Mr. David McWilliams:

I have always liked using history to explain matters. The interesting thing about human nature is that it never changes. All these things happen again and again. At the time, what really struck me as fascinating from an economic historian’s perspective was how Spain went from being the richest and most aggressive colonialist country in Europe in the 16th century to the poorest in the 17th century. How did that happen? There are many theories but one in particular struck me. What actually happened was that when they plundered all the gold from Latin America, it became easier not to work. Huge swathes of the Spanish manufacturing and agricultural sectors stopped because the Spaniards did not bother working. The people who actually got the most benefit from the Spanish plunder of the Inca gold were not the Spanish but the Dutch and the British who actually made the nails, the hammers, the guns and other products they sold to the Spaniards. That always struck me as interesting.

What the Spaniards had was a massive monetary stimulus, like in the context of Ireland. They woke up one morning and had all the money in the world. We woke up one morning and through the banks had all the money in the world. As had happened in Spain, when one has all the money in the world, prices and inflation rise and one abandons manufacturing. Why should we make stuff when we can actually sell a site down the road?