Wanderlust World Wanderlust World The massive influx of American silver and gold (16th–18th centuries) did not end all European empires, but it critically weakened the Iberian ones through several mechanisms:
Money supply surged → prices rose 300–400% in Spain (1500–1650). Fixed incomes (salaries, rents) collapsed; wages lagged. Spanish goods became uncompetitive.
Easy bullion profits discouraged domestic manufacturing. Spain imported textiles, tools, luxury goods—exporting raw materials and importing finished products. The "Dutch disease" avant la lettre.
Luxury demand (Asian silks, porcelain, spices) drained silver to China via Manila Galleon. Trade deficits became structural.
Revenue funded wars and court extravagance, not roads, canals, schools, or universities. Long-term productivity stagnated.
Sudden wealth bred venal office-holding, tax farming, and elite capture. The bureaucracy served extraction, not development.
England and the Netherlands—lacking bullion—developed finance, shipping, joint-stock companies, and technological innovation. By 1700, they eclipsed Iberia economically and militarily.
Portugal's decline was also driven by Dutch/English competition in Asia and the 1755 Lisbon earthquake. Spain's empire persisted until 1898, but its foundations eroded centuries earlier.
In short: American treasure financed imperial overreach while hollowing out the domestic economies that needed to sustain it.