How Does Too Much Money Affect You?

by Ron Haynes

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.

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So much new capital also inflated the cost of Spanish made goods, destroying the manufacturing base of the country as well. This encouraged the consumption of cheaper imports from other areas of Europe as Spanish manufacturing trailed behind in both quality, quantity, and technological improvements. Eventually Spain passed into semi-oblivion as the empire weakened and consumers turned to the English, French, and Dutch.

Too much money also encouraged the Spanish crown to pursue expensive foreign wars in North Africa, Italy, and the Netherlands. These wars drained the crown of it’s monies and further decayed an already weakened economy.

Does anyone else see a correlation between 16th Century Spain and 21st Century USA?

The indebtedness to Asia, the consumable culture, the extraction of natural resources with abandon, the tax rates, the wars, the expansion of the money supply –  all kinda eerie, no?

I’m not saying that money is bad. Money in itself isn’t bad, but too much of it in a short period of time does tend to distort your view of reality. “Money won’t change me” is the usual claim … not 100% true but even if it doesn’t affect you, it WILL alter the choices that are available to you. That in itself will change you because we are the sum total of the choices we’ve made over our lifetime.

About the author

Ron Haynes has written 1000 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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{ 5 comments }

David

Yes, clearly we should switch to using a currency backed by gold – after all, you can’t create it or … oh, wait.

Ron

Switching back would hurt a great deal in the short run but in the long run, may well be worth it. Even the Euro is backed 20% by gold.

David

Because significant inflation is fine so long as it’s not intended to actually do good? Things aren’t perfect with a fiat currency, but they seem clearly better – long term as well as short.

101 Centavos

All empires eventually decline. The US Empire will be no different. What will vary is the length of the decline, whether it will be gradual or sudden.

Emily

Another variable will be who remains in charge of what before, during, and after the crumbling.

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