Could there be such a thing as too much money? In our Western culture the usual answer is “of course not, silly!” But at least one history lesson indicates otherwise. How would 181 tons of gold affect YOU?
According to American Colonies by Alan Taylor (Penguin Books), between 1500 and 1650 AD, the Spanish empire extracted over 181 tons of gold and 16,000 tons of silver from the Americas. Tons. Of gold. And silver. Tons. Much of this wealth paid private debts but one fifth of it went to the crown in the form of taxes.
With those kinds of riches, life should have been easy for the people of Spain, right? Hardly. In their consumer culture,Spain racked up huge debts with Asia, using debt to purchase massive quantities of spices and cloth, items that get quickly used up and have no lasting value.
The sudden (even over 150 years it was sudden), influx of money expanded the money supply faster than the growth of goods and services. What happened as a result? Inflation. Spain (and even some parts of Europe) experienced a 500% increase in prices, effectively keeping the working class under the heel of the upper class because wages didn’t keep up with the rising cost of living.