Spanish Price Revolution

The Spanish Price Revolution is a period, beginning as early as 1470 and lasting until as late as 1650, when gold and silver poured into Spain from the New World; Mexico, Peru and the rest of the Spanish Empire.The specie flow through Spain increased Spanish prices and consequentially spread inflation through Western Europe. This enlarged the money supply and price levels of many European countries. The Spanish Price Revolution is overwhelmingly the most prolonged and influential occurrence of rampant inflation in modern history. In addition to leaving negative effects on the Spanish society and market, the price revolution spurred numerous economic, historical and political theories that continue to fascinate scholars today.

One of the first historical references to the beginning of the Spanish price revolution phenomenon occurred during the festival of San Giovanni in Florence on June 24, 1491. This festival of celebration was in honor of a newly issued Florentine coin, which many believed would bring economic prosperity to the country. However, shortly after this celebration, the leader of the country, Savonarola died from a physician’s misdiagnosis. The country faced widespread poverty and conflict, as Savonarola’s son (and later his son’s replacement) could not support and defend the country. In response to the devaluation of currency and political turmoil, prices surged to unprecedented rates in the 1490s as the economy started to fail.

Despite this tale of the failure of the Florentine coin, most historians look at the end of the Renaissance as the start of the Spanish Price Revolution. An era often considered a time of peace for the Western Europe population, the Renaissance was a period where Western Europe experienced equilibrium in the price of commodities and labor. It also was a period where there was a high concentration of wealth in the hands of a few (The Bubonic Plague had wiped out nearly a third of the population a century before). Additionally, Europe experienced technological advancement in the mining industry, the stream of currency through debasement from royals, and the emergence of Protestantism. Everything from the market economy to colonization was going Western Europe’s way.

However, that would all change following the discovery and exploration of the New World abroad. While Spain enjoyed a plethora of economic opportunity in the New World, the financial pressure it faced after the discovery halted any and all progress as prices inflated across Europe. This would mark the beginning of what would become a widespread phenomenon known as the Price Revolution.

The “alleged” first scholar to make a quantity-theory link between the influx of American “treasure” and the Price Revolution was the renowned French philosopher Jean Bodin in his 1568 response to a 1566 treatise by the Royal Councilor Jean Cherruyt de Malestroit. Malestroit argued that lower quality coins were the chief culprit of price influx—similar to the periodic inflations of the fourteenth and fifteenth centuries. Bodin responded by dismissing this argument contending that the growing influx of silver from the Spanish Americas was the primary cause of price inflation. Championed for his “quantity theory of money,” Bodin was able to “demonstrate” that the inflation of prices in France was due far more to Spanish-American influx than to any change in coin debasement.

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