During the early modern period, discovery and exploration of large amounts of precious metals in the New World was associated with large, world-wide monetary injections. Spain and Portugal extracted large amounts of precious metals from their colonies which they spent primarily in imports. In association with this, European and Asian economies experienced a large monetary increase: England's money supply, for example, increased seven fold between 1500 and 1750. Initially, population and prices didn't keep up, and velocity increased. Usury laws were relaxed.

Europeans were above all interested in Asian goods. China, on the other hand, did not have much interest in European goods, but it was very interested in precious commodities, as a source of credible monetization of its large economy. In combination with advances in maritime technology, there was now much scope for trade, and it ensued.

I discuss available evidence on the size of American treasure, and how it was transmitted into world-wide money supply. While it is hard to give precise estimates for Spanish silver, holistic quantities are known. Further, I consider recently available primary source data from Portugal which suggests endowments of Brazilian gold during the 18th century were larger than was previously believed. I compute bounds to official quantities, which control for smuggling and other contingencies.

I show in an equilibrium, calibrated model how a monetary shock is transmitted under a commodity money system. I simulate a shock of the appropriate dimension and discuss it's implications under alternative assumptions. I discuss the counterfactual experiment of no shock. The model gives tentative answers to the questions: What were the macroeconomic consequences of American treasure? To which extent was it associated with nominal price increases in Europe? Were there associated changes in real wealth distribution? Further, was there an associated change in patterns of demand, both within Europe and by means of an increase in Euro-Asian trade? I conclude world-wide long-run allocations would have most likely been different had there not existed such large endowment of precious commodities in America.