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.