[mcc1ane]

> 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.

ELI5, please!

[throwup238]

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.

[littlestymaar]

This entirely misses the fact that Spain became a European superpower during that period because war was then done by mercenaries…

> Any wealth created for the state mostly just went into paying for wars because the inflation worked its way up through salaries.

Wealth created for the state just went into paying for wars because that what mattered to the early modern aristocracy and that's what they wanted to pay with their additional money. From the point of view of the Spanish elite of the time, their “wealth” increased dramatically during that period, it's just that this don't fit your or my criteria for wealth.

[ares623]

hold up a minute

[jiggawatts]

Sounds an awful lot like the AI data center build out sucking up resources at the expense of the rest of the economy. E.g.: Sam Altman cornering the market for computer memory.

[panick21_]

It was not actually a massive inflation. It was a little inflation but people were not used to it.

[goodcanadian]

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.

[nickff]

Notably, the 'massive inflation' was a rate of 1-1.5% per year...

[ijk]

It's interesting that mining gold and silver is similar to printing more money; we usually think of inflation as represented by debasing coinage but there's been a few circumstances where flooding the local economy with precious metals is the same effect.

[esafak]

Bullion imports caused inflation; the money supply increased without corresponding increases in the production of goods and services. https://en.wikipedia.org/wiki/Price_revolution

[kristianp]

What an interesting topic. One of the further reading links is to a paper that claims the inflation started earlier in the 1500s, due in part to the rise of German silver mining: https://web.archive.org/web/20110706211346/http://repec.econ...

It would be interesting to learn about the technological developments Spain failed to make compared to some of their European neighbours. Merchant banking is one of them.

[adastra22]

Money is the thing you use to buy things. Wealth is having those things. Only in an ideal world are the two the same. The world is not ideal.

[PessimalDecimal]

But why couldn't they, e.g. buy other people's thing in exchange for their gold? IOW, why is the relevant fact that _Spain_ didn't have much more wealth despite having more gold? Other people in other countries valued (and still value) gold too.

[analog31]

That may be true, but a modern money system could get you pretty close to that ideal, where the main difference is the friction of transactions.

It's close to ideal for a loaf of bread, or a bag of nails. I can hop on my bike and turn my money into either of those things in a few minutes. Turning money into a house is further from that ideal of course.

[vondur]

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.

[cherryteastain]

Adam Smith's Wealth of Nations explores the topic in depth

[wongarsu]

They spent a lot of resources (some tangible, some less tangible) and ended up getting a roughly equivalent amount of money out if it

[rr808]

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.

[Herring]

It's just investing vs extracting/exploitation. Both can get you rich, but one is short-term and the other is long-term.

Consider what that means for sustainability and the future.

[HPsquared]

You can't eat gold.

[cenamus]

You also can't eat money, but I imagine it's pretty useful if you're hungry

[conception]

Actual EL5 - Stregga Nona but with money.

[delbronski]

Smugness level 110. It is a good question. Get over yourself please.