Global silver trade from the 16th to 19th centuries

The global silver trade between the Americas, Europe, and China from the sixteenth to nineteenth centuries was a spillover of the Columbian exchange which had a profound effect on the world economy. Many scholars consider the silver trade to mark the beginning of a genuinely global economy,^[1] with one historian noting that silver "went round the world and made the world go round".^[2] Although global, much of that silver ended up in the hands of the Chinese, as they accepted it as a form of currency.^[3] In addition to the global economic changes the silver trade engendered, it also put into motion a wide array of political transformations in the early modern era. "New World mines", concluded several prominent historians, "supported the Spanish empire", acting as a linchpin of the Spanish economy.^[4]

Spaniards at the time of the Age of Discovery discovered vast amounts of silver, much of which was from the Potosí silver mines, to fuel their trade economy. Potosí's deposits were rich and Spanish American silver mines were the world's cheapest sources of it. The Spanish acquired the silver, minting it into the peso de ocho to then use it as a means of purchase; that currency was so widespread that even the United States accepted it as valid until the Coinage Act of 1857.^[5] As the Spanish need for silver increased, new innovations for more efficient extraction of silver were developed, such as the amalgamation method of using mercury to extract silver from ore.^[6]

In the two centuries that followed the discovery of Potosí in 1545, the Spanish silver mines in the Americas produced 40,000 tons of silver.^[7] Altogether, more than 150,000 tons of silver were shipped from Potosí by the end of the 18th century.^{[8][failed verification][better source needed]} From 1500 to 1800, Bolivia and Mexico produced about 80%^[9] of the world's silver with 30% of it eventually ending up in China. In the late 16th and early 17th century, Japan was also exporting heavily into China and the foreign trade at large.^[9]

As has been demonstrated, China dominated silver imports. China's huge demand of the silver was caused by the failure of making paper money "Hong Wu Tong Bao" and "Da Ming Tong Bao Chao" and the difficulties when making copper coins. After various status changes in China history, silver played a more important role in the market and became a dominant currency in China in the 1540s.^[10] The silver flow into China passed through two cycles: the Potosí /Japan Cycle, which lasted from the 1540s to the 1640s, and the Mexican Cycle, which began in the first half of the 1700s.^[11] The market value of silver in the Ming territory was double its value elsewhere, which provided great arbitrage profit for the Europeans and Japanese.^[9] The room for arbitrage profit was further enlarged because of the silver content difference between silver ingots from Ming and Qing China and New World silver.^[12] At the same time, China also made significant arbitrage earnings in the markets for silks, ceramics, and other non-silver goods, which formed a multiple arbitrage system.^[11] In addition, the abundance of silver in China made it easy for the country to mint it into coinage and many methods and tools for identifying and measuring silver appeared to solve the problem caused by the difficulty in identifying and measure silver from 16th to 19th century. That process was so widespread that local Chinese government officials would demand taxes to be paid in silver to the point that silver eventually backed all of China's economy.