This is only partially true of the 16th and 17th centuries. The period of the great price revolution. It is true that the gold did not elicit the inflation that might be expected from the volumes that were imported, because large amounts were re-exported to India. But it did cause inflation in Europe. Ecobabble or not money is money, whether it is a commodity money or a paper money or fictious money. An increase in the supply will increase price levels unless the amount of commodities also increases. This did happen but not to the extent that the money supply increased. The usual story from Hamilton to Keynes to DeVries is that because the distribution of the gold within Europe was unequal prices of output went up faster that prices of inputs (both labour and materials) therefore profits increased in real terms. This stimulated production. There is no doubt that this happened to some extent, but to the extent that overall growth did is debatable. The gold is irrelevant, what is important is the volume of the trade in commodities with the colonies. If Europe ran a current account deficit with the rest of the world, it gained by the trade by the amount of the deficit, because they had stolen the means of paying for it. (We can add to this the utility that Europeans obtained from holding gold.) First: Barkley, like others on this list, is missing the fact that gold and silver in the 16th century didn't mean the same as money does in the 19th-20th. Gold and silver were COMMODITIES, simply the most valuable (and valued) commodities in all economies. If you had most of the gold and silver -- and the Europeans did have that! -- you had some stuff that you could trade for other commodities at a HUGE profit, since the cost of acquiring the metals in America was very low -- measured any way you want to -- in comparison to their value in all E hemisphere markets. Second: All the economumble about velocities of circulation, transaction costs, monetarism, etc., etc., is a matter of using characteristics of modern industrial capitalist economy and assuming falsely that things worked that way in precapitalist times. As Marx said (somewhere) you shouldb't use 19th century criteria to explain 13th century facts -- or words to that effect. Rod Hay [EMAIL PROTECTED] The History of Economic Thought Archives http://socserv2.mcmaster.ca/~econ/ugcm/3ll3/index.html Batoche Books http://members.tripod.com/rodhay/batochebooks.html http://www.abebooks.com/home/BATOCHEBOOKS/ ______________________________________________________ Get Your Private, Free Email at http://www.hotmail.com
