"The Spaniards will never see their gold again, just as they don't see their ears" this is supposedly what Stalin said according to Alexander Orlov. From the same link.
As a sibling comment said, gold was effectively money. Having more money, without having more products to buy, effectively triggered massive inflation. Prices went up, but the actual supply of goods and services didn't change much. The Spanish economy suffered massive inflation, as did Europe in general to a lessor extent.
But why couldn't they, e.g. buy other people's thing in exchange for their gold? IOW, why is the relevant fact that _Spain_ didn't have much more wealth despite having more gold? Other people in other countries valued (and still value) gold too.
Marx wrote about commodity fetishism. Perhaps the ultimate version is a belief gold is innately valuable. It has valuable properties, but almost its sole function is to be rare and desirable. That we now use gold for electronics in some ways undermines its rei-ification as the personification of value.
Spain fucked up. They mistook the gold for something more valuable than Labor. The Merino sheep of Spain were a better bet, in the long term.
The Spanish gold disappeared into economies with a better sense of what value is.
Yes, I often say that the gold from America was a poisonous gift. It made the country so rich that they stopped caring about other stuff, they could just buy them from elsewhere. So there was little incentive to manufacture first, and industrialize later. Which is ironic because some of first steam engines you can find in Europe were invented in Spain (https://en.wikipedia.org/wiki/Jer%C3%B3nimo_de_Ayanz_y_Beaum...). It also enabled the funding of numerous stupid wars, with the human cost they bring. The name of this process is called the Dutch Disease https://en.wikipedia.org/wiki/Dutch_disease
never heard of the dutch disease (i am dutch). pretty cool comment thanks.
kind of funny to think they still have trouble to actually extract that gas due to activism around earthquakes and ppl not eager to move away from these places. also now the climate push.
it kinda looks (from an uneducated perspective) they suffered this disease for nothing.
Gold is a VERY unique metal and its value comes directly from that. Particularly the complete lack of oxidation, I'm sure it was seen as absolutely magic that it would not tarnish while every other metal known at the time would oxidize very easily.
Value is ultimately always in the eye of the beholder.
Indeed. I believe the parent commenter should pause and assess why people buy things, and what makes something desirable or a luxury good. We can start with mechanical watches: They are of poorer quality by every utilitarian measure than a crystal-oscillator driven one, but command much higher prices and status.
spain was no longer a major player in world politics by 1800s, but they had a good 2-3 century run. not sure if the monetary crisis was really did them in, or more just it being the ebb and flow of history. britain's world dominance is long over too. if they did "fuck up", it was because charles v was the first global hegemon, nobody know how to do that, he was in uncharted territory. and obviously no, the merino sheep weren't a better bet long term, that's absurd. global dominion required a cohesive domestic home country to serve as the wellspring of power, not the fractured foedal remnants of a mediaeval europe that required constant war to keep together. and then of course, industrialize early.
Gold is used by industry at current prices due to its physical properties, so its current price and value are fairly close.
This still allows for significant price swings because there vast quantities of gold sitting around in vaults, but unlike say bitcoin it does have high intrinsic value. IE: If gold sustained a 90% drop in price across decades at lot more would be used by industry creating a price floor.
How can you conclude that the current price and value is fairly close? Seems to me that all you are showing (rightly so) is that there are some use of gold which has higher value than today's price.
I agree that industry use creates a price floor, but that might be much lower than what the price is today. I.e if suddenly everyone lost faith in gold as a carrier of value, so everyone who keeps gold just as a passive keeper of value started selling it off, then we would get a new market clearing price which represents golds 'real value'. I have no clue what this would be, but it is certainly not obvious to me that it's close to today's price.
If gold is inherently valueless, then isn’t shipping all of it away immediately to other countries in return for useful goods the most rational thing to do?
And if they could get gold at a fraction of the cost of other countries and exchange it for useful goods, isn’t that more rational than building the goods yourself?
The Spanish were not stupid and were not acting irrationally — except perhaps thinking on too short of a time frame. The gold trade was a total moral abomination, but it was a good trade economically for hundreds of years.
The main problem was that it was basically an arbitrage play and once the margin got erased from inflation, they had let the rest of their economy atrophy.
This is one of the reasons the Saudis invest so much money in tech companies and other industries.
The School of Salamanca about value and money said something else in 16th century. The Spaniards were anything but dumb.
It just happened that the British industrial revolution steamrolled everyone. You can't compete aganst the steam engine and the railway making communications and sharing of goods and raw materials something ridiculously cheap compared to the previous times, even by boat in both UK and Spain where the big rivers like Douro and Tagus could sustain a lot of transport. But, still, the train allowed to reach anyone in the country.
Which cheap transportation you can connect industrial powerhouses (and competent engineers and scientists) and the rest it's history. Addthe telegraph on top of that and it's game over for any outdated empire.
When knowledge sharing can be reduced hours and maybe a day or two instead of weeks or months, it's like upgrading from having a 486 based computer with DOS to a Ryzen one with multiparallel processing. Literally.
Marx called gold "the money-commodity" and said that paper money (even early fiat currency) always represents gold/silver in circulation.
The massive Spanish purchases of weapons and other manufactured goods from other countries in the 16th and 17th centuries played a large role in jump-starting the capitalist economic revolution in Europe.
understanding what humans collectively find valuable is much more lucrative than understanding why humans collectively find a thing valuable
being on this forum for a decade I see people consistently get caught up in the latter, at the expense of noticing the opportunities the same people are here for
One thing you can do when people are spending money on magic beans is point out that magic beans don’t exist and they are all stupid for buying them. The other thing you could do is open a magic bean store.
Ideally you do the first part while buying up all the beans for cheap, then commence step 2: convince people they are super valuable and sell the magic beans for profit.
[delayed]
510 tonnes went to Moscow to never be seen again.
https://en.wikipedia.org/wiki/Moscow_Gold_(Spain)
No it didn't. The gold didn't disappear.
Did you actually read the wiki you linked?
Spain transferred the gold to Moscow who liquidated it on Spain's behalf to buy guns, fund the civil war, and deposit in banks.
There's mixed views whether Moscow took too much of a margin, but they melted down gold after selling it and the gold is still in circulation.
Exactly that, never to be seen again :)
Huh?
If you melt down gold, how are you not staring at the same gold?
Moscow didn't steal anything either.
"The Spaniards will never see their gold again, just as they don't see their ears" this is supposedly what Stalin said according to Alexander Orlov. From the same link.
> The problem was that the conquest of the New World left Spain with a lot more money, but not that much more wealth, if you follow me.
ELI5, please!
Bullion imports caused inflation; the money supply increased without a corresponding increases in the production of goods and services. https://en.wikipedia.org/wiki/Price_revolution
As a sibling comment said, gold was effectively money. Having more money, without having more products to buy, effectively triggered massive inflation. Prices went up, but the actual supply of goods and services didn't change much. The Spanish economy suffered massive inflation, as did Europe in general to a lessor extent.
Money is the thing you use to buy things. Wealth is having those things. Only in an ideal world are the two the same. The world is not ideal.
But why couldn't they, e.g. buy other people's thing in exchange for their gold? IOW, why is the relevant fact that _Spain_ didn't have much more wealth despite having more gold? Other people in other countries valued (and still value) gold too.
They spent a lot of resources (some tangible, some less tangible) and ended up getting a roughly equivalent amount of money out if it
You can't eat gold.
You also can't eat money, but I imagine it's pretty useful if you're hungry
You can though. People eat gold all the time.
Marx wrote about commodity fetishism. Perhaps the ultimate version is a belief gold is innately valuable. It has valuable properties, but almost its sole function is to be rare and desirable. That we now use gold for electronics in some ways undermines its rei-ification as the personification of value.
Spain fucked up. They mistook the gold for something more valuable than Labor. The Merino sheep of Spain were a better bet, in the long term.
The Spanish gold disappeared into economies with a better sense of what value is.
Yes, I often say that the gold from America was a poisonous gift. It made the country so rich that they stopped caring about other stuff, they could just buy them from elsewhere. So there was little incentive to manufacture first, and industrialize later. Which is ironic because some of first steam engines you can find in Europe were invented in Spain (https://en.wikipedia.org/wiki/Jer%C3%B3nimo_de_Ayanz_y_Beaum...). It also enabled the funding of numerous stupid wars, with the human cost they bring. The name of this process is called the Dutch Disease https://en.wikipedia.org/wiki/Dutch_disease
Arab states could get into the same trap
Spaniard there. We have gentlemen like Leonardo Torres Quevedo and the 'Telekino', something even the IEEE would get amazed of.
But our damn national motto on R&D was "Que inventen otros" (Let the -foreign- ones invent).
It's a recurring theme. At the time of the Civil War, the Mississippi River Valley had more millionaires per capita than anywhere else in the US.
https://www.history.com/articles/slavery-profitable-southern...
never heard of the dutch disease (i am dutch). pretty cool comment thanks.
kind of funny to think they still have trouble to actually extract that gas due to activism around earthquakes and ppl not eager to move away from these places. also now the climate push.
it kinda looks (from an uneducated perspective) they suffered this disease for nothing.
Gold is a VERY unique metal and its value comes directly from that. Particularly the complete lack of oxidation, I'm sure it was seen as absolutely magic that it would not tarnish while every other metal known at the time would oxidize very easily.
Value is ultimately always in the eye of the beholder.
Indeed. I believe the parent commenter should pause and assess why people buy things, and what makes something desirable or a luxury good. We can start with mechanical watches: They are of poorer quality by every utilitarian measure than a crystal-oscillator driven one, but command much higher prices and status.
> every other metal known at the time
You’re forgetting lead, but the point is all the same.
Lead rapidly oxidizes and tarnishes, and is reactive with many chemicals, as any person who has actually worked with it can attest to.
spain was no longer a major player in world politics by 1800s, but they had a good 2-3 century run. not sure if the monetary crisis was really did them in, or more just it being the ebb and flow of history. britain's world dominance is long over too. if they did "fuck up", it was because charles v was the first global hegemon, nobody know how to do that, he was in uncharted territory. and obviously no, the merino sheep weren't a better bet long term, that's absurd. global dominion required a cohesive domestic home country to serve as the wellspring of power, not the fractured foedal remnants of a mediaeval europe that required constant war to keep together. and then of course, industrialize early.
Gold is used by industry at current prices due to its physical properties, so its current price and value are fairly close.
This still allows for significant price swings because there vast quantities of gold sitting around in vaults, but unlike say bitcoin it does have high intrinsic value. IE: If gold sustained a 90% drop in price across decades at lot more would be used by industry creating a price floor.
How can you conclude that the current price and value is fairly close? Seems to me that all you are showing (rightly so) is that there are some use of gold which has higher value than today's price.
I agree that industry use creates a price floor, but that might be much lower than what the price is today. I.e if suddenly everyone lost faith in gold as a carrier of value, so everyone who keeps gold just as a passive keeper of value started selling it off, then we would get a new market clearing price which represents golds 'real value'. I have no clue what this would be, but it is certainly not obvious to me that it's close to today's price.
If gold is inherently valueless, then isn’t shipping all of it away immediately to other countries in return for useful goods the most rational thing to do?
And if they could get gold at a fraction of the cost of other countries and exchange it for useful goods, isn’t that more rational than building the goods yourself?
The Spanish were not stupid and were not acting irrationally — except perhaps thinking on too short of a time frame. The gold trade was a total moral abomination, but it was a good trade economically for hundreds of years.
The main problem was that it was basically an arbitrage play and once the margin got erased from inflation, they had let the rest of their economy atrophy.
This is one of the reasons the Saudis invest so much money in tech companies and other industries.
The School of Salamanca about value and money said something else in 16th century. The Spaniards were anything but dumb.
It just happened that the British industrial revolution steamrolled everyone. You can't compete aganst the steam engine and the railway making communications and sharing of goods and raw materials something ridiculously cheap compared to the previous times, even by boat in both UK and Spain where the big rivers like Douro and Tagus could sustain a lot of transport. But, still, the train allowed to reach anyone in the country.
Which cheap transportation you can connect industrial powerhouses (and competent engineers and scientists) and the rest it's history. Addthe telegraph on top of that and it's game over for any outdated empire. When knowledge sharing can be reduced hours and maybe a day or two instead of weeks or months, it's like upgrading from having a 486 based computer with DOS to a Ryzen one with multiparallel processing. Literally.
Marx called gold "the money-commodity" and said that paper money (even early fiat currency) always represents gold/silver in circulation.
The massive Spanish purchases of weapons and other manufactured goods from other countries in the 16th and 17th centuries played a large role in jump-starting the capitalist economic revolution in Europe.
understanding what humans collectively find valuable is much more lucrative than understanding why humans collectively find a thing valuable
being on this forum for a decade I see people consistently get caught up in the latter, at the expense of noticing the opportunities the same people are here for
One thing you can do when people are spending money on magic beans is point out that magic beans don’t exist and they are all stupid for buying them. The other thing you could do is open a magic bean store.
Ideally you do the first part while buying up all the beans for cheap, then commence step 2: convince people they are super valuable and sell the magic beans for profit.
then,
selling people a better understanding of why they find things valuable, is worth a lot!
To be fair, Adam Smith and Marx would 100% agree on this point. It's not "capitalist" to confuse money with value, it's just a mistake.