New World Gold: Cultural Anxiety and Monetary Disorder in Early Modern Spain (review)

How does one win a multimillion-dollar lottery and still end up broke? This is the conundrum that Early Modern Spaniards were confronting: how was it possible that after discovering the New World and literally receiving boatloads full of gold, silver, and precious stones, Spain’s economy had collapsed?

In her book, New World Gold: Cultural Anxiety and Monetary Disorder in Early Modern Spain, Elvira Vilches delves into the intricate world of finance and credit of Early Modern Spain and shows how most Spaniards of the XVI and XVII centuries, using scholastic and mercantilistic lines of thought, judged the economic collapse of their era to spiritual malaise and to the mismanagement of gold and silver brought to the Peninsula from the Americas.

Elvira Vilches’s use of a wide scope of writings—which include economic treatises, letters, chronicles, and literary works—and authors—such as Christopher Columbus, Gonzalo Fernández de Oviedo, Luis Saravia de la Calle, Diego de Covarrubias, Tomás de Mercado, Lope de Vega, Miguel de Cervantes, and Mateo Alemán—allows her to create a comprehensive portrayal of the financial concerns of Early Modern Spain and of the New World during the era of discovery and early colonization. The writing of this era reflects the distress caused by the dire situation of Spain and its inhabitants’ frustration at failing to understand why the increase in riches negatively affected the economy. By exploring an array of writings, Elvira Vilches not only explains the theories developed to comprehend and potentially solve the crisis, but also shows how difficult it was for the people of that era to grasp the complexities of credit, the abstraction of money, inflation, and the devaluation of precious metals. This approach does not converge into a single narrative that explains the economic demise of Spain—it is not Vilches’s objective to create a theory explaining why it occurred—rather, it provides us with the multiple narratives of the era, thus forcing readers to reflect upon Spain’s economic circumstances to reach their own conclusion.

Amongst the most important ideas that surface constantly throughout the book is the distress caused in the population by the shift from concrete money to abstract money. Under the monetary system of Medieval Spain, a coin’s worth was based upon the quantity and quality of the metal it contained. The seal of the king did not add value to the coin, it just certified that it was not an adulterated coin. However, this system was based on the idea that gold had an intrinsic, unalienable, and stable worth. Because the value of gold was perceived as immutable, an influx of it should not affect its value at all. In fact, according to the mercantilistic writings of the era, the more gold acquired, the better off they would be. However, this view was challenged by the arrival of riches from the New World that depreciated the value of gold and by the monarchy’s decision to increase the worth of the currency in the New World but not in Spain; this had the unintended consequence of creating greater monetary confusion and economic disincentives. As inflation soared through the Peninsula and the New World, Spaniards found that the purchasing value of their coins had diminished, yet the fluctuation of gold’s value was inconceivable for Early Modern Spaniards; mercantilists came to the conclusion that to save the economy, the gold had to be kept within Spain and pushed to stop exporting raw materials to foreign nations in exchange for manufactured goods. They blamed the people for not being frugal and for spending their money in trifles. This belief persisted, though Vilches does point out that scholars at the School of Salamanca had figured out that precious metals did not have intrinsic value, and had asked the government to monitor the new credit industry and money market.

Elvira Vilches provides us with the multiple perspectives about the economic crisis of Early...