The Saga of Spanish Silver: an Austrian Perspective – Part 1, Before the Storm

Hi everybody. This is is my first blog post so let’s give a bit of an introduction here.

This is part one of a series of blog posts about the impact of the huge quantities of Spanish silver which started arriving in Europe in the second half of the XVI century. While massive price inflation is the only widely known consequences, there was so much more to it. The arrival of such a huge mass of precious metal had enormous consequences, many little known to the general public. Always remember these posts are written from an Austrian Economics prospective so many of my conclusions and comments may sound different from “mainstream” history. I’ll write a new blog post about it every fortnight (two weeks). Enjoy!

Ever since the days of the Roman Republic silver had been the main currency of Europe. Gold has always been the proverbial precious metal but, in reality, silver coinage was what people used in their everyday transactions. These ancient coins were a far cry from the modern, well minted descendants: they were invariably struck on small, very thin silver discs, often of low purity. The main Spanish currency when the first conquistadores sailed for the Americas was the Castillian real, first coined during the reign of Pedro I (1350-1369). It weighed a paltry 3,4 grams and was so thin it could be easily bent. This was due to both the scarcity of silver ore and the lack of efficient mining and refining technologies.

A bent real from the XV century

A one real coin issued by Pedro I, struck by the Seville mint

The situation started to change in the XV century, even before Christopher Columbus (1451-1506) was born. Technical advancements in mining started to increase output from the existing silver mines, many of which had been in use since Roman times, but this was nothing compared to the discovery of very large silver ore deposits in the Alps (Tyrol) and the Erzebirge (Saxony).

The first effects of these discoveries were felt south of the Alps. In 1472 the Republic of Venice issued the so called lira Tron, the first “heavyweight” silver coin ever minted in Europe. It weighed a massive (by contemporary standards) 6,5 grams, twice as most silver coins then in existence, with .948 purity. What struck contemporaries the most is this was the first silver coin that didn’t easily bend: it was six or seven times as thick as any existing coinage. To understand the reasons of this unusual coinage it must be understood Venice had a massive trade surplus with the Holy Roman Empire. The Germans paid in silver (usually bars or bullion), of which they now had a good supply, the many goods the Venetian merchants sold north of the Alps.

The first Lira Tron

Not to be undone by its ancient rivals, the Dukedom of Milan in 1474 issued an even heavier coin, the 20 soldi. It was both heavier (9,8 grams) and higher purity (.963) than the Venetian coin. Milan had a huge trade surplus with the Empire as well, the result of its well-developed industry.

In 1477 the first truly modern European silver coin was issued by Archduke Sigismund of Tyrol. It weighed a massive 31,93 grams with .937 purity. It was called the Guldiner, since it was worth as much as the most common Imperial gold coin, the Rheinischer Gulden. It was quickly followed by a smaller version, weighing about half as much (15,96 grams) and having the same purity and called appropriately the Halbguldiner.

The Guldiner of Sigismund of Tyrol

As you may well expect, Gresham’s Law struck back with a vengeance. The new heavyweight coins pretty much disappeared from circulation as soon as they were struck. People used the old, thin coinage in their everyday transactions and hoarded the new Tyrolean, Venetian and Milanese coins which, with both their high silver content and hefty weight, proved to be a formidable mean of storing wealth.

Spain was a particular case. In 1474 Ferdinand and Isabella had inherited a chaotic monetary situation: there were literally tens of different coin types in circulation. The Castillian real of Pedro I was just one of many: there were Aragonese coins, Catalonian coins, Muslim coins from Granada… The year after their coronation the two sovereigns issued the first monetary law which mostly concerned itself with fixing exchange rates between the various coins then in circulation.  The law had to be repeated in 1494 and again at regular intervals until American silver started arriving in large quantities during the early reign of Philip II. To give a measure of how efficient these measures were let’s turn to the famous poet Garcilaso Inca de la Vega who wrote that still in 1560 people in Peru, Spaniards and Indians alike, were accustomed at buying and selling “in the Spanish fashion, by weighing gold and silver”. Merchants and money changers had a better grasp of how much coins were really worth than government officials who, it must be said, often turned a blind eye on these “illegal” transactions.

Finally let’s turn an eye to the Americas. After the first conquistadores had settled down and the first viceroys had arrived from Spain there was an alarming lack of currency. American civilizations had  terribly complicated and not easy to grasp monetary systems, some of which are almost unknown to us. Some peoples used gold dust, other cacao seeds, other still T-shaped copper tokens. The first Spaniards adopted these systems for a time, at least in their transactions with local Indian population. When they had to use gold or silver (for example to buy goods from Europe) they used the method described by Garcilaso de la Vega: they weighed the precious metals. These metals were usually divided in two types. Metal assayed and stamped by a competent office (of known purity) and metal of unknown purity, called corrente.

The currency situation was so bad the Spanish crown was forced to actually send silver coins to the colonies. The first issue was in 1506, followed by two more issues in 1523 and 1531. However this had no impact on the colonies’ economy. Still in 1547 the viceroy of Nueva Espana (present day Mexico) reported to the king only a handful of cities had any quantity of coins in circulation and a man in Guayaquil who owned a “handful of coins” was regarded as somewhat between a tourist attraction and an eccentric millionaire. The deep irony is that just while silver was starting to arrive from Mexico and Peru (the first recorded shipment is dated 1531: before that date only gold shipments were recorded) the Spanish government was forced to buy silver from Genoa to strike coins to send to the New World.

So this was the situation just before the first ships loaded with American silver started to arrive in Spain.


Cipolla, Carlo M. Conquistadores, Pirati e Mercatanti, Bologna 1996, Il Mulino

Farres, Octavio Gil, Historia de la Moneda Espanola, Madrid 1976, Apartado

Hamilton, Earl J. American Treasure and the Price Revolution in Spain, London 1965, Octagon Books

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