How American Silver Ruined Spain
The Spanish economic and financial disaster following the conquest of America
Illustration from 1590 depicting a Spanish galleon in the Philippines. Galleons were the symbolic ships of the Spanish Empire: they contained silver, which, once it arrived in Spain, generated inflation and hindered the development of a nascent industrial bourgeoisie in favor of an ever-growing parasitic class of nobles, clergy, and enriched merchants. - Commons Wikimedia.
At first glance, one might assume that the conquest of the American territories and their vast riches contributed to the growth of Spain’s economy and industry during the Modern Age. However, the reality was quite the opposite. Following the conquest of the Americas, immense wealth began to flow into Spain, especially after the 1540s, when enormous silver mines were discovered in Peru and Mexico. The “silver fever” quickly replaced the earlier “gold fever” that had driven Cortés and the first conquistadors.
It is estimated that between 1503 and 1660, Spanish ships brought nearly 16 million tons of silver from the New World. Yet, a large portion of this wealth was used to repay bankers, mainly German and Genoese, who had financed the Spanish crown’s costly wars. To service these debts, King Philip II increased taxes, stifling local industry and driving up prices.
This price surge was not solely the result of fiscal policy: the influx of American silver had multiplied the money supply in Europe by at least four times, triggering severe inflation. This benefited manufacturing nations but harmed those reliant on imports, such as Spain. Indeed, Spain used its American silver to pay for imported goods, fabrics and wines from France, tapestries from Belgium, linens from the Netherlands, Venetian glass, Florentine brocades, and Milanese weapons. As a result, Spain’s trade balance was perpetually in deficit.
Domestic industry was virtually nonexistent, its development crippled by the very wealth arriving from America. The kingdom’s nobles spent their profits from the American mines on lavish palaces and luxury imports instead of investing in local production, allowing foreign competition to crush Spain’s nascent industries.
Meanwhile, newly wealthy financiers and merchants used their fortunes to purchase land and noble titles, thereby exempting themselves from taxes and further increasing the fiscal burden on the rest of the population. This economic and industrial collapse is starkly illustrated by the fact that in 1558 Seville had 14,000 looms, but by 1598 only 400 remained.
As a result of these factors, during the reign of Philip II, Spain declared bankruptcy three separate times.
Eduardo Galeano, Open Veins of Latin America. Five Centuries of the Pillage of a Continent, Monthly Review Press US, 1996
Leone Buggio, master's student in "European History" at the University of Roma Tre and the University of Paris Cité
18/06/2026
Salvatore Ciccarello