it has always done so throughout History. It is likely that
the Euroasian Bloc will initiate the monetary transformation of the world, in
due course.
We cannot know what configuration the adoption of gold as the world’s
money will take, but it may mean that the various currencies of the world
will once again be simple representatives of various quantities of gold.
Silver will always have a value with respect to gold, that will necessarily
be a fluctuating value, but doubtless, the value of silver will be much
higher than it is at present. The fluctuation of the value of silver with
regard to gold can be reduced, but it is impossible to eliminate it: to
ignore this fact has been the rock upon which all bimetallic standards have
hitherto foundered.
Given these considerations, it is clear that Banxico would not be mistaken
in purchasing silver for its Reserves: by doing so, it strengthens itself
against the collapse of the dollar as world currency, and at the same time,
it powerfully encourages Mexican mining industry, for the benefit of the
national economy.
If besides purchasing silver for its Reserves, Banxico proceeds to
monetize silver, by giving the silver coin a monetary value superior to its
intrinsic value, adjustable for increases in the price of silver, but leaving
intact the monetary quote in the case of falls in the price of silver, it
will have applied a measure of transcendent importance that will encourage
and protect the savings of Mexican families, and which at the same time will
produce something of inestimable value: the full confidence of Mexicans in
the great future of their country. A Mexican silver coin, monetized according
to our program, would enjoy great demand on the part of American savers, and
indeed, among savers around the world. Savers would hold these coins in their
savings indefinitely, precluding their return to Mexico in exchange for fiat
money. Thus, Banxico’s monetization of a silver coin would create an
important export product for Mexico.
I have nothing more to add, than to reiterate my belief, that silver is
linked to the great future of Mexico.
Thank you all, for your attention!
Note(1): “By multiplying the 159 billion ounces of paper silver traded in
2016 by the average spot price of $17.14, we arrive at a staggering $2.27 Trillion
of notional paper silver traded versus $4.4 billion actual silver investment.
Thus, the paper notional silver trading ratio to physical silver
investment was a whopping 517 to 1....” (Source: www.srsroccoreport.com).
