Fifteenth-century Europe encountered a severe shortage of precious metals—particularly silver—that scholars have named the Great Bullion Famine. The worst years of the bullion famine lasted from 1457 until 1464. Evidence of price levels are scanty, but E. J. Hamilton, author of a well-known study of the sixteenth-century price revolution, found evidence that prices in Valencia and Aragon dropped as much as 50 percent in gold equivalents, and 25 percent in silver equivalents from 1400 to 1500. Interest rates that ranged between 4 7/8 and 8 3/8 percent during the first half of the fourteenth century in Italy, rose to a range between 6 percent to over 10 percent 100 years later.
The reasons for the bullion famine lay in the depletion of silver mines located in what are now Germany, Austria, the Czech Republic, and Slovakia, and a European trade deficit with countries of the Middle and Far East. Diminished European silver production began with the depopulation caused by the Black Death epidemic of the fourteenth century, and continued into the fifteenth century. A contributing factor to the bullion famine was the strong tendency to hoard precious metals in plate, cups, jewelry, and treasures of coin. Falling prices rendered hoarding precious metal a productive investment and hoarding was also a means of protection against coinage debasement.
A European trade deficit with the Middle and Far East existed because exotic goods from China and India—spices, silks, cotton, and others—were highly prized in Europe, but European products—such as woolens from England—were not valued in Eastern countries. Even falling European prices could not erase the trade deficit. Precious metals, particularly silver, were strongly valued in the Eastern countries, and European precious metals sent to the East in payment for goods never returned in payment for exported European goods. Precious metals were a European export, and Eastern countries became a sinkhole for those metals. The Eastern countries exhibited the same strong propensity to save that now is associated with Japan, causing Japan to export goods to the United States without buying a comparable volume of United States goods.
Mints closed down all across Europe. A lack of bullion forced mints in the Rhineland to close one after another between 1440 and 1443. The English mint at Calais shut down permanently in 1442, and at one point the Tower of London housed the only mint in northwestern Europe that remained active. As early as 1392 the minting of silver in France had dropped to a trickle, and about the same time Sweden ended minting silver for 20 years. At the height of the bullion famine mints closed down in Flanders, Holland, Hainaut (southwestern Belgium), Dordrecht, and Valenciennes.
The bullion famine was one of the not-so-secret causes of the Age of Discovery. Portuguese explorations down the coast of Africa opened up new routes to sub-Saharan gold. Christopher Columbus in his diary of his first voyage mentions gold 65 times. After the mid-sixteenth century, the discovery of silver in Latin America put an end to the bullion famine, Europe entered an era of rising prices, and trade with the Eastern world reached a higher level of intensity.