The decline of the Spanish Empire

Spanish Empire 2 of 2

From the 1500s, Spain and its colonies produced as much as 70 percent of the world’s gold, Mexico alone produced half of the world‘s gold output.. However, Spain was struggling against Portugal and England. The old world is focused on the control of trade with the colonies in Asia and the Americas. Even if Spain was banking from the riches coming in from the Americas, it is combating both inflation and the expensive wars it waged all over Europe. The most expensive of them all was the Spanish Armada in 1588, a campaign planned to overthrow England’s Elizabeth 1.

The abundance of gold was both a blessing and a curse, while the Spanish monarch wasted their wealth on waging wars, Portugal wasted theirs on palaces and pageantry. The flood of gold and silver coming in from the Americas caused market prices to rise as much as 400% as the quantity of goods could not keep up with the volume of silver coming in from America. The volume of Spanish produced goods was never enough to keep up with the rising demand. Spain had to export gold to France, Germany and Italy in exchange for consumer goods. In reality, Spain is bleeding gold much faster than it could acquire it. This was made worse when the monarchs borrowed money from bankers using the expected shipment of gold coming from America. The shipments arrive once a year so this kind of collateral was never safe for the creditors as no one would know how much would reach the shores of Spain.

Eventually the creditors stopped loaning out their money to the Spanish monarchs. At some point the expenditures and obligations of Spain was over 3 times its income. By the 1800s, most Spanish colonies are poised for independence and the empire did decline gradually when Mexico, Philippines, Puerto Rico, Chile Colombia and most of its colonies declared independence. The loss of these colonies combined with raging internal inflation took a heavy toll on the Spanish economy. The once wealthy Spanish empire was left standing by itself as its empire fragmented into several independent countries.

Spanish Empire 2 of 2

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