Gold Forecast And Silver Forecast For 2020: An Interview With Hugo Salinas Price

Hugo Salinas Price is a Mexican citizen, born in the USA of an American mother and a Mexican father. He is 83 years of age. Married for 60 years to a Mexican wife; they have 18 grandchildren. He studied at three universities: Wharton Business School, Monterrey Tec (Mexico) and National Autonomous University of Mexico.  Hugo started out in business life in 1952 as a General Manager of a tiny company manufacturing radios in Mexico City. He was 20 years old at the time and soon learned about the importance of having funds to meet the pay-roll every Friday. The company was owned by his father, which gradually turned into a manufacturing company with its own retailing branch, selling all sorts of consumer goods, including its own TVs.  Later Hugo retired from the retail business, leaving it in the hands of his son (who today is a very wealthy man in Mexico). Additionally, Hugo Salinas is currently President of the Mexican Civic Association Pro Silver, A.C. where for a number a years he has worked tirelessly to get Mexico to adopt a silver coin as legal currency. He has drawn worldwide attention to his plight with the Mexican government and has become a stalwart in expanding the awareness of gold and silver as real money.

Gold-Eagle is proud to interview the venerable Hugo Salinas Price:

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Question:   For millenniums gold and silver were considered money. In fact centuries ago there was NO PAPER MONEY.  However, today fiat currencies dominate the major world markets. Why do you think paper money has enjoyed so much recent popularity?

Hugo:  In the late 18th Century, in Britain, it so happened that machinery was invented that could be moved not only by animal or human labor, but by harnessing Steam, produced by heating water with Coal. Thus began the Industrial Revolution and the enormous increases in production of goods which elevated the standard of living of masses of people. Everything that goes into the production of goods, with the exception of Land and Labor, is called Capital. Accumulation of Capital - that is to say, "Tools" - raised the standard of living in the world beyond anything ever dreamt of in previous ages. But when people got comfortable, they forgot that it is the accumulation of Capital that produces a higher standard of living for all. Accumulating Capital requires Savings, and Savings means enduring present deprivation, so that the future may be better. As the standard of living rose, the population increased. Soon enough, politicians began courting the masses of people with the idea that they had a right to a better economic condition and began promising State benefits to the "underprivileged", who in previous days had to rely on charitable institutions for help. So the State took over the Charity business, and required loads of money to carry out its charity work, known as "Welfare".  The State could only tax away just so much wealth, for its distribution as Welfare, and that was not enough. And so the State added paper money to the gold money. In due course, the gold money went out of circulation and only paper was left. And that is where we are today. Gold as money and the Welfare State are mutually exclusive.

Question:  Do you believe gold and silver are money per se? And why?

Hugo: Gold and silver are certainly money, per se. We would all be using gold and silver as money, were it not for the fact that the State TAXES the use of these metals as money: for instance, if you pay a debt with gold, the State wants to know how much paper money you spent to purchase the gold you used to make the payment, and if you paid less paper dollars for it when you bought it, than it was worth when you paid the gold out, then the State says, "You made a profit on the transaction, and you must pay the State a tax on that profit." This prevents the use of gold and silver as money.

Gold and silver are the substances that have the lowest rate of decline in value, relative to quantity. You can buy gold with paper money, and sell it for paper money, in large amounts and only lose less than one-thousandth of the gold in the process. Using gold as money, when you sell something, and then buy something else, you are really buying gold in the first case, and selling gold in the second case. Your cost would be minimized absolutely. You cannot make a more economical transaction using any other substance! Silver gets the second place. Gold and silver are money because they are the most economical way of effecting exchanges of merchandise.

Question:   Are there any nations today that embrace and accept gold and silver as money? And if so, which are they.

Hugo: None at all. All governments in the world today, spend more than they gather in taxes; they make up the difference with paper money.

Question:   In recent years four states in the USA have legalized the use of gold and silver, which is considered Legal Tender for the payment of debt.  In fact a growing number of states are seeking shiny new currencies made of silver and gold. Worried that the Federal Reserve and the US dollar are on the brink of collapse, lawmakers from 13 states, including Minnesota, Tennessee, Iowa, South Carolina and Georgia, are seeking approval from their state governments to either issue their own alternative currency or explore it as an option.  In light of the growing acceptance, do you feel that in the not too distant future, the US Federal Government will approve authorizing gold and silver as legal currency in all 50 states?  And what in your opinion might accelerate this decision?

Hugo:  Suppose some States legalize the use of gold and silver as money: any use of gold or silver as money will require the citizen to declare how much the gold or silver cost when purchased, and how much it was worth when it was spent - thus incurring a "profit" according to the Government, and forcing the user of gold or silver as money to pay the relative tax on the "profit" (that "profit" is only in terms of paper that has fallen in value, of course).

In my opinion, gold and silver as money cannot return to use in the world until a huge change takes place in the way the nations of the world are governed. You have some 47 million people receiving food stamps in the US.  Impossible to go to gold and silver, until those people either work for a living, or find enough private charity to live on. The US spends something like $650 billion in one year on military expenditures. For gold and silver to be used as money, that has to be reduced to a tiny fraction of itself.  A return to gold for the US would mean a necessary reduction of Deficit Spending on the order of perhaps 99% - and deficits as extraordinary events, not as going on for decade after decade!  So that implies a US that would be unrecognizable, as compared to the present-day US.

Question:   We understand that for many years you have been THE stalwart revolutionary in trying to persuade the Mexican Government to give silver the status of legal money.  One of the primary factors fueling your tireless crusade is the fact that Mexico has been the world’s number one producer of silver for over 300 years. In light of this obvious benefit to your country, what rational augments (if any) does government of Mexico have for delaying a decision to legal silver as money? Is it political, commercial or what?

Hugo:  The very rational argument is that Mexico is a neighbor of a powerful USA, and US Government would overthrow any Mexican government that would dare to introduce silver money into circulation in parallel with paper. Can't have Americans looking over the border at Mexican silver coins as money, while Americans only have Federal Reserve paper and digital (banking) dollars.

Question:   And in the event many more US states, and eventually Mexico accept the use of silver as real commercial money, would this possible and eventually probable event be the catalyst sparking a global move to accept gold and silver as legitimate money?  

Hugo:  I regret to have to say that, in my opinion, only out of the complete ruin of the US, will anything happen to restore real money to the American people. However, I think Russia may at some point, decide to put a Silver Ruble into circulation, in parallel with the paper and digital ruble.

Question:   Assuming the inevitable acceptance of gold and silver as real money, would this not materially increase the demand for gold and silver?  Consequently, would the Law of Economics (Rising Supply vs Stable Demand) kick in by raising the price of gold and silver to ever increasing values?  And would this action, consequently, motivate the mining companies to increase production by opening new mines and hiring more workers?

Hugo:  About demand: I do not see how demand for gold can increase, because every single gram of gold ever mined is owned by someone, either person or corporation. Anyone who owns something, is exercising a demand for it. So all the gold ever mined is in demand, now, because all gold ever mined is owned by someone and therefore, in demand by those who own it. What will happen eventually is that the person offering to purchase something by paying in GOLD, will have first choice, because those who have gold have the most acceptable substance on Earth with which to satisfy their wishes and needs. Because of this advantage that gold gives to its owners, its price will rise - probably to outlandish heights at some time in the future, when the world finally enters into a crushing crisis.

When gold is again recognized as the real money, then mining will not be calculated in dollars; it will be calculated in gold: a gold mine will have to produce more gold than it consumes in its operation. This will be the limit for the expansion of the gold-mining industry: "Gold Return on Gold Invested" or "GRGI".

Question:   Everyone knows the US government is drowning in debt, which according to many monetary experts can never ever be repaid.  The US national debt it today well more than $18 TRILLILON…and growing hand over fist daily.  Apparently, the cancer like growth of the US Debt doesn’t seem to bother Washington or the Fed, because it just keeps issuing more US Treasury Bonds to finance the growing debt.  However, China and Japan indeed have to worry about this problem as they own $1.3 TRILLION and $1.0 TRILLION, respectively.  Indeed, the Sino nation and Tokio really have no way out of this pernicious FOREX quagmire.  And if the PBOC and Japan’s Central Bank start to dump Uncle Sam’s T-Bonds, the price will plummet…causing horrific loses to their remaining portfolio of fiat paper.  How do you think China and Japan might escape from this insurmountable problem? 

Hugo:  I just do NOT see any way out. If you get into a bad business, you have lost money on the very first day of getting into that bad deal, even though you may not be aware of the loss until much later. So those countries that have received humongous amounts of dollars for the merchandise sent to the US for sale at Walmart etc., like China and Japan, lost money when they received the dollars - they just did not know it. They were focused on building manufacturing empires, and they got their empires, but the cost was when they received paper dollars in "payment" for their exports - you can have a Trillion paper dollars, but if you can't spend them, you actually have nothing at all. Such is the problem of China and Japan. Some analysts say that China is buying up physical natural resources around the world, by palming-off some of its T-Bonds in doing those purchases.

Question:  You are an internationally renowned monetary pundit.  And based upon your decades long experience – and taking into account all the above insightful and timely knowledge, what are your forecasts for precious metals five years from now (i.e. in 2020)?

Hugo:  Thanks for the unearned compliment!  I rather doubt that the world can withstand the on-going impoverishment it is suffering, for five more years.  Deficit spending - going on all over the world - is making the world poorer. Deficit spending is like going to the larder for the day's meals, without replenishing the larder with surplus money, sooner or later: deficit spending is like going to the larder every day, day in, day out. Eventually, there is nothing in the larder. This is what is happening to the world. The day when there is nothing in the larder will have to come, sooner or later. All Hell will then break loose.

Gold in 2020: $10,000 to $50,000/oz, or perhaps no price, in paper money.  Only by selling something, will you be able to acquire gold or silver. Think Zimbabwe: you act like Zimbabwe, you get your Zimbabwe. Impossible to buy gold using Zimbabwe dollars!

Silver in 2020: $600 - $3,000/oz

Count on this sort of prices, if war breaks out between US and Russia/China. Otherwise - who knows?

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Gold-Eagle’s staff and its global readership are very grateful to Hugo Salinas Price for taking the time to share his insightful and timey wisdom with us.  Visit his website at www.plata.com.mx (In English and Spanish).