Price revolution

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The price revolution was a period of rising prices in the sixteenth and seventeenth century Europe.

This "gold and silver inflation" increased Europe’s money stock according to certain estimates by not more than 50 percent; according to others by up to 500 percent. However, this happened over a period of 150 years (an average growth rate of the money supply somewhere between 0.3 and 3.3 percent per annum).

Around the year 1500, the total stock of money in Europe was about 3,500 tons of gold and 37,500 tons of silver. Over the next 150 years, Spain imported some 181 tons of gold and some 16,886 tons of silver from its mines in South America (other producers were negligible as compared to these figures). A major part of these Spanish imports were re-exported to the Far East and to the Middle East.[1]

From the 1540s until the 1640s, the cost of food in Europe - which showed no sustained upward trend for three hundred years - rose markedly. In England the cost of living increased by a factor of seven in the same period, not a high rate of inflation (on average around 2 percent per year), but a revolutionary increase in the price of bread by medieval standards.[2]

Quantity theory of money

Many complained about the rising prices (Luther berated the need to get by with 200 Gulden, where 100 were needed before). But a few have realized that it wasn't the goods that have risen in value. John Law said that silver fell in the 200 years from 1500 to 1700 to a 1/20th:[3]

"In France it has been observ'd, that about 200 years ago, the same Land was in 30 years worth double the Money it was worth before. So Land worth a 100 lib. anno 1500, was worth 200 lib. anno 1530, 400 lib. anno 1560, and so on, till within these 50 or 60 years it has continued near the same value. In England 20 times the Quantity of Money is given to Goods, than was given 200 years ago. In these Countries 'tis thought Goods have rose; but Goods have kept their value, 'tis Money that has fallen."

Some authors claimed that Jean Bodin in 1568 was the first to connect the rise in prices with the increase in the quantity of money in circulation, an increase which he attributed to the influx of American gold and silver, among other causes.

But the basic principles of the quantity theory had been glimpsed by other medieval writers, while the effect of American treasure on the European price-level was first noted in Spain, the country where it was first felt. Both prices and the imports of bullion reached a new high-level in the sixth decade of the century. In 1556 Azpilcueta Navarro produced the first clear statement that the high cost of living was a result of the import of treasure. He thus preceded Bodin by twelve years. In England it was not until 1581 that the same observation was made, and it is interesting to see how American treasure in its passage across Europe called up the quantity theory in Spain, France, and England successively.[4])


  1. Jörg Guido Hülsmann. The Ethics of Money Production, online version, Chapter 4. Utilitarian Considerations on the Production of Money, p.73-74, referenced 2011-09-09.
  2. Niall Ferguson. The Ascent of Money, Chapter 1, p. 25-27. Published 2008, ISBN 9780141035482. Referenced 2012-06-08.
  3. Richard Gaettens. Geschichte der Inflationen Von Altertum bis zum Gegenwart (German: History of Inflations from Old Ages to the Present), John Law und die französischen Finanzprobleme nach dem Tode Ludwigs XIV. (John Law and the French financial troubles after the death of Louis XIV.) p. 105, 123. ISBN: ISBN 3-87045-211-0. Referenced 2011-09-09.
  4. Marjorie Grice-Hutchinson. "The School of Salamanca" (pdf), p.52, referenced 2011-09-09.