** economics -- American gold and silver








Economics: American Gold and Silver


Figure 1.--Virtually no Aztec gold survived the Conquest of Mexico. Some Inca pieces have survived. This is a gold mask found somewhere in Peru. It is described as an Inca sun mask. We do not have details on its provinance. The American gold and silver, especially the silver, that flooded into Europe had a huge impact on both history and the economy.

Spanish Conquistadores conquered the Aztec and Inca Empires in the first half of the 16th century. The result of the booty and the working of existing as well as new mines was a a huge influx of gold and silver bullion flowing into Europe. The impact on the European economy was immense altering the course of history that still affect us today. Columbus and other early expolrers encountered small quantities of gold in the Caribbean, but fantastic accounts of a Kingdom of Gold began to circulate in Europe--the legendary El Dorado. He was a king who was so wealthy that he covered himself with gold dust every day and dove into a lake. Political factors also drove the European conquest. German Emperor and Spanish King Charles V desperately needed gold bullion. Charles had taken out large loans to bribes the electors that made him Holy Roman Emperor (1519). He also faced a costly war with the Turks. The Ottomons moving north took Belgrade (1521). Next they conquered Hungary (1526). Soon they had reached Vienna, the center of Hapsburg rule (1526). Charles not only faced the Turks, but the Protestant Reformation in Germany. This forced Charles to seek even more loans. One way in which Charles paid his loans is by granted licenses to pursue treasure in the Americas. Thus conquistadors financed by European banks descended upon the New World, scouring every corner for the legendary El Dorado. Hernan Cortez defeated the Aztec ruler Montezuma in Mexico (1520) and sent the first large shioment of gold objects back to Spain. Charles V immediately smelted them down to bullion. Francisco Pizarro demanded a ransom for Inca ruler Atahuallpa and obtained a vast treasure of gold and silver objects (1532). The Spanish first simply seized good and siklver objects from the native Americans, in effect looted the artistic trasures of entire civilizations. Historians estimate that about $140 million work of gold and silver objects were obtained from Peru alone between 1531 and 1540. [Hoopes] Then they used the indeginous people as slaves to produce more bullion from existing and new mines. The American treasure, however, quickly passed through Charles' treasury. It served to enable him to take out even more loans. Charles by 1551 had borrowed 14.4 million ducats at interests rates approaching 50 percent. [Hoopes] Charles army did stop the Ottomans from moving further into Christian Europe, but it could not cintain the Protesrant Revolution. But the impact of the gold is much larger. The American gold helped finance Renaissance art. As much of went into the pockets of bankers, it played an important role in the expanding European economy in the countries that had financed Charles. The gold also financed the illfated Spanish Armada unleashed on England by Charles's son Phillip II (1588). Some of the gold flowed into other European treasuries as other maritime powers (England, France, and the Netherlands) began preying upon Spanish treasure ships. Some of the gold can be seen in gold leaf and trasures of the churches across Europe. But much of the rest of the gold is difficult to trace with precission. What is known is that the American gold significantly increased the gold stock of Europe, resulting in both inflation and an expansion of economic activity.

American Gold and Silver

Amer-Indian peoples were basically a stone age people. The lack of metal weapons was one reason the Spamish comnquistadores were so suceesful against huge Amer-Indian armies. Strangely the had developed metalurgy technologies. This was primarily accomplished in South America by Andean and related coastal people. This process may have begun very early, beginning with gold work (about 2000 BC). Copper work followed later (about 1300 BC). These two metals have about the same smelting point (1064-84° C). The difference being that gold is not an active metal and thus cam be found in nature. Copper is an active metal and thus technologies had to be developed to refine the metal. We are not sure when the first silver work began. Silver has a very low melting point (961° C), but like copper is an active metal and thus methods to refine these metals had to be developed. Researchers have found eviudence of work with lead and tin. Iron with its high melting point (about 1500° C) was beyond the reach of Amer-Indan craftsmen who did not have bellows. There is evudence of work with platinum in Ecuador. That technology was graduall acquired by Meso-American people to the north. Ecuadorean marine traders are believed to have played an important role. For some reason, Amer-Indian metalurgy was never used to any significant degree to fashion useful tools and weapons. The metals were primarily used to fashion religious art or personl adornment for the elite. South American civilizations had developed sophisticated technologies for the extraction, purification, and alloying of metals and metal crafting. Smelting was limited because the lack of bellows. Many alloys were developed. In fact the Soanish complained about the impurity of Inca gold. This was not brcause the Inca metalurgists were unskilled, but because they created alloys to enhnce the color characterustics of the gold. For the Inca it was color that was important, not purity. The Inca were the inheitors of a long histoy of technologicazl devlopment. It as, however, coastal peoople tht were especually gufyed, particularly the Chimu snd Moche. After conquering these people, their craftmbn were bought to Cuzco. The resutt of all this work was a considerable quatity of gold and silver which proved to be a powerful educement to conquest. What the Amer-Indian people had mined and refined, however, was a small fration of what the Spanish would find still unmined after the conquest.

Charles V

Political factors also drove the European conquest of the Amerucas. German Emperor and Spanish King Charles V desperately needed gold and silver bullion. Charles had taken out large loans to bribes the electors that made him Holy Roman Emperor (1517). Germany sas potentially the most powerful nation in Europe,. But the Holy Roman Empire was not a unified Germnb state. And the Protestant Reformation was further dividung the Empire. Charles faced two serious threats. The princes of the Empire enbracing Proitestantusm in an effrt to create independent sttes, frcturing the Empire. Charles also faced a costly war with the Turks. The Ottomons moving north took Belgrade (1521). Next they conquered Hungary (1526). Soon they had reached Vienna, the center of Hapsburg rule (1526). The costly wars with the Protestants and Turks forced Charles to seek even more loans. American gold plays a central in Charles's reign. And he gradually iss tranformed from a a not particularly politically aware youth to a liberal statesman who came to exceeded his predecessors in his teritorial ambitions. At the same tried he tried without notable succes to treart his new subjects humnanely. He ended his reign as a besieged Catholic monarch, obsessed with destrioying the Protestant heresy and the need to obtain funds for this objective. [Thomas] One way in which Charles paid his loans was by granting licenses to pursue treasure in the Americas. These would play huge dividends to him and his son, King Philip II of Spain. Charles when the American gold first reached him had 'excelentes' issued, gold coins minted with 24 carat gold meaning pure gold. This was not common. Usually copper or silver was mixed in to both make a haeder coin and to make the gold go further. Around 1530, the gold dekiveries from Mexico began to decline. And other European rulers got hold of Charles' excelentes, melted them down and mixed the pure gold with silver and with this lower-grade gold they then issued new coins. To prevent this, Charles replaced the excelente with a new gold coin of a lower gold content even though gold from Peru had begun to arrive. (1536). This was the escudo d'oro, which from 1538 under the name of scudo d'oro. American gold and silver would finance their effort to destoy the Protestant hersesy, including the Spanish Armada. Ultimately, Charles a broken man conceded the Peace of Augsburg (1556). This essenbtially ended his multi-national project and issued a series of abdications (1556). Charles retired to the Monastery of Yuste in Extremadura (1557) and died there a year later.

Spanish Conquistadores

Spanish Conquistadores conquered the Aztec and Inca Empires in the first half of the 16th century. The result of the booty and the working of existing as well as new mines was a a huge influx of gold and silver bullion flowing into Europe. The impact on the European economy was immense altering the course of history that still affect us today. Columbus and other early expolrers encountered small quantities of gold in the Caribbean, but fantastic accounts of a Kingdom of Gold began to circulate in Europe--the legendary El Dorado. He was a king who was so wealthy that he covered himself with gold dust every day and dove into a lake. Thus conquistadors financed by European banks descended upon the New World, scouring every corner for the legendary El Dorado. Hernan Cortez defeated the Aztec ruler Montezuma in Mexico (1520) and sent the first large shipment of gold objects back to Spain. Charles V immediately smelted them down to bullion. Francisco Pizarro demanded a ransom for Inca ruler Atahuallpa and obtained a vast treasure of gold and silver objects (1532). The Spanish first simply seized good and siklver objects from the native Americans, in effect looted the artistic trasures of entire civilizations. Historians estimate that about $140 million work of gold and silver objects were obtained from Peru alone between 1531 and 1540. [Hoopes] Then they used the indeginous people as slaves to produce more bullion from existing and new mines.

Impact on Europe

The American treasure, however, quickly passed through Charles' treasury. It served to enable him to take out even more loans. Charles by 1551 had borrowed 14.4 million ducats at interests rates approaching 50 percent. [Hoopes] Charles army did stop the Ottomans from moving further into Christian Europe, but it could not cintain the Protesrant Revolution. But the impact of the gold is much larger. The American gold helped finance Renaissance art. As much of went into the pockets of bankers, it played an important role in the expanding European economy in the countries that had financed Charles. The gold also financed the ill-fated Spanish Armada unleashed on England by Charles's son Phillip II (1588). Some of the gold flowed into other European treasuries as other maritime powers (England, France, and the Netherlands) began preying upon Spanish treasure ships. Some of the gold can be seen in gold leaf and trasures of the churches across Europe. But much of the rest of the gold is difficult to trace with precission. What is known is that the American gold significantly increased the gold stock of Europe, resulting in both inflation and an expansion of economic activity. The influx of American gold also played a role in the growing influence of the middle-class in northern Europe. Bullion from America helped create a "price revolution" in Europe. Such inflationary episodes often significantly affect existing social and economic relationships. Various groups can be affected and in Europe during the 16th century prices variously rose two to four times. This meant that landowners renting property and workers wee adversely affected. Governments were aalso adversely affected. Taxes at the time were commonly flat sums and not a percentage of incomes. In this environment it was entrepreneurs that benefitted most. [McNeill, p. ?.] Other factors were involved explaining the rise of the middleclass such as the expanding economy of Europe, improved maritime bulk transport, and technological advances were also involved. But American gold and silver were important factors. Much of the bullion, except that siphoned off by English and other freebooters, extered Europe through Spain. It was not the Spanish middleclass, however, that most benefitted. Spain used the bullion to import goods and it was merchants and entrepreneurs in the exporting countries that most benefitted.

Impact on the Americas

Europeans in the 16th and 17th centuries thought that Spain had secured the most valuable colonies. The reason of course was the gold and silver that flowed from Mexico and Peru. The Dutch, English, French, and Portuguese also wanted bullion. In the colonization process, two very differnt groups of people flowed into Spanish and Portuguese dominated South America and British dominated North America. The Spanish Conquistadores wanted gold. They did not want a farm where they could eke out a living. They wanted either gold or a large estate which they could work with essentially enslaved Native American labor. [Bowden] Many early English settlers also sought gold, but when it was not found there were many still interested in colonizing the new continent. Here motivations different. An essental element was the desire for religious freedom, but the desire for land that they could farm was also an important factor. Today it is of course North America that is the center of the world economy. Most of Spanish South and Central America and Portuguese Brazil suffers from poverty and underdevelopment. The reasons for the desparity in the social and economic evolution of North ans South America are complex, but the initial motivations and settlement were an important factor.

Sources

Bowden, Thomas. The Enemies of Christopher Columbus.

Hoopes, John. University of Kansas Lawrence Campus.

McNeill, William H. The Rise of the West: A History of the Human Community (University of Chicago Press, Chicago, 1991), 828p.

Thomas, Hugh. The Golden Enmpire: Spain, Chzarvels V, and the Creatiion of America (Deckle Edge: 2011).





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Created: October 12, 2003
Last updated: 1:07 AM 1/10/2021