Silver and the internal market

Friday, 1 November 2002

Hugo Salinas Price

I have been harping for seven years on the fact that Mexico has been following a policy which places its center of gravity outside its borders, pursuing exports as the objective of development.

Now, President Fox tells us that we must reactivate our internal market, and seek there our further development, which will otherwise stagnate along with our exports.

Thus my prediction is confirmed: that when the U.S. should enter, as it has in fact entered, the period of adjustment which always follows bouts of unfettered credit expansion, what would become of our exports, of employment in the “maquiladoras”, and of the industries primarily devoted to exports?

Now, there is a recognition that we must attend to our internal market, an excellent proposition. The problem is that as exports diminish, there is going to be a shortage of dollars and if there is a shortage of dollars we shall have further devaluations, unavoidably, because the peso is a derivative of the dollar, and not a currency with its own value, not subject to devaluation.

The only solution to this dilemma, lies in having a currency with intrinsic value.

I have pointed out silver currency as a money not subject to devaluation, which was used in the past, and could be used again. Thus we would not be burdened with what Antonio López de Santa Anna called “money of imaginary value” way back in 1841. Santa Anna left a bad historical record – he lost Texas to American immigrants – but as far as money was concerned, he had a great deal of common sense.

If Mexico had a real money - silver money and therefore superior to the dollar in quality – all producers in Mexico would want to obtain this money in return for their products. They would have an incentive to attend to our internal market just as forcefully as they seek exports. The problem of dollar reserves would cease to be central, as it is today.

To serve an internal market that pays in pesos when you owe dollars is suicide.

On the other side of the world, President Mahathir Bin Mohammad of Malaysia, who bravely resisted the I.M.F. and its destructive intentions during the Asian Crisis back in 1997-8, has announced plans to introduce a new money for the region, based on silver and gold, according to Islamic Law. There is a leader who is on the right track.

The first and most important condition towards empowering the internal market, is to endow it with a money of quality. All the rest, with regard to this excellent objective, will come about spontaneously.