American Precious Metals and Their Consequences for Early Modern Europe

Abstract

Over the early modern period and beyond, massive amounts of silver and gold were found and mined in the Americas. In this paper, I review the consequences for the European economies. Some second-order receiver countries such as England benefited in both the short and long run. First-order receivers such as Spain and Portugal also benefited in the short-run, but their continued exposure to the arrival of massive quantities of precious metals eventually led to loss of competitiveness and an institutional resource curse.

Reconstruction of the Spanish Money Supply, 1492-1810

“…For example, according to the quantity theory of money, the causal link runs from to , for given and . Palma (2019) , however, argues that early modern money inflows rendered Spain's economy chronically uncompetitive, i.e. some of the importance of is causally attributed to .…”

“…The arbitrariness inherent in this approach has been pointed out by many authors, including Braudel and Spooner themselves. The assumption that the value of the gold stock equals the value of the silver stock lacks grounding in economic theory ( Glassman and Redish, 1985;Morineau, 1985;Palma, 2019 ). In addition, the resulting initial stock value of 74,854 tonnes of silver equivalent is so high that it defies the available production side data.…”

“…The influx of vast amounts of precious metals from Spain's American colonies, together with a rising price level, gave birth to early formulations of the quantity theory of money at the School of Salamanca. Today, research into the economic consequences of the inflow of American precious metals into Europe continues ( Brzezinski et al, 2019;Palma, 2019Palma, , 2021. We hope that the money supply estimate we provide in this paper generates new inroads for the quantitative analysis of this unique period in monetary history.…”