Inflation soared in Europe primarily due to the influx of vast quantities of gold/silver bullion.
I recently ran across this review of David Hackett Fisher's The Long Wave. The reviewer, John Munro, economics prof at the University of Toronto, specializes in economic history of that time period. Munro lists a number of reasons for price inflation in Europe during that time frame, including gold from Africa, silver mining in Bohemia and Germany, and most important, according to Munro, the invention of new forms of credit which could be traded in secondary markets.
>>For the far better known 16th-Century Price Revolution, Fischer seems to pose a much greater threat
to traditional monetary explanations, especially in so quixotically dating its commencement in the
1470s, rather than in the 1520s. Certainly Fischer and many other critics are on solid grounds in
challenging what had been, from the time of Jean Bodin (1566-78) to Earl Hamilton (1928-35), the
traditional monetary explanation for the origins of the Price Revolution: namely, the influx of Spanish
American treasure. But not until after European inflation was well underway, not until the mid-1530s,
were any significant amounts of gold or silver being imported (via Seville); and no truly large imports
of silver are recorded before the early 1560s (a mean of 83,374 kg in 1561-55: TePaske 1983), when
the mercury amalgamation process was just beginning to effect a revolution in Spanish-American
mining.
Those undisputed facts, however, in no way undermine the so-called "monetarist" case; for Fischer,
and far too many other economic historians, have ignored the multitude of other monetary forces in
play since the 1460s. The first and least important factor was the Portuguese export of gold from
West Africa (Sao Jorge) beginning as a trickle in the 1460s; rising to 170 kg per annum by 1480, and
peaking at 680 kg p.a. in the late 1490s (Wilks 1993). Far more important was the Central European
silver mining boom, which began in the 1460s, at the very nadir of the West European deflation, which
had thus raised the purchasing power of silver and so increased the profit incentive to seek out new
silver sources: as a technological revolution in both mechanical and chemical engineering. According
to John Nef (1941, 1952), when this German-based mining boom reached its peak in the mid 1530s, it
had augmented Europe's silver outputs more than five-fold, with an annual production that ranged
from a minimum of 84,200 kg fine silver to a maximum of 91,200 kg -- and thus well in excess of any
amounts pouring into Seville before the mid-1560s. My own statistical compilations, limited to just the
major mines, indicate a rise in quinquennial mean fine-silver outputs from 12,356 kg in 1470-74 to
55,025 kg in 1534-39 (Munro 1991). In England, 25-year mean mint outputs rose from 18,932 kg silver
in 1400-24 to 33,655 kg in 1475-99 to 59,090 kg in 1500-24; and then to 305,288 kg in 1550-74 (i.e.,
after Henry VIII's "Great Debasement"); in the southern Low Countries, those means go from 54,444
kg in 1450-74 to 280,958 kg in 15 50-74 (Challis 1992; Munro 1983, 1991).
In my view, however, equally important and probably even more important was the financial revolution
that had begun in or by the 1520s with legal sanctions for and then legislation on full negotiability,
and the contemporary establishment of effective secondary markets (especially the Antwerp Bourse)
in fully negotiable bills and rentes, i.e., heritable government annuities; and the latter owed their
universal and growing popularity, compared with other forms of public debt, to papal bulls (1425,
1455) that had exonerated them from any taint of usury. To give just one example of a veritable
explosion in this form of public credit (which thus reduced the relative demand for gold and silver
coins), an issue that Fischer almost completely ignores: the annual volume of transactions in Spanish
heritable juros rose from 5 million ducats (of 375 maravedis) in 1515 to 83 million ducats in the 1590s
(Vander Wee 1977). Thus we need not call upon Spanish-American bullion imp orts to explain the
monetary origins of the European Price Revolution, though their importance in aggravating and
accelerating the extent of inflation from the 1550s need hardly be questioned, especially, as Frank
Spooner (1972) has so aptly demonstrated, even anticipated arrivals of Spanish treasure fleets would
induce German and Genoese bankers to expand credit issues by some multiples of the perceived bullion
values. Fischer, by the way, comments (p. 82) that: "the largest proportionate increases in Spanish
prices occurred during the first half of the sixteenth century -- not the second half, when American
treasure had its greatest impact." This is simply untrue: from 1500-49, the Spanish composite price
index rose 78.5%; from 1550-99, it rose by another 92.1% (Hamilton 1934). <<
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