The discovery of America revealed to Europeans a new
source of the precious metals. The Spaniards soon secured large quantities of
gold by plundering the Indians of Mexico and Peru of their stored-up wealth.
After the discovery in 1545 A.D. of the wonderfully rich silver mines of Potosi
in Bolivia, the output of silver much exceeded that of gold. It is estimated
that by the end of the sixteenth century the American mines had produced at
least three times as much gold and silver as had been current in Europe at the beginning
of the century.
CONSEQUENCES OF THE ENLARGED MONEY SUPPLY
The Spaniards could not keep this new treasure. Having few
industries themselves, they were obliged to send it out, as fast as they
received it, in payment for their imports of European goods. Spain acted as a
huge sieve through which the gold and silver of America entered all the
countries of Europe. Money, now more plentiful, purchased far less than in
former times; in other words, the prices of all commodities rose, wages
advanced, and manufacturers and traders had additional capital to use in their
undertakings. The Middle Ages had suffered from the lack of sufficient money
with which to do business; from the beginning of modern times the world
has been better supplied with the indispensable medium of exchange.
