Mahatma Gandhi is famous for clever quotes; one of my favorites is his response to Winston Churchill offering independence to India if they would fight the Japanese in the Second World War: “That’s like accepting a postdated check from a failing bank.”
The Piñera government recently bought U.S. dollars, notes from the Federal Reserve Bank, a private corporation subsidized by the U.S. government. Government spending in the U.S., Japan and Europe is so uncontrolled that there soon will be national bankruptcies. All currencies have been devalued relative to copper, silver, gold, and oil, the basic foundation of modern life.
Pinera made the purchases not because he believed the dollar is undervalued; he simply wanted to bail out foolish Chilean businesses who neglect to offset currency risk using derivatives. This is the fourth time in the last 8 years that the Chilean government has manipulated the peso.
The current ruling political party and the previous one in Chile have ran this scam. Meet the new boss – same as the old boss.
Chile has a unique opportunity to create a new industry in silver coinage. Peru and Mexico dominated it for 400 years and prefer to print fiat money as currency. Chile has substantial silver and could buy more from Peru to become the leader in producing silver coins for the world market.
Some time in the next 20 years a silver currency will become the standard medium of exchange worldwide. The profits from the industry, seignorage, will be earned by the first government to renounce fiat money and currency manipulation; and uses silver as a medium of exchange. Will it be Chile?