Spanish silver from the New World: galleons, inflation and the Genoese
The creation of a Spanish empire in the Americas in the sixteenth century led to the ruthless exploitation and extermination of the indigenous population to mine gold and silver, through a series of very productive mines. A massive inflow of precious metals was unleashed towards Spain, Europe and from there to Asia. The effects of such large inflows on the Spanish economy of the sixteenth and seventeenth century were typical of a massive and prolonged increase in liquidity for over a century: an initial prosperity, followed by price increases, the loss of competitiveness of local producers, an increase in imports, the destruction of national industry and ultimately a process of impoverishment, made even more evident when silver and gold inflows from the new world decreased.
Local mining opportunities in the old world were not matched by sophisticated minting capacities and neither highly skilled personnel nor more recent minting techniques were developed for a long time. Instead of resorting to mechanized processes that were being developed in Europe, the Spanish used abundant unskilled forced labour to strike by hand very rough pieces of metal with an iron hammer. Rather than regular round disks, they used so called "cobs" or "caba", cracked pieces of metal roughly cut with scissors from the end of metallic bars. The surface was therefore casually and irregularly struck, making the cobs often unreadable and setting quality standards far below average.
Those cobs were then rapidly shipped to Spain, to be used as coins or often to be remelted and reminted into proper coins. Cobs were transported over the Atlantic by galleons, which sometimes were intercepted by pirates or by the official fleets of other states, or were lost during storms. In recent years the recovery of the content of such shipwrecks by private entrepreneurs has created a disputed market for such pieces. When acting without government licence such firms can be defined as mere looters. They may cause the destruction of the archeological setting of the shipwreck, destroying information and less obvious artifacts, as well as appropriating treasures which should belong more appropriately to the countries from which the metal had been extracted originally. In 2012, Spain won a case in the US courts against a firm which had recovered 16 tons of precious metal, for a total of 574,553 silver coins and 212 gold coins from a single galleon, the Nuestra Senora de las Mercedes, that sank off Portugal's Atlantic coast near the straits of Gibraltar in 1804. The shipment was returned to Spain despite the fact that the metals were mined and the coins minted in territories now located in Bolivia, Chile and Peru.
Silver cobs were of 8 reales and smaller denominations (gold pieces were also minted), of the appropriate weight and with the prescribed high fineness of 930 thousands of silver and 920 thousands of gold. We have here illustrated an anonymous 2 reales with the castle and the lion of Castilla y León and the crest of the Spanish monarchy. Later a number of frauds in various Latin American mints, where the content of silver had been reduced well below the official standard, reduced confidence in the value of cobs. The Spanish government was forced to discontinue their production, starting in Peru, and to revert to higher standards of coinage. The new design is here illustrated by a 2 reales minted in 1769 in Bolivia, boasting the Bourbons' control over the old and the new world, with the Pillars of Hercules representing the Straits of Gibraltar separating the two worlds and with the motto of "ultra que unum".
The Genoese bankers played a dominant role in financing the Spanish monarchy between 1557 and its default of 1627. In return for their loans, they received a large part of the American silver that had to be transformed into gold and transported by land to the Netherlands to finance the continuous wars of the Spanish there, without subjecting them to the risk of being intercepted by the English, Dutch or French fleets. Genoa played an important role as a European financial centre in that period and reminted cobs into its own silver pieces for internal and international use. Such pieces could be of normal size but also as large as 382 grams, while the Spanish 8 reales was only 27.47 grams. Size and splendour suggested wealth and prestige, even if those enormous coins were too uncomfortable for ordinary transactions. Here a Scudo Largo of 38 grams, minted in Genoa in 1652, shows the higher artistic care taken by the maritime republic in its coinage.
Luca Einaudi, Centre for History and Economics
Centre for History and Economics,
Cambridge CB3 0AG, UK
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