Worldwide Inflation Summary

  • Last updated on November 11, 2022

Prices for goods in Europe in the sixteenth century rose to about four times the level that had prevailed during the preceding three centuries, increasing poverty levels but also raising the profit potential for those who were in a position to exploit an economy that was suddenly based primarily upon money and credit rather than labor and trade.

Summary of Event

Prices in Europe, and in European settlements in America, increased at a very rapid rate during the sixteenth century, in comparison to at least the three preceding centuries. Prices of many commodities were, in 1600, about four times what they had been in 1500. Inflation Economy;inflation Bodin, Jean Columbus, Christopher Cortés, Hernán Pizarro, Francisco Philip II (1527-1598) William the Silent Elizabeth I Bodin, Jean Cortés, Hernán Pizarro, Francisco William the Silent Elizabeth I (queen of England)

This enormous increase in prices was attributed, as early as 1568, to the huge quantities of gold and silver brought back to Europe by the Spaniards from their conquests in Central and South America, following Christopher Columbus’s discovery of America in 1492. Jean Bodin, a French political philosopher, published a pamphlet in 1568 in which he blamed the “debasement” of the coinage of Europe on the very large quantities of bullion imported into Spain, and thence into the rest of Europe. Exploration and colonization;Spain of the New World

Initially, the Spanish conquistadors, led by Hernán Cortés, were most attracted to the gold in the numerous ornaments of the conquered Indians and in the mountain streams of Mexico. By the middle of the century, however, their emphasis had shifted to silver, thanks to the conquest, by Francisco Pizarro, of the Andean silver mines at Potosí. Silver;discovery of in the Americas Moreover, in the second half of the sixteenth century, a new technology, using an amalgam of mercury, made separating the pure silver from the mined ore substantially quicker, simpler, and more profitable.

Because the kind of detailed statistics common in the twentieth century are lacking for earlier periods of history, analyses of the impact of the American bullion are based only on estimates. However, following some researches done in Spanish archives in the 1930’s by American scholar Earl Hamilton, it became possible to arrive at figures for the amount of bullion entering Europe in the sixteenth century from Spain’s empire in Central and South America. It is estimated that, during the sixteenth century, some 180 tons of gold reached Europe from America, along with some 15,000 tons of silver.

Since then, the effect of this influx of bullion on the European economy has been played down, as new studies have shown that a good deal of the Spanish silver was not used to create coins but rather was used primarily in payment for the supplies needed by Spanish officials to support their empire, as well as to supply the armies being deployed by Philip II to maintain Spain’s political control of its holdings, especially the Netherlands. Spain’s dominance of the Netherlands was challenged by the Dutch under William the Silent. At the same time, the empire’s dominance of the Atlantic was challenged by the English under Elizabeth I, demonstrated most spectacularly by the English defeat of the Spanish Armada in 1588.

The most widespread impact of sixteenth century inflation was the divergence between the cost of goods and the wages that ordinary people could command. Because the population of Europe was growing at a significant rate—resulting in more people seeking employment than there were jobs available—wages increased far less than the cost of food. Although the great increase in trade that followed the infusion of much new capital into the European economy made many more goods available, ordinary people could not afford to buy these things. Most Europeans of the time lived a subsistence lifestyle, and most of what they bought was food. The price of food skyrocketed, and the result was a widespread descent into poverty. Diets that earlier had included meat instead became almost entirely vegetarian.

Despite the careful controls established by the Spanish government, which ensured that much—though not all—of the bullion coming from America landed in Spain, much of it soon flowed out again. Partly it went to sustain the cost of importing the bullion: About half of each year’s imports went to pay for the cost of the next year’s voyages. Much of the remainder went to pay for the goods needed to sustain the Spanish armies fighting in France and the Netherlands, especially the latter. The supplies for the Spanish armies were bought with funds supplied by Italian financiers, especially from Genoa. The result was a heavy buildup in the Spanish government’s debt, which had to be restructured on a number of occasions during the latter half of the sixteenth century.

The growth in population, Population growth;Europe and the conversion of many social relationships in Europe to ones based on the exchange of money, meant that the trade in agricultural products was of growing importance. Even though an estimated 200,000 Spaniards emigrated to the new Spanish colonies in the New World, the steadily growing population in Europe could no longer be fed by the agricultural products of Western Europe, so that, increasingly, foodstuffs had to be imported. The place these foodstuffs were imported from was Eastern Europe, where the aristocracy converted their estates from self-supporting units into large grain-producing operations. This grain was shipped in ever-increasing amounts to the cities of Western Europe. Not only was an economy based on self-sufficiency gradually being replaced by one based on an exchange of money, but the exchange was no longer local; rather, it embraced the entire continent of Europe. Trade;Europe with the Americas

As social relationships came to be determined by economic relationships, the possession of money came to be critical. The aristocracy came to depend on money rents for their land holdings in place of the labor services that had been characteristic of the Middle Ages. Instead of leading a local community, the aristocracy came increasingly to be officeholders of the new national kingdoms that were arising. The rulers of these kingdoms came, moreover, to rely heavily on systems of credit, as they borrowed money to operate their new national governments.

As royal debt became national debt, a new class of “rentiers” arose, those who lived from the income earned by the money they lent both to monarchs and to new commercial enterprises. The commercial enterprises themselves became “international,” even “global,” in their operations to a far greater extent than in earlier centuries, making use of the large amounts of capital now available. In a sense, this was the first era of “globalization.”


The inflation of the sixteenth century transformed the society of Europe. The gap between prices and wages depressed the living standards of ordinary people, but it enabled those with access to money to increase their assets and their living standards. For those who had money, or who knew how to make money in an inflationary economy, the new conditions made possible a luxurious lifestyle not known since the Roman Empire. Modern capitalism got its start at this time.

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Braudel, Fernand. “Prices in Europe from 1450 to 1750.” In The Cambridge Economic History of Europe. Vol. 4. Edited by E. E. Rich and C. H. Wilson. Cambridge, England: Cambridge University Press, 1967. Braudel wrote this chapter before his masterwork, Civilization and Capitalism, but it concentrates on the issue of inflation.
  • citation-type="booksimple"

    xlink:type="simple">Elliott, J. H. Europe Divided, 1559-1598. Malden, Mass.: Blackwell, 2000. Contains a chapter on the European economy, with a special section dealing with silver and prices.
  • citation-type="booksimple"

    xlink:type="simple">Fischer, David Hackett. The Great Wave: Price Revolutions and the Rhythm of History. New York: Oxford University Press, 1996. Although its conclusions and causal connections have been widely attacked by economists, Fischer’s book contains many useful graphs that illustrate what happened to prices over the long haul.
  • citation-type="booksimple"

    xlink:type="simple">Kamen, Henry. Spain’s Road to Empire: The Making of a World Power, 1492-1763. London: Allen Lane, 2002. Written by the author of a number of works on sixteenth century Spain, this work portrays Spain’s global leadership at that time.
  • citation-type="booksimple"

    xlink:type="simple">Lynch, John. Spain, 1516-1598: From Nation State to World Empire. Malden, Mass.: Blackwell, 1991. A more concentrated treatment than that provided by Kamen, focused on the sixteenth century.
  • citation-type="booksimple"

    xlink:type="simple">Rich, E. E. “Expansion as a Concern of All Europe.” In The New Cambridge Modern History. Vol. 1. Edited by G. R. Potter. Cambridge, England: Cambridge University Press, 1957.

Early 1460’s: Labor Shortages Alter Europe’s Social Structure

1482-1492: Maximilian I Takes Control of the Low Countries

1490’s: Decline of the Silk Road

June 7, 1494: Treaty of Tordesillas

Jan., 1498: Portuguese Reach the Swahili Coast

Beginning c. 1500: Coffee, Cacao, Tobacco, and Sugar Are Sold Worldwide

1505-1515: Portuguese Viceroys Establish Overseas Trade Empire

1531-1585: Antwerp Becomes the Commercial Capital of Europe

1545-1548: Silver Is Discovered in Spanish America

1558-1603: Reign of Elizabeth I

1568-1648: Dutch Wars of Independence

1580-1581: Spain Annexes Portugal

July 26, 1581: The United Provinces Declare Independence from Spain

Dec. 31, 1600: Elizabeth I Charters the East India Company

Categories: History