Montesquieu
 

XXII.6 For what reason the price of usury diminished by half upon the discovery of the Indies

The Inca Garcilaso1 says that in Spain after the conquest of the Indies, inte­rest, which was at ten per­cent, fell to five per­cent. That is what had to hap­pen. A large quan­tity of sil­ver was all at once ship­ped to Europe ; soon fewer peo­ple nee­ded sil­ver, the price of eve­ry­thing went up, and the price of sil­ver went down ; the pro­por­tion was thus bro­ken, and all prior debts were paid off. We can remem­ber the time of the System2 when eve­ry­thing was highly valua­ble except sil­ver. After the conquest of the Indies, peo­ple who had sil­ver were obli­ged to lower the price or the hire of their mer­chan­dise, in other words the inte­rest.

Since that time, len­ding has not been able to return to the for­mer rate, because the quan­tity of sil­ver has increa­sed every year in Europe. In addi­tion, as the public funds of some sta­tes, based on the wealth which com­merce has pro­cu­red for them, were yiel­ding very modest inte­rest, pri­vate contracts had to be adjus­ted in conse­quence. Finally, exchange having given men sin­gu­lar ease for trans­por­ting sil­ver from one coun­try to ano­ther, sil­ver could not be scarce anyw­here without pou­ring in on all sides from pla­ces where it was com­mon.

History of the Spanish Civil Wars in the Indies.

This was the name given to the project of Mr. [John] Law in France.