The question of money supply and inflation has been erroneously been set in stone predominantly by the debasement of Spain and Britain during the period of Henry VIII. This was really a period where there were various countries and their currency completely relied on the exchange market in Amsterdam, which was based entirely upon their metal content. This period was far less judgmental insofar as we have today where currencies rise and fall purely on anticipation of political events. During the middle ages, this influence of anticipating future value based upon possible political decisions was not readily dominant and the coins of one nation were compared entirely on their metal content.
For example, because of the French at war with Britain, they created a wave of inflation that spread like a contagion to other nations, namely Spain and Italy, because money was commodity based using gold and silver. In this way, there was really a single currency base among nations and the problems of one would be exported to all others by their debasement. Continue reading