Mercantilism and World Trade

The European discovery of the Americas and the sea route to the Indian Ocean realigned world trade, creating a new world economy marked by a higher degree of transoceanic and cross-continental trade, mostly carried in European vessels. The Spanish possessions in the New World were a rich source of precious metals, particularly silver. The center of New World silver production in the sixteenth century was the mine of Potosí in Peru, where drafted native men worked under brutal conditions to extract silver for Spain. Silver was exported to Manila in the Spanish Philippines and then to China and to Spain itself, from which it circulated throughout Europe. The second half of the sixteenth century in Europe was marked by a “great inflation” in which the increased circulation of silver caused money to lose much of its value.