The diary of a Spanish Merchant

Dear Diary:

Here in Mexico we have

discovered vast gold and
silver mines. For many years
we had almost ran out of
precious metal in Europe,
but now we have an almost
unlimited amount. death.

I went to one of the The owner of the mine

mines to negotiate collect
some, however the mines
are brutal places. There's
not enough Spanish here, so
Africans are brought over as
slaves and almost worked to
provided us with silver in
exchange for the profit we
will collect on the journey
West on the Manila
Galleons.
Dear Diary:

Using the trade winds we

arrived in the Philippines
quickly, but we didn't stay
long as the Chinese
produced the best goods.
The only place they allowed
us to trade in however in prove they were authentic.
Fujian, but there we could
still buy a great deal of silk, These coins are used
porcelain and jade. across China as a sort of
second currency and they
They, like most people, are apparently trying to
were happy to accept our produce their own based on
Spanish dollars, but they our money.
would always stamp them to
 Dear Diary:
When countries began to produce their own money, they used the
Weas
Spanish Dollar called into Japan on
a basis.
the way back, buying some
screens and fans. There they
These include the Chinese Yuan, Malaysian Ringgit, Japanese Yen,
also accepted our dollars
US Dollar, Australian
quite happily.Dollar, Philippine Peso and many more.
We sold our weapons to
the Japanese Christians, but back to the Americas.
it seems like the goverment So we set sail back to
is getting more suspicious of the Americas, ship filled
foreigners and may soon with Asian goods.
close the country to us. This Thankfully, unlike past
is especially true as many Empires, we don't need to
Portuguese and my fellow worry about a deficit, as
Spanish still buy young there's always more silver in
Asians as slaves to bring Mexico.
Dear Diary:
Back in Mexico we divided
the profits between
ourselves and the silver mine
owner. So he was happy to
fund another expedition out
West to Europe.
However, the Caribbean
seas are now filled with
Pirates. We were almost
ambushed so had to quickly
land in Venezuela.
Strangely however, we
were greeted by many
Germans, all of which
worked for the Welser family.
It seems our King, Charles
V, borrowed a lot of money
from them to fund his election
campaign and now he has
allowed this banking family to
colonize Venezuela.
It seems strange that
despite our riches, our King is
still dependent on these rich
German banking families.
Reducing the
Dear value
Diary:of a coin. For
instance, using tin or nickel coins
instead of silver or gold.made
We finally This itallows
back
a country to
withkeep
ourthe precious
silver still safe.
metals. However, there is a major
problem. It seems that far too
much has arrived in Europe
recently and it has become
worthless. The English have debased
If a currency Our
becomes too strong
intellectuals andit
makes it harder toare
export. So bywhat to their currency while others
officials debating are practicing currency
lower the do
value of their
next, but they're haven't
currencyreducing manipulation, but we do
decidedhow whatmuch
to do.it Itis seems nothing. I worry about the
worth willfar
help you
too sell nobles
many things and
abroad. They can do this by selling future of the Spanish Empire
merchants would lose too if we do nothing about this
a lot of their
muchownif money and it entering
we restrict
buying a foreign countries. soon.
the country.
 Dollar Sign

@ Symbol.
Used by Spanish and Portuguese traders during this
period to show prices of goods. For instance: “10
kg of silk @ 40 dollars a kg.”
 Inflation
The Spanish didn't do much to fight against the inflation of their silver, and gradually the Empire weakened.
The cost of wars and basic items rose as silver became less valuable, but the people's salaries remained the
same. Plus, as rent prices rose, many people were forced to leave their houses.

Some manufacturers also stuggled, because Spain's currency grew quickly, while other nations remained the
same. So their products were too expensive for other nations to buy and their businesses closed.

Some did however benefit, like the merchants who brought Asian goods
to Spain. They would sell their items and quickly spend the silver they
made before it dropped in value.

Today we can still see inflation in currencies. For instance, Venezuela is a

huge oil exporter and, when the price of oil dropped, they printed off
more money to continue spending.

People now struggle to buy basic items because they can double in price
very quickly, but their salaries remain the same.
 Commodity Inflation
International
This is when aCartel
previously expensive product starts to become incredibly cheap.are
These countries Thispart
canof
happen if new resources are found, or if new technology allowsOPEC.
themThey
to beproduce
createdmost
at much
of the
faster
A collection
and cheaper
of nations
in another
and country. worlds oil and they all joined
businesses who all unite to together to set the price of oil.
For instance,
control the market.
Ivory Coast in Africa, used to make a lot of moneyThis
from sellingthat
means Chocolate in the
even if new oil
1960s and 70s. However, other countries began to grow the cocoa beanare
reserves anddiscovered,
the price prices
dropped a great deal. This left many people unemployed, businesses closed
will remain theand even
same a war
and no
broke out. country loses money.
How could this have been avoided? This has created problems for
other countries, like expensive
oil and even shortages in times
of diplomatic issues. But, for the
countries involved, they
continue to make money.
Netherlands gain
their independence
from Spain
TRADED GOOD:

Stocks
 What are Stocks?
Example:

YouAwant
lot of businesses
to make money fromarethebroken up into
Asian trade many
in 1600, but,parts.
you justAn investor
paid $100 for can buy
a boat to be
a East
sent percentage
and it sank.of the
You lostbusiness
all of your but in return he will make the same
money.
percentage of the profits.
A trading Company is letting you buy stocks in their company. Instead of paying for 1 ships
journey, you pay for $100 for 25% of 4 ships.
This allows small businesses to make money quickly. So if you have a
1 ship sank,
great and you
idea, butlost
no$25, but the
money toother 3 ships
start, youcame back stocks
can sell and made in$600
yourdollars profit.
business
Because you invested,
to raise you take 25% of the profit which is $150. So, even though 1 ship sank, you
the money.
still made a profit of $50.

This is spreading the risk.

Plus, it allows investors to continue making money, without doing work.
And, instead of buying one business, it allows them to spread the risk.
 Trading Companies
A lot of the trade was lead by Trading Companies. These are businesses who only deals with trading goods,
sometimes only one. Kings would often give the company the right to monopolize the trade in a region or
commodity.

Plus their shares can be bought and sold by shareholders.

Where did these operate and what do you think they traded?

British East India Company Guinea Company

Why did countries give private
Turkey Comapny Virginia Company companies a monopoly over trade in a
region?
Russian-American Company Muscovy Company
 Dutch East India Company.
The Netherlands fought for 80 years against Spain to achieve their independence. But they remained a small
country, stuck between large nations like England and France.

However they had a quite large middle class which they could use to invest in overseas trade, so they set up the
Dutch East India Company. These middle class men would buy stocks in the company, allowing the company to
build huge fleets, travel around the world and fight wars. In return the investers would get a share of the profits
from the new Empire.
Case Study: The Anglo-Dutch War
 Causes of War
The Dutch and English used to be good allies as they shared the same rivals - France and Spain. Plus, they were
both Protestant nations. However, they fell out over trade, as both countries wanted to expand into Asia and the
Americas.

For instance in 1623 the Dutch East India Company massacred members of the English East Company in the
Spice islands.

Then, during the English Civil War, when the Parliamentarians removed the King from power, the Dutch had been
supporting the King.

So, when the King was removed, the new English ruler, Oliver Cromwell passed the Navigations Act. This banned
any foreign ships from entering England to sell foreign goods, only allowing English ships to bring goods from
Asia and the Americas.

This was deliberately aimed against the Dutch, who made a great deal of money from this trade, so war between
the 2 countries broke out.
 Anglo-Dutch Wars
So this
The English
period
were
is known
the larger
as the
nation
Dutch and
Golden
spentAge.
a great
Many
dealpeople
on their
became
military,
incredibly
as such,wealthy,
they hadthey
moreexperienced
powerful a
ships and
boom in arts,
wontechnology
most of theandbattles.
culture and their large navy defended them against foreign threats. This is when
the stock market can lead to a boom.
However, they Dutch had more merchant ships and converted these into warships. Although no match for the
English in direct battle, the Amsterdam Stock Market had allowed the Dutch to build an incredible amount of
them. One province of the Netherlands called Holland had over 1,800 ships, whereas large nations like France
only had a couple hundred.

This is because in countries like England, they could only depend on parliament to fund the construction of a
navy. They would agree to fund ships, but to do so it would require raising taxes, something that has always been
unpopular.

So, England could defeat numerous Dutch ships but never control much of the Sea, allowing the Dutch to attack
English merchant ships elsewhere. So, unable to win a quick war, the English made peace.

Further wars would be fought between the 2 nations and the Dutch would famously raid English soil later on.
Booms and Recession
In the capitalist economies, the markets can go up and down. This can change
the economy of the whole country, even in completely different markets.

What happened here?

What caused it?

Case Study: Tulip Mania
 Tulip Mania
Tulips arrived in the Netherlands during this period and
they became incredibly popular.

But it could take tulips to bloom and until then, you

didn't know what the tulip would look like.

So the Dutch tulip traders would sell a contract,

promising that to give the buyer the tulip once it
blooms. But, because the buyer is taking a risk, they
would get it for cheaper. This is called a futures contract
and are still important in the stock market today.
 Tulip Mania
But, people began to sell these contracts for a profit and soon everybody
began to see this as a good way of making money.
So the contract was
bought for $10 from the
Tulip grower, but then
sold to someone else for
$20, and then sold again
for $40 and then for $80.
All of this took place
before the tulip had even
bloomed. Eventually the
cost of a tulip contract
cost the same as a house.
 Recession
Because the stock market is speculative, this means that the price of certain stocks can
rise and fall very quickly. If enough people begin to see the stock as useless they will all try
and sell at the same time and this will cause the price to drop.

Then, this can lead to companies going bankrupt, people losing their jobs and sometimes
the whole world can suffer.

Can you think of any recent examples?

 Dot.Com Bubble in 2000
NASDAQ is a stock market in the United States that deals a lot with IT companies. In the 1990s they began to see
record trading as a lot of people believed the new websites would make a lot of money. But, by 2000 it became clear
that a lot of websites were not going to make millions of dollars, so investors began to sell quickly. Hundreds of
websites were forced to close down.

This lead to a stock market crash in 2001 and a worldwide recession as over 5 trillion dollars were lost in total.

How can this be avoided?

What can a government

do to avoid a recession or
depression?
You decide --- Power of Private Companies
This is your country. You have recently won your independence and
now look to expand abroad to make money. But, your parliament
won't raise taxes to help you build a navy to protect your merchants
abroad.

A group of merchants come to you saying that they can control trade
for you if you allow them to have a monopoly over an area.
However, you've heard reports of the Dutch companies fighting in
foreign wars you don't want to get involved in.

A German banker also comes to you saying he will loan you money,
but in return he can get colonize whichever region he begins trading
in. Again, this could anger your far more powerful neighbours, and
you don't have a large enough army to fight against an invasion.

What do you do?