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Working paper MUNRO-99-02

John H. Munro, "The Monetary Origins of the Price Revolution' Before the Influx of Spanish-American Treasure: the South German Silver-Copper Trades, Merchant-Banking, and Venetian Commerce, 1470-1540", 1999-06-11
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Abstract: This paper seeks to provide a new and chiefly monetary explanation for the origins of the sixteenth-century era of sustained inflation (c.1520 - c.1640) commonly known as the Price Revolution'; and in particular it provides an answer to the question: not, as traditionally posed, why did the Price Revolution commence so early; but rather why did it commence so late? Beginning with the French philosopher Jean Bodin (1568) and culminating with Earl Hamilton and Keynes (1929, 1936), most economists and historians had attributed this sustained European inflation to the influx of Spanish-American treasure', chiefly silver from Peru- Bolivia and Mexico. But with advances in our knowledge of price history in the post-war era, economic historians pointed out that European inflation had commenced as early as the 1520s, some three decades before any substantial amounts of silver had been imported from the Americas. They therefore sought an alternative explanation: unfortunately, one that wrongly made population growth the prime mover' for inflation, with grave deficiencies in their economic theory. Most have confused a change in relative prices (e.g. a rise in wheat prices) with a change in the overall price level (CPI). Only one (Jack Goldstone) has sought to link population growth, and urbanization in particular, to monetary variables: i.e. to changes in payment structures and thus to the income velocity of money (or to changes in Cambridge k).

Keywords: gold, silver, bullion, mining, inflation, Price Revolution, public finance, Spanish America, South Germany, England, Venice, Antwerp.

JEL Classification: E3;E5;E6;F4;G2;H5;H6;N1;N2;N7