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a period in which commodity prices rise significantly because of a drop in the value of the noble metals that act as the universal equivalent.
In the history of the world economy there have been two cases of leaps in prices related to a drop in the value of noble metals. After the discovery of America, gold and silver costing much less to extract than in Europe began coming to European countries. Whereas average annual production of silver between 1493 and 1520 was 151,000 troy ounces, average annual extraction of the metal from 1545 to 1560 rose to 10 million troy ounces. Working rich deposits of silver in Mexico and Peru was the main cause of the increase in silver extraction. The drop in the value of noble metals—especially silver, which was the chief money metal in the 16th century—led to a 150–300 percent rise in commodity prices.
The second wave of marked price rises was observed at the end of the 1840’s, when the California (and later Australian) gold mines were first worked. Whereas the total amount of gold extracted from 1821 to 1850 was 28,698,375 troy ounces, in the 30 years from 1851 to 1880 the total reached 181,250,894 troy ounces—an increase of more than 500 percent. The growth of labor productivity in the gold-extracting industry and the consequent drop in the cost of gold caused commodity prices to rise 25–50 percent during this latter period. The Price Revolution in the second half of the 19th century led to growth in the cost of living and a worsening of the position of the proletariat and also played a certain part in the concentration of industrial production.
The emergence of the quantitative theory of money, according to which an increase in the amount of money in circulation causes a rise in prices, was directly linked to the increase in prices resulting from the influx of large amounts of gold and silver. In reality, growth in the amount of money reflects a decrease in the value of noble metals, because in this case the value of commodities is expressed in a larger amount of gold and silver. “Prices are not high or low because more or less money is in circulation,” K. Marx noted. “The opposite is true: more or less money is in circulation because prices are high or low. This is one of the most important economic laws” (K. Marx and F. Engels, Soch., 2nd ed., vol. 13, pp. 88–89).
A. A. KHANDRUEV