Inflation Blog - Part 2: Greed and the Four Horsemen

Written by Tony, 06 January 2022

The Sixteenth Century – England under the Tudors and Stuarts, Reformation Europe and the Conquistadores

In this series I am looking at past periods of high inflation, hoping to see if they might be able to throw any light on the inflationary surge that we are seeing today.

Before setting off for the early 1500’s, it’s perhaps worth mentioning that in the month or so since I wrote the first instalment in this series, inflation has become more rather than less of an issue and is even battling for headlines with the Omicron variety of Covid-19.

I have long suspected that when a more serious bout of inflation came along (which may or may not be the case today) the monetary authorities would probably dismiss it as insignificant. As in the story of ‘The Boy who cried Wolf’ the world’s central bankers have been faced with inflation scares many times over the last four decades. Each time the beast has either failed to make an appearance or slunk away unnoticed without the need for any action on their part. This time the central bankers have strong incentives to do nothing – they believe that today’s inflation is a temporary phenomenon caused by disruptions in the supply chain resulting from the pandemic, which will resolve themselves in the months ahead.

No one wants to raise interest rates significantly or remove stimulus while the pandemic is still raging and economies remain vulnerable. But yesterday (December 14th) the International Monetary Fund (IMF) took the Bank of England to task for finding excuses not to act. The annual IMF report on the UK economy predicted that inflation would reach 5.5% early next year, almost three times its target of 2.0%, and that it would remain above target until early 2024, commenting that ‘it would be important to avoid inaction bias, in view of the costs associated with the second-round impacts of inflation’.

It appears that the question of inflation hasn’t become any less relevant over the last month.

Turning now to the early modern period…

What Happened

Although the events in question took place only four hundred years ago, a mere blink in the eye of history, we are peering into a world which is unimaginably distant, when most people couldn’t read and had never travelled more than a few miles from their villages, and when there was no light on winter evenings other than that from the fire and a few tallow candles. A time when the Church taught that the Earth is flat, and when you had a fever the doctor would remove a pint of your blood to reduce the element of fire in your body. Data from the period is patchy and unreliable, and as with the Black Death era, authorities contradict one another with frustrating regularity.

Leading up to this period, an index of prices looks like this:

Year Index

During the sixteenth-century, inflation delivered the longest consistent rise in prices in recorded history. It began in Italy in the 1470s, gradually spreading to France and England around ten years later, then to Spain and Portugal, and to Eastern Europe by 1500. Prices continued to rise, slowly and inexorably, with increasingly wild spikes as time went on, until the middle of the seventeenth century, 150 years later. This was a general increase in all prices, with the exception, for some reason, of glass and possibly wax. But the price rises weren’t even - the price of food rose consistently faster than the price of industrial goods – as always seems to happen during inflationary times. After a time-lag, the price of timber and charcoal, the main sources of fuel, rose even faster than the cost of food. In the sixteenth century, the prices of food and fuel rose by around 6-8 times overall, while industrial products rose around threefold. Wages rose in line with prices early in the period, but afterwards failed to keep pace. Real wages fell by around half during the sixteenth century, sharply increasing inequality in what were already very unequal societies.

At a time when the bulk of most people’s incomes was spent on food and warmth, it may be that there was simply not enough money left over from the household budget to pay for industrial goods. In any case, industrial production is better able to cope with an increase in demand, making shortages leading to price pressure less likely.

Why did prices start to rise in the late fifteenth century when they had been flat for a hundred years beforehand? A number of explanations have been proposed, some by contemporaries and others by scholars of the period. The main ones follow:

Population Growth

The population of England, estimated at 5.0 million before the Black Death, fell sharply during the pandemic and continued to decline thereafter, to a low of around 2.0 million in 1450. From then on it began to rise, as society had stabilised and wages were good. People married earlier and had larger families. The population recovered to around 2.8 million in 1540, and over 4.0 million by 1600. Cities grew faster than the general population – that of London increased five-fold from 40,000 in 1500 to 200,000 in 1600. City-dwellers produced a far lower proportion of their own food than their country cousins and were reliant on surplus produce coming in from outside. A growing population and rapid urbanisation make complete sense as explanations of rising food prices. Increased demand for timber contributed to the rapid deforestation of the country, due in part to build ships for King Henry VIII’s naval war with France.

Contemporary commentators make clear that the growing population was seen as problematic. ’There are so many people everywhere, no one can move’ said Sebastian Franck in his Deutshen Chronik (1538), echoed by the Englishman John Bayker in the same year ‘I think thayr were never moo people and fewer habitations’. There were far fewer people in England at this time than there had been two hundred years earlier, but the rate of change is what people tend to notice.

Increased Money Supply and Other Monetary Factors

The Spanish conquistadores discovered huge quantities of gold and silver bullion in their conquered territories, and it wasn’t long before the bullion was shipped back to Spain and turned into coin which began circulating freely around Europe. This would appear to be a perfect explanation for the rising tide of prices, and it was in the second half of the sixteenth century that the link between the quantity of money and inflation was first made. Here’s the Spanish writer Martin de Azpilicueta ‘Money is worth more when and where it is scarce than when it is abundant’. However, the timing doesn’t work – the bullion shipments only really got going around 1550, over eighty years after prices first started to rise. It seems that the American gold fuelled the flames of a fire which had been lit almost a century earlier.

The money supply also grew through the debasement of currency – the practice of melting down gold and silver coins and mixing them with baser metals to produce more cash. The most egregious example occurred in the 1540’s under King Henry VIII, coinciding with one of the two most intense periods of inflation in the entire century. Henry needed money to finance his wars with France and Scotland. War is hugely expensive, is nearly always inflationary, and often bankrupts the participants.


Apart from the Spanish Armada in 1588, which history tells us Sir Francis Drake and his fleet dispatched without raising a sweat we think of the Tudor century as a relatively peaceful one, but England was in fact at war for more or less the entire period. The busiest periods of conflict, the 1540s and 1590s, coincided with the biggest spikes in inflation.

In 1540, Henry was at war with France and Scotland at the same time. In 1543, he agreed with the Holy Roman Emperor, Charles V, to invade France the following year, each providing a force of 40,000 men. Charles, however, thought better of the idea and signed a peace treaty at Crepy the following year. Henry, who hadn’t been told of the treaty, went ahead anyway, personally leading his troops at the siege of Boulogne, which fell to the English in 1544. The following year the French launched a naval attack on England, arriving in the Solent unopposed. In the ensuing battle the King’s flagship, the overloaded and clumsily handled Mary Rose, capsized and sank. The French landed on the Isle of Wight but were repulsed.

Meanwhile the King’s troops beat the Scots at the battle of Solway Moss (1542) but failed to press home their advantage, leading to a conflict, known as the ‘rough wooing’ which lasted till the end of Henry’s reign. The English lost heavily at the battle of Ancrum Moor (1545). No wonder, then, that when Henry died in 1547, the English treasury was bankrupt, despite all the extra coinage created through debasement.

As with the Spanish gold and silver, coinage debasement cannot be the underlying cause of price rises, as it took place decades after the inflation began, though it, and the spending on the wars for which the extra debased coinage was required, must have been contributory factors. It’s also true that debasement wasn’t entirely a one-way process. In 1561, Queen Elizabeth restored the currency ‘to its former purity and perfection’ as was said at the time. Despite this measure, prices in England and the rest of Europe continued on their upward trajectory for another century.

In the 1590s, Queen Elizabeth was at war with Spain, Ireland, France and the Netherlands. The 1590s saw a further spike in inflation, exacerbated by four consecutive harvest failures in 1594-7.

The relationship between inflation, war and government spending is complex and interesting. It appears that once inflation takes hold, government revenues fall behind spending and governments become desperate to lay their hands on cash by all possible means. In times gone by, the need for cash may have fed the natural belligerence of monarchs, though the result of war was nearly always less rather than more cash.

As an aside, one striking feature of the period is the failure of Spain to make use of its vast bullion windfall. During the sixteenth century, Spain became the dominant power in Europe and cast itself as the guardian of peace and of the Catholic faith in Europe. Spending, on wars mainly, rose until it had used up all the bullion, and the Spanish government was forced to borrow against future shipments at eye-watering rates of interest. There is a possible analogy here with modern Saudi Arabia, where the government has increasingly used oil revenues to placate all those elements of society which aren’t direct beneficiaries of the bonanza. Saudi Arabia faces a future in which its vast outgoings are increasingly less likely to be paid for by sales of crude oil.

Bad Harvests

Harvest failures were common during this period, adding to the chronic inability of food production to keep up with demand. During the 1630s, there was only one good harvest.

Bad Policy, Greed, Profiteering

Many contemporaries believed that economic hardship was a punishment from God for drunkenness and other vices, while others pointed the finger at landowners, merchants, rentiers and others. There is little doubt that certain behaviours, such as the coinage debasement already mentioned, contributed to the problem. As we have seen in our own time, shortages (toilet paper, petrol) lead to hoarding, and hoarding creates further shortages.

Sale of Monopolies

Today it is generally agreed that monopolies stifle healthy competition, and in most countries regulations exist to oppose monopolies and other anti-competitive practices. Tudor and early Stuart monarchs, blissfully unaware of the economic damage they were causing, were happy to sell monopolies to raise much-needed revenue. Elizabeth’s favourite Sir Walter Raleigh controlled the sales of tin and playing cards, together with the licencing of taverns. The whole point of owning a monopoly is that it allows you to charge what you like, and as such monopolies are structurally inflationary. The monopolist gains at the expense of everyone else.


Hoarding and panic-buying are natural responses to shortage and happened on a domestic level throughout the period but were far more damaging when practised on an industrial scale. People spoke of ‘the accursed activities of middlemen’. In ‘The Great Wave’ David Fischer quotes the example of a merchant in Antwerp in 1565, who, while people were literally starving in the street, had packed his warehouse so full of grain, which he was hoping to sell when its price had risen further, that the building collapsed, leading to a riot which quickly spread across the city.


In the aftermath of the Black Death, the lack of workers caused farmers to switch from the production of labour-intensive grain to the less intensive activity of sheep farming. In the early years of the sixteenth century, the profits from farming wool for cloth far exceeded the return from mutton, which was seen as a by-product.

Today the magnificent wool churches in our area, the Cotswolds, as well as in East Anglia, bear silent witness to the huge sums that could be made from farming sheep. The dissolution of the monasteries in the 1530s released more land for sheep production. Not all enclosures caused hardship – often farmers fenced their own land to prevent livestock from wandering and thus increase productivity, but all too often landowners enclosed common land, on which villagers had rights to graze their own livestock and hunt. These commoners were brutally evicted, adding to the number of beggars, which grew steadily through the century. Many of the displaced rural poor ended up in the cities.

Land was enclosed in response to the profitability of wool production. The social effect, in what was still primarily an agrarian economy, was to reduce the area of land available for the production of grain for bread, while increasing the number of people who depended on others for their food. All this would put pressure on the price of the staple commodity and add to inflation. It also added to inequality, for rising food prices hurt those people most who spend almost all their income on food.

Wicked Landlords

Brinkelow’s Complaynt attributed the evil of rising prices to the greediness of landlords. ‘This inordinate enhancing of rents…must needs make all things dear…for as he increaseth his rent, so must the farmer the price of his wool, cattle and all victuals and likewise the merchant of his cloth, for else they cannot maintain their living’.

But were landlords the cause of price rises, or were they merely one element in the inflationary spiral? Landlords had pricing power where their tenants had little alternative to staying put, but in other circumstances market forces must have played a part. However, it’s clear from Brinkelow’s comments that landlords and other owners of capital were better able to protect themselves than the vast majority of their contemporaries.

Winners and Losers

Inequality grew as real wages fell. Discussing the changes of the time, contemporary William Forrest wrote ‘the worlde is changeth from that it hath beene, not to the better but to the warsse farre…unto the rich it maketh a great deale, but much it takketh from the commune weale’

As in the time after the Black Death, aristocratic landlords who failed to adapt fell behind, and yeoman peasants who were able to increase their landholdings prospered, while their poorer neighbours, forced off their small plots, became landless labourers, and sometimes beggars.

The age was punctuated by famines which hit the poorest hardest. This description was of Venice in 1529

‘Give alms to two hundred and as many again appear. You cannot walk down a street or stop in a square or church without multitudes surrounding you to beg for charity: you see hunger written in their faces, their eyes like gemless rings, the wretchedness of their bodies with skins shaped only by bones…’

It seems likely that the Reformation was in large part a reaction against the wealth of the Church of Rome, its coffers swelled by the sale of ‘indulgencies’ (where your sins were absolved in return for a down-payment) in the late Middle Ages.

How Inflation Becomes Embedded

The IMF comment on the slothfulness of the UK monetary authorities at the start of this piece refers to ‘the costs associated with the second-round effects of inflation’. In times of inflation, it isn’t long before people come to expect inflation to continue and start building it into their expectations. Pay settlements must not only take account of last year’s inflation but must anticipate next year’s inflation as well. Higher wage settlements push up employers’ costs, which they will pass on to their customers if they can. It starts making sense to buy goods before the price goes up, and to borrow as much money as possible on the assumption that the debt will lose its value quickly.

Sixteenth century Inflation increased the returns to capital while reducing real wages and increased inequality in an already unequal society. The rich had the ear of Government, then as now, and were able to argue against the burden of taxes falling on them, which led to an inefficient regime in which the poorest in society bore the brunt of taxation. Government revenues fell behind spending, and the remedy, currency debasement, fuelled further inflation. Once these patterns become entrenched, inflation becomes much harder to control.


Inflation in the time of the Tudors and Stuarts appears to have its origins in the late fifteenth century, when the population of Europe began to recover from its long decline after the Black Death a hundred years earlier. The surge was compounded by changes in agricultural practice favouring the production of wool over grain, a steady drift of people to the cities, war, the greediness of speculators, and later on by currency debasement and the flood of bullion from the Spanish colonies. The end of the period, known as ‘The Crisis of the Seventeenth Century’ was a time of great hardship, civil unrest and religious conflict.

As in the earlier Black Death period, inflation made fortunes for the few while impoverishing the many.

Next time – Inflation Three: 1923 - The Death of Money in Germany and Austria.

Tony Yarrow. December 2021

Note: I have used a number of sources for this article but have leaned most heavily on Inflation in Tudor and Early Stuart England by RB Outhwaite and The Great Wave by David Hackett Fischer.

Please note, these views represent the opinions of Tony Yarrow and do not constitute investment advice. This document is not intended as a recommendation to invest in any particular asset class, security or strategy. The information provided is for educational purposes only and should not be relied upon as a recommendation to buy or sell securities. Wise Investment is authorised and regulated by the Financial Conduct Authority, number 230553.