"while the flood of gold into Spain in the 16th century seemed like a big haul at the time, by modern standards it was a trivial amount. Total world gold production during the 1500s is estimated to have been around 36 tons;"
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World silver production during the 16th century was around 23 thousand tons[1]. Silver was closer in value to gold back then too, at around one tenth the value per weight. The economic impact of new world gold was a rounding error compared to the impact of silver.
If you have a mental image of Spanish conquistadors sparking global inflation purely by looting Inca gold, erase it. The real culprit was silver extracted from Potosi and a few other New world mines.
Zacatecas (Mexico) is mostly a desert now but it used to be covered with forests. The wood was used as fuel for smelting silver during the colonial period.
>If you have a mental image of Spanish conquistadors sparking global inflation purely by looting Inca gold, erase it. The real culprit was silver extracted from Potosi and a few other New world mines.
That is when labors start to flood to Netherlands.
As I understand it, some of the silver was siphoned off in trade with China (via the trans-Pacific route to Manila). China needed continuing silver imports because silver was not used there in the form of standardized coinage, but rather in ingots that were weighed and subdivided, with inevitable continuing loss.
It was very surprising to see zero mention of the Manila galleon[0] trade route in the linked article, even if technically the question was about gold rather than silver. The simple answer to the question of what happened to the money was that Spain spent it! The impacts on SE Asia were profound and are still being felt today.
I've not heard the inevitable loss as a culprit for Chinese demand. IIRC it had to do with a failed paper money system triggering inflation followed by a reversion to silver for exchange plus a growing population and market forces from the new supply from the new world.
Spain’s colonies funneled huge amounts of gold and silver into the European economies without a complementary increase in productivity to absorb it, causing massive inflation.
A ship for transatlantic shipping might have first cost 100,000 maravedí to build and equip before the treasure fleet expeditions, but afterwards with so much gold flowing into the economy and lots of competition for a limited ship building industry, the costs would inflate to 1 million maravedí (number roughly from memory). Same with the canons and shot, animals and sailor salaries, and so on.
Meanwhile, shipbuilders with all their newfound money are competing for blacksmiths, the outfitters are competing for livestock and horses, and so on. This puts lots of pressure on the rest of society which might need the iron for farming tools and the livestock to survive the winter, which they can no longer afford since the conquistadors and their merchants can pay a lot more in gold. In the end the maravedí accounts look bigger but represent the same amount of physical goods or labor.
Repeat this process across the whole economy and it throws everything into chaos. Some people here and there get rich, but economy wide it’s a total wash. Any wealth created for the state mostly just went into paying for wars because the inflation worked its way up through salaries.
As a sibling comment said, gold was effectively money. Having more money, without having more products to buy, effectively triggered massive inflation. Prices went up, but the actual supply of goods and services didn't change much. The Spanish economy suffered massive inflation, as did Europe in general to a lessor extent.
They spent it on war. The Spaniards were fighting the Ottoman Empire and the Relgious Wars brought on by the Protestant Reformation. Funny enough their main enemy for the religious wars was France, who was also Catholic. The Spaniards also went bankrupt multiple times too.
Today - if you give everyone $10 million dollars there isn't enough production for everyone to buy what they want - you just get inflation. Its probably worse for the economy as people stop working.
Some of all this gold is still on display in Spain. Earlier this year my wife and I visited Granada in southern Spain. Vast amounts, truely impressive, of gold are exposed in its Cathedral and in the burial place of Emperor Karl (Charles/Carlos) and his wife, Isabella. Alhambra is still the #1 sight there but if you can spare the time, do visit these two places. They are co-located in central Granada.
> For the latter part of the 1500s and on into the 1600s Spain was a debtor nation, spending more abroad than it took in. The result was a net outflow of gold and silver. Attempts were made to restrict the export of precious metals, but without much success. In the end it all simply dribbled away. The problem was that the conquest of the New World left Spain with a lot more money, but not that much more wealth, if you follow me. They didn’t realize that until too late, and suffered centuries of poverty as a consequence.
Sounds like America since the second half of the 20th century.
Spain was different. There were no 'proper' colonies, but everyething was deal as if they were an inner province in Iberia. That's the way you could get fancy universities for its time.
But backwards people like Ferdinand the 7th cut down the modernisation of Spain
which could boost us up to the level of France if not more. I'm no kidding. Just look at
the Cádiz constitution from 1812.
Nope. By any objective measure the USA has continued to organically generate enormous amounts of real wealth during that period. We have some issues with inequality and letting foreign countries take advantage of our trade policies but the new wealth is quite real.
With all this gold, Spain went on a buying spree, weapons, art, churches etc - and the sellers(rest of Europe) industrialized as the gold trickled down into THEIR economies.
When the gold no longer arrived, Spain went into a steady decline as their rich upper crust of RC Churche, Kings, Queens, Lords, Ladies etc. and eventually became democratic after Franco.
A solid 50% of this entire thread is people arguing about inflation and bikeshedding the concept of money. Amazing. (COVID gets an honorable mention. Six years on now, but hey. Stay mad.)
Marx wrote about commodity fetishism. Perhaps the ultimate version is a belief gold is innately valuable. It has valuable properties, but almost its sole function is to be rare and desirable. That we now use gold for electronics in some ways undermines its rei-ification as the personification of value.
Spain fucked up. They mistook the gold for something more valuable than Labor. The Merino sheep of Spain were a better bet, in the long term.
The Spanish gold disappeared into economies with a better sense of what value is.
Yes, I often say that the gold from America was a poisonous gift. It made the country so rich that they stopped caring about other stuff, they could just buy them from elsewhere. So there was little incentive to manufacture first, and industrialize later. Which is ironic because some of first steam engines you can find in Europe were invented in Spain (https://en.wikipedia.org/wiki/Jer%C3%B3nimo_de_Ayanz_y_Beaum...). It also enabled the funding of numerous stupid wars, with the human cost they bring. The name of this process is called the Dutch Disease https://en.wikipedia.org/wiki/Dutch_disease
Gold is a VERY unique metal and its value comes directly from that. Particularly the complete lack of oxidation, I'm sure it was seen as absolutely magic that it would not tarnish while every other metal known at the time would oxidize very easily.
Value is ultimately always in the eye of the beholder.
If gold is inherently valueless, then isn’t shipping all of it away immediately to other countries in return for useful goods the most rational thing to do?
And if they could get gold at a fraction of the cost of other countries and exchange it for useful goods, isn’t that more rational than building the goods yourself?
The Spanish were not stupid and were not acting irrationally — except perhaps thinking on too short of a time frame. The gold trade was a total moral abomination, but it was a good trade economically for hundreds of years.
The main problem was that it was basically an arbitrage play and once the margin got erased from inflation, they had let the rest of their economy atrophy.
This is one of the reasons the Saudis invest so much money in tech companies and other industries.
spain was no longer a major player in world politics by 1800s, but they had a good 2-3 century run. not sure if the monetary crisis was really did them in, or more just it being the ebb and flow of history. britain's world dominance is long over too. if they did "fuck up", it was because charles v was the first global hegemon, nobody know how to do that, he was in uncharted territory. and obviously no, the merino sheep weren't a better bet long term, that's absurd. global dominion required a cohesive domestic home country to serve as the wellspring of power, not the fractured foedal remnants of a mediaeval europe that required constant war to keep together. and then of course, industrialize early.
The School of Salamanca about value and money said something else in 16th century. The Spaniards were anything but dumb.
It just happened that the British industrial revolution steamrolled everyone. You can't compete aganst the steam engine and the railway making communications and sharing of goods and raw materials something ridiculously cheap compared to the previous times, even by boat in both UK and Spain where the big rivers like Douro and Tagus could sustain a lot of transport. But, still, the train allowed to reach anyone in the country.
Which cheap transportation you can connect industrial powerhouses (and competent engineers and scientists) and the rest it's history. Addthe telegraph on top of that and it's game over for any outdated empire.
When knowledge sharing can be reduced hours and maybe a day or two instead of weeks or months, it's like upgrading from having a 486 based computer with DOS to a Ryzen one with multiparallel processing. Literally.
Gold is used by industry at current prices due to its physical properties, so its current price and value are fairly close.
This still allows for significant price swings because there vast quantities of gold sitting around in vaults, but unlike say bitcoin it does have high intrinsic value. IE: If gold sustained a 90% drop in price across decades at lot more would be used by industry creating a price floor.
understanding what humans collectively find valuable is much more lucrative than understanding why humans collectively find a thing valuable
being on this forum for a decade I see people consistently get caught up in the latter, at the expense of noticing the opportunities the same people are here for
Marx called gold "the money-commodity" and said that paper money (even early fiat currency) always represents gold/silver in circulation.
The massive Spanish purchases of weapons and other manufactured goods from other countries in the 16th and 17th centuries played a large role in jump-starting the capitalist economic revolution in Europe.
beloch|2 months ago
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World silver production during the 16th century was around 23 thousand tons[1]. Silver was closer in value to gold back then too, at around one tenth the value per weight. The economic impact of new world gold was a rounding error compared to the impact of silver.
If you have a mental image of Spanish conquistadors sparking global inflation purely by looting Inca gold, erase it. The real culprit was silver extracted from Potosi and a few other New world mines.
[1]https://digital.library.unt.edu/ark:/67531/metadc40312/m2/1/...
pier25|2 months ago
zenmac|2 months ago
That is when labors start to flood to Netherlands.
pfdietz|2 months ago
exidy|2 months ago
[0] https://en.wikipedia.org/wiki/Manila_galleon
TSiege|2 months ago
https://en.wikipedia.org/wiki/Global_silver_trade_from_the_1...
mcc1ane|2 months ago
ELI5, please!
throwup238|2 months ago
A ship for transatlantic shipping might have first cost 100,000 maravedí to build and equip before the treasure fleet expeditions, but afterwards with so much gold flowing into the economy and lots of competition for a limited ship building industry, the costs would inflate to 1 million maravedí (number roughly from memory). Same with the canons and shot, animals and sailor salaries, and so on.
Meanwhile, shipbuilders with all their newfound money are competing for blacksmiths, the outfitters are competing for livestock and horses, and so on. This puts lots of pressure on the rest of society which might need the iron for farming tools and the livestock to survive the winter, which they can no longer afford since the conquistadors and their merchants can pay a lot more in gold. In the end the maravedí accounts look bigger but represent the same amount of physical goods or labor.
Repeat this process across the whole economy and it throws everything into chaos. Some people here and there get rich, but economy wide it’s a total wash. Any wealth created for the state mostly just went into paying for wars because the inflation worked its way up through salaries.
goodcanadian|2 months ago
esafak|2 months ago
adastra22|2 months ago
vondur|2 months ago
cherryteastain|2 months ago
wongarsu|2 months ago
rr808|2 months ago
Herring|2 months ago
Consider what that means for sustainability and the future.
HPsquared|2 months ago
conception|2 months ago
hecanjog|2 months ago
[deleted]
msylvest|2 months ago
rayiner|2 months ago
Sounds like America since the second half of the 20th century.
anthk|2 months ago
But backwards people like Ferdinand the 7th cut down the modernisation of Spain which could boost us up to the level of France if not more. I'm no kidding. Just look at the Cádiz constitution from 1812.
https://en.wikipedia.org/wiki/Ferdinand_VII
https://en.wikipedia.org/wiki/Spanish_Constitution_of_1812
Not bad for its time at all.
nradov|2 months ago
aurizon|2 months ago
anthk|2 months ago
otherme123|2 months ago
alejohausner|2 months ago
Nace en las Indias honrado, // donde el mundo le acompaña; // viene a morir en España // y es en Génova enterrado.
(Mr. Money) is born in the Indies an honest man, with the world on his side; he comes to Spain to die, and is buried in Genoa.
venturecruelty|2 months ago
ggm|2 months ago
Spain fucked up. They mistook the gold for something more valuable than Labor. The Merino sheep of Spain were a better bet, in the long term.
The Spanish gold disappeared into economies with a better sense of what value is.
aarroyoc|2 months ago
Arab states could get into the same trap
Scubabear68|2 months ago
Value is ultimately always in the eye of the beholder.
empath75|2 months ago
And if they could get gold at a fraction of the cost of other countries and exchange it for useful goods, isn’t that more rational than building the goods yourself?
The Spanish were not stupid and were not acting irrationally — except perhaps thinking on too short of a time frame. The gold trade was a total moral abomination, but it was a good trade economically for hundreds of years.
The main problem was that it was basically an arbitrage play and once the margin got erased from inflation, they had let the rest of their economy atrophy.
This is one of the reasons the Saudis invest so much money in tech companies and other industries.
trgn|2 months ago
anthk|2 months ago
It just happened that the British industrial revolution steamrolled everyone. You can't compete aganst the steam engine and the railway making communications and sharing of goods and raw materials something ridiculously cheap compared to the previous times, even by boat in both UK and Spain where the big rivers like Douro and Tagus could sustain a lot of transport. But, still, the train allowed to reach anyone in the country.
Which cheap transportation you can connect industrial powerhouses (and competent engineers and scientists) and the rest it's history. Addthe telegraph on top of that and it's game over for any outdated empire. When knowledge sharing can be reduced hours and maybe a day or two instead of weeks or months, it's like upgrading from having a 486 based computer with DOS to a Ryzen one with multiparallel processing. Literally.
Retric|2 months ago
This still allows for significant price swings because there vast quantities of gold sitting around in vaults, but unlike say bitcoin it does have high intrinsic value. IE: If gold sustained a 90% drop in price across decades at lot more would be used by industry creating a price floor.
yieldcrv|2 months ago
being on this forum for a decade I see people consistently get caught up in the latter, at the expense of noticing the opportunities the same people are here for
ajross|2 months ago
faidit|2 months ago
The massive Spanish purchases of weapons and other manufactured goods from other countries in the 16th and 17th centuries played a large role in jump-starting the capitalist economic revolution in Europe.
nephihaha|2 months ago
ErneX|2 months ago
https://en.wikipedia.org/wiki/Moscow_Gold_(Spain)
caminante|2 months ago
Did you actually read the wiki you linked?
Spain transferred the gold to Moscow who liquidated it on Spain's behalf to buy guns, fund the civil war, and deposit in banks.
There's mixed views whether Moscow took too much of a margin, but they melted down gold after selling it and the gold is still in circulation.
darubedarob|2 months ago
hdb385|2 months ago
[deleted]