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.

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nickff 4 hours ago | parent | next [-]

Notably, the 'massive inflation' was a rate of 1-1.5% per year...

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AnimalMuppet 4 hours ago | parent [-]

Which, for the gold standard, is still rather shocking.

	▲	SoftTalker 4 hours ago \| parent \| next [-]
		Well only with a fairly fixed amount of gold available. If suddenly a vast new supply of gold is discovered, its not shocking that there would be inflation.
	▲	colechristensen 2 hours ago \| parent \| prev [-]
		Since the industrial revolution productivity has actually been increasing and automation continues to make this happen. If you don't have a mechanism for productivity increase matching your inflation it's just making whoever is creating the new money temporarily proportionally wealthier until the money spreads everywhere.

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ijk 5 hours ago | parent | prev [-]

It's interesting that mining gold and silver is similar to printing more money; we usually think of inflation as represented by debasing coinage but there's been a few circumstances where flooding the local economy with precious metals is the same effect.

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nradov 5 hours ago | parent | next [-]

We sometimes see similar localized effects when wealthy foreign governments and NGOs go into poor countries to "help" with foreign aid and investment. When done correctly this can boost the local economy in a sustainable way, kind of priming the pump. But often it just dumps a lot of cash in, causing price inflation as the supply of goods and services fails to keep pace with the supply of money.

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colechristensen 2 hours ago | parent [-]

Outside influence heavily distorts local economies and needs to be done extremely carefully or you end up making a few people rich and starving everybody else.

	▲	WillAdams an hour ago \| parent [-]
		Heifer International presents a good face on doing this be introducing livestock, providing education to the new owners, and imparting an in-kind donation requirement so as to perpetuate and spread the gains.

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Gibbon1 4 hours ago | parent | prev [-]

In the latter 1800 there wasn't enough gold to accommodate the vast increases in industrial production. Which was deflationary.

https://en.wikipedia.org/wiki/Cross_of_Gold_speech

You can imagine every year the price per bushel of the wheat you grow drops and your mortgage stays the same. When your whole economy is like that no one wants to borrow or lend money and investment slows.