Spain’s colonies funneled huge amounts of gold and silver into the European economies without a complementary increase in productivity to absorb it, causing massive inflation.

A ship for transatlantic shipping might have first cost 100,000 maravedí to build and equip before the treasure fleet expeditions, but afterwards with so much gold flowing into the economy and lots of competition for a limited ship building industry, the costs would inflate to 1 million maravedí (number roughly from memory). Same with the canons and shot, animals and sailor salaries, and so on.

Meanwhile, shipbuilders with all their newfound money are competing for blacksmiths, the outfitters are competing for livestock and horses, and so on. This puts lots of pressure on the rest of society which might need the iron for farming tools and the livestock to survive the winter, which they can no longer afford since the conquistadors and their merchants can pay a lot more in gold. In the end the maravedí accounts look bigger but represent the same amount of physical goods or labor.

Repeat this process across the whole economy and it throws everything into chaos. Some people here and there get rich, but economy wide it’s a total wash. Any wealth created for the state mostly just went into paying for wars because the inflation worked its way up through salaries.

As a sibling comment said, gold was effectively money. Having more money, without having more products to buy, effectively triggered massive inflation. Prices went up, but the actual supply of goods and services didn't change much. The Spanish economy suffered massive inflation, as did Europe in general to a lessor extent.

Bullion imports caused inflation; the money supply increased without corresponding increases in the production of goods and services. https://en.wikipedia.org/wiki/Price_revolution

Money is the thing you use to buy things. Wealth is having those things. Only in an ideal world are the two the same. The world is not ideal.

They spent it on war. The Spaniards were fighting the Ottoman Empire and the Relgious Wars brought on by the Protestant Reformation. Funny enough their main enemy for the religious wars was France, who was also Catholic. The Spaniards also went bankrupt multiple times too.

Adam Smith's Wealth of Nations explores the topic in depth

They spent a lot of resources (some tangible, some less tangible) and ended up getting a roughly equivalent amount of money out if it

Today - if you give everyone $10 million dollars there isn't enough production for everyone to buy what they want - you just get inflation. Its probably worse for the economy as people stop working.

It's just investing vs extracting/exploitation. Both can get you rich, but one is short-term and the other is long-term.

Consider what that means for sustainability and the future.

You can't eat gold.

Actual EL5 - Stregga Nona but with money.

[flagged]