I was wondering if you could comment on why it seems to be that in rapidly growing economies we often see two contradictory patterns: rapidly rising prices alongside rapidly increasing productivity (even before modern banking practices)? For example, in England in the years 1100-1300 the number of towns absolutely explodes along with specialization and presumably overall productivity; yet at the same time so do prices and, of course, money in circulation-both money and prices basically double between 1200-1300 (Dyer, “An Age of Transition,” 2005, p. 8). Where did this precious metal come from; was it just sitting on the sideline? Any thoughts, insights, or reading suggestions you might have would be greatly appreciated. Thank you very much.
For the causes of the “price revolution” in the 16th and 17th centuries, the evidence is more secure. The Spanish monetary inflation from the exploitation of the gold and silver mines of the new world. For example:
For the earlier period, the evidence is not so clear. David Hacket Fisher argues that the previous price inflation coincided with the beginning of the hundred year’s war and the black death. If that’s the case, then it was caused by a reduction in production and not an increase in the money stock. See his book, The Great Wave: Price Revolutions and the Rhythm of History.
The increases in the money stock prior to the price revolution of the 16th century came from silver mines in central Europe. Jim Bolton in his book, Money in the Medieval English Economy, 973-1489, estimates that the silver money stock in England increased 27 to 40 fold from 1086 to 1300.