# Second Period explained — The Wealth of Nations

> Chapter companion for The Wealth of Nations by Adam Smith.

## What happens

This chapter examines the second period (approximately 1570 to 1640) during which the value of silver fell significantly relative to corn, primarily due to the discovery of abundant mines in America. Despite increasing demand from Europe's advancing industry, the supply of silver exceeded demand, causing its real value to drop and corn prices to rise. The chapter provides detailed price data from Windsor market and Eton College accounts to illustrate the magnitude of the change.

## Themes in this chapter

### Wealth and Money

The chapter explores how the value of silver, as a form of money and measure of wealth, was affected by the massive increase in supply from American mines.

### Historical Development of Society

The chapter traces the historical impact of the American mine discoveries on European prices and economic conditions over a seventy-year period.

## Character check-ins

### Silver

Silver's value is the central focus, with its real value declining due to the influx from American mines.

## Key lines

> From about 1570 to about 1640, during a period of about seventy years, the variation in the proportion between the value of silver and that of corn, held a quite opposite course. Silver sunk in its real value, or would exchange for a smaller quantity of labour than before; and corn rose in its nominal price...

Between roughly 1570 and 1640, the relationship between silver and corn prices reversed: silver became less valuable (buying less labor), while corn became more expensive in terms of silver.

_Smith summarizes the key trend of the second period, contrasting it with the first._

> The discovery of the abundant mines of America, seems to have been the sole cause of this diminution in the value of silver in proportion to that of corn.

The main reason for silver's drop in value relative to corn was the discovery of rich silver mines in America.

_Smith attributes the decline in silver's value to the massive increase in supply from American mines._

> The greater part of Europe was, during this period, advancing in industry and improvement, and the demand for silver must consequently have been increasing. But the increase of the supply had, it seems, so far exceeded that of the demand, that the value of that metal sunk considerably.

Even though Europe's growing economy increased the demand for silver, the supply from America grew even faster, causing silver's value to fall substantially.

_Smith explains the interplay of supply and demand in determining silver's value._

## Links

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