Mexico is cheap and nearby. The weather is sunny and warm. That’s why it’s a popular vacation spot among US holidaymakers. That’s also why there’s plenty of cash leftover from these journeys, lingering about many houses, sometimes for decades.
I am often met with a question how much a certain amount of Mexican Peso is worth. The asker is usually amazed with the high denomination of these notes – 10.000, 20.000 or even 100.000 peso. Type “10 000 mexican peso in us dollars” and you’ll get a simple answer – $532. After reading such an information many get unjustifiably excited and start listing all the expensive things they’ll buy after getting thousands of dollars from selling their pesos.
Well, I don’t have good news for you. Mexico’s monetary system has, for decades, been much less stable than ours. As a result, the country has experienced a period of high inflation. Here’s a graph comparing inflation rates of the US and Mexico.
The graph shows a phenomenon almost unknown in the USA – hyperinflation. That term describes a rapid increase in prices of services and products with a simultaneous loss of purchasing power of banknotes. During hyperinflation, one can buy less and less for the same amount of money as the time progresses and the government responds by issuing higher and higher denominations.
The Mexican hyperinflation saw an introduction of banknotes with high denominations. A 20.000 peso note was introduced in 1985, 50.000 peso in 1986, and the highest one, 100.000 peso, in 1991.
Nn 1993, Mexico shifted their monetary system, a process referred to as redenomination. The government introduced a 1 ‘new peso’, which could be obtained for 1.000 ‘old pesos’. That meant, a person arriving at the bank with 55.000 pesos, would leave it with 55 of the new pesos. The international code for the old pesos is MXP and for the new ones, it’s MXN.
To find out how much are your peso banknotes worth, you need to check whether you own old or new ones. All ‘new pesos’ are dated from July 31, 1992. Knowing this will allow you to find one of the two kinds of peso in our currency list and make a simple calculation. As a result of it, you will find out that 10.000 MXP is worth less than the cheapest available postage stamp. Sending these banknotes to us is simply not worth it.
There’s, however, some benefit to having old pesos. They provide us with a valuable lesson for the future.
The lesson is: the only real money is gold, not paper. Looking at the history of the world, one will see that, for 5.000 years, golden coins and bars have not lost their purchasing power. If you own a gold coin made a hundred years ago, you are still able to use it as means of payment. On the other hand, paper currencies are losing their value continuously, every day and every year.
An overbearing budget deficit leads to such levels of national debt that a country goes bankrupt and its currency quickly becomes worthless. Politicians, whether Democrats or Republicans, always seem to omit that fact.
Mexico’s, and many other bankrupt countries’ fate can be shared by the US. That’s why it’s worth it to locate a part of your capital in investment gold.