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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Ilaine who wrote (5934)7/17/2001 12:26:54 PM
From: Don Lloyd  Read Replies (1) of 74559
 
CB -

...In other words, that the Spaniards got away clean, and brought the gold back to Spain without too much trouble.

And then what happened? Well, is gold a store of value? I think not. I think it's only a medium of exchange, but it's certainly purchasing power. For the Spanish kings, it was like winning the lottery many times over....

Whenever the supply of money increases, the first people to receive it benefit at the expense of the last.

If Spain were a closed economy, as well it might be after looting Fort Knox, the gold as money creates no wealth for the economy as a whole, but merely increases the money prices of goods and services. Of course the gold could be used to gold plate everything in sight, and not used as money.

If it is not a closed economy, it can buy consumption goods from overseas until its gold runs out, but this is not a lasting gain. Only if it buys capital goods from overseas that increase the productivity of its economy will it have a lasting effect.

Regards, Don
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