The General Crisis - Inflation

Inflation

Precious metals from newly discovered deposits in America, especially silver from Potosí in modern Bolivia and from Mexico, was shipped by Spain to China as well as to Europe. Silver was less prevalent in China than in Europe and consequently more valuable. The continuous flow of silver from the New World caused a continuous flow of wealth from China to Spain. Similarly, the relative value of silver and gold was fixed by traditional law in the Ottoman Empire. The fixed exchange rate resulted in wealth being drawn out of the Ottoman Empire as the value of silver could not be adjusted downwards. The silver imports also caused general price inflation throughout Europe. Rapid population growth until the mid-decades of the seventeenth century also initially contributed to inflation in some areas.