The problem of trade balance and equilibrium in international trade

The trading world of Europe and Asia in the early modern period was precariously dependent on a monetary system incorporating a large number of metallic currencies. This dependence on gold and silver for international financial transactions was cast into new dimensions by the discovery and working of the Spanish American mines in the sixteenth century, which set in motion a world-wide movement of precious metals. The old monetary frontiers were rapidly eroded in the process, giving rise to new trade flows, and bringing forward in economic policy-making new ideological issues that were to dominate Europe for more than two centuries. In the contemporaneous economic literature the role and distribution of American treasure throughout the world occupied a large place. As the annual flota de plata came into port at Cadiz from Vera Cruz in New Spain statesmen and merchants turned it into an occasion for thanksgiving. Wars could now be financed, the soldiery paid, and the merchant was once again assured of being able to meet his obligations. The enemies no less than friends of Spain looked to the Iberian reservoir to replenish their stocks of money. In the bitter words of Don Geronymo de Uztariz, the high-ranking Spanish official who wrote a treatise on the theory and practice of commerce, the vast treasures which arrived in Cadiz from the Indies contributed nothing to Spain's relief or advantage but were rather to be turned against her government.