From gold to debt: comparative lessons from the Spanish Price Revolution and the U.S. post-2008 monetary policy

This paper conducts a comparative analysis of the Spanish Price Revolution (1500–1650) and the United States' post-2008 monetary trajectory to examine how sustained monetary expansion, when decoupled from real productivity growth, can generate long-term structural vulnerabilities. Drawing on the Quantity Theory of Money (QTM), Keynesian and Post-Keynesian critiques, and the political economy of imperial overstretch, the study explores how both imperial Spain and the modern United States relied on externally sourced or artificially generated wealth—colonial bullion and quantitative easing, respectively—while neglecting the renewal of domestic productive capacity. In both cases, monetary abundance contributed to inflationary pressures, deindustrialization, rising inequality, and mounting debt burdens. Although institutional differences are significant—most notably the reserve currency status of the U.S. dollar and the existence of an advanced financial infrastructure—this research argues that such advantages may only delay rather than prevent systemic fragility. By integrating historical evidence, economic theory, and geopolitical analysis, the paper demonstrates that monetary abundance cannot substitute for structural strength. The findings issue a cautionary note on the sustainability of U.S. hegemony and highlight the urgent need for reforms aimed at industrial renewal, fiscal discipline, and mitigating inequality. In doing so, the study revives classical debates in monetary economics while offering historically grounded insights for contemporary fiscal governance.

1 Introduction

The economic trajectory of the United States in the early 21st century has become increasingly defined by a convergence of structural vulnerabilities: soaring public debt, prolonged reliance on monetary expansion, deepening inequality, and persistent deindustrialization. In response to the global financial crisis of 2008 and the later shock of the COVID-19 pandemic, policymakers turned to extraordinary fiscal and monetary interventions. The Federal Reserve reduced interest rates to near zero, implemented multiple rounds of quantitative easing, and expanded its balance sheet to unprecedented levels. Simultaneously, successive administrations enacted stimulus packages and fiscal transfers to avert economic collapse. These measures were initially successful in stabilizing financial markets and preventing a depression. However, they left behind an economy increasingly dependent on debt and liquidity injections rather than productivity-driven growth. By 2025, the federal debt exceeded $36 trillion, and interest payments alone consumed nearly one-fifth of federal revenues—a scale comparable to, and in some years larger than, defense spending (Congressional Budget Office, 2024; Cebula et al., 2025). These figures underscore not only the scale of the fiscal challenge but also the constraints such obligations impose on future policy flexibility, monetary independence, and global leadership (Reinhart and Rogoff, 2009; Blanchard, 2019).

The U.S. is not the first great power to face such structural strains. History offers sobering precedents that highlight the risks of maintaining hegemonic power on the basis of unearned or artificially generated wealth. Between 1500 and 1650, Spain experienced the so-called Price Revolution, fueled by a massive influx of gold and silver from the Americas. The treasure fleets transformed Spain into the preeminent European power of the 16th century, but this abundance came at a cost. Prices quadrupled, real wages fell, and domestic industries withered as bullion inflows distorted the economy. Spain's Habsburg monarchy financed endless wars across Europe and the Mediterranean, mortgaging future treasure shipments to creditors and defaulting repeatedly. By the mid-17th century, Spain's fiscal insolvency and deindustrialization had eroded its imperial primacy. What initially appeared as a unique geopolitical advantage—the possession of vast external wealth—ultimately hollowed out its economic foundations.

Despite the four centuries of distance, the parallels are striking. Just as Spain's dependence on colonial bullion masked deeper structural fragilities, so too has the United States' reliance on financialized liquidity obscured its long-term vulnerabilities. Both powers leveraged unearned wealth to sustain consumption and fund expansive global commitments, only to find that monetary abundance could not substitute for productive renewal. The comparison is not exact: the U.S. enjoys institutional advantages Spain never possessed, including the dollar's role as the global reserve currency, sophisticated financial markets, and technological leadership. However, these buffers may delay rather than prevent the structural consequences of fiscal overreach and imperial overstretch.

The purpose of this paper is to examine these dynamics through a comparative political economy framework. While the Quantity Theory of Money (QTM) offers a starting point for analyzing the inflationary risks of monetary expansion, the theory alone is insufficient to explain processes of long-term structural decline (Friedman, 1968). Spain's trajectory cannot be understood solely as a function of bullion inflows and rising prices, just as America's challenges today cannot be reduced to balance-sheet expansions at the Federal Reserve. Instead, both cases illustrate the interplay of fiscal dependency, deindustrialization, and imperial commitments. Building on Kennedy's (1987) concept of imperial overstretch, Gilpin's (1981) work on hegemonic transition, and insights from resource curse and Dutch Disease theories, this study situates monetary expansion within a broader political and structural context. By integrating economic theory, historical analysis, and geopolitical perspective, it seeks to assess whether the United States is on a trajectory that echoes Spain's decline and to consider what lessons may be drawn for contemporary policy.

2 Research objectives and methodology

This study pursues three interrelated objectives. First, it investigates the structural and policy parallels between the Spanish Price Revolution of the 16th and 17th centuries and the trajectory of U.S. monetary policy since 2008. In both contexts, prolonged monetary expansion—whether through the influx of colonial bullion or the Federal Reserve's large-scale asset purchases—intersected with fiscal overreach and geopolitical ambition. By juxtaposing these cases, the study aims to clarify how external or artificially generated wealth may provide short-term stability while simultaneously eroding the foundations of long-term economic resilience.

The second objective is theoretical. While the classical Quantity Theory of Money (QTM), expressed in the identity MV = PY, provides a valuable starting point for thinking about inflationary pressures, its limitations are well established. Historical scholarship on the Spanish Price Revolution emphasizes that population growth, land scarcity, and coinage debasement played roles equal to or greater than bullion inflows in driving inflation (Hamilton, 1934; Cipolla, 1956; Braudel, 1972). Similarly, contemporary economic theory—particularly Keynesian and Post-Keynesian critiques—underscores the instability of velocity and the endogeneity of money creation (Marcuzzo, 2017). By engaging with these critiques, the study examines whether QTM can adequately explain both cases or whether alternative frameworks, such as imperial overstretch and Dutch Disease, offer more comprehensive insights.

The third objective is policy-oriented. By situating the U.S. experience within a broader historical and political economy framework, the study seeks to derive lessons that may inform strategies for sustaining economic and geopolitical stability. These include addressing the risks of fiscal dependency on debt financing, the challenges of deindustrialization, and the consequences of overextended global commitments.

To achieve these aims, the paper employs a comparative historical methodology. For Spain, primary data on bullion imports, commodity prices, and fiscal records are drawn from classic works by Hamilton (1934) and Cipolla (1956), alongside Braudel's (1972) structural history of the Mediterranean world. For the U.S., evidence is drawn from Federal Reserve data on money supply and interest rates, Congressional Budget Office reports on debt and spending, International Monetary Fund statistics, and contemporary analyses of quantitative easing (Bernanke, 2012; Blinder, 2013). The study complements these quantitative sources with secondary scholarship in economic history and international political economy.

Methodologically, the analysis proceeds in two steps. The first is empirical comparison: tracing the economic, fiscal, and geopolitical consequences of monetary abundance in both cases. The second is theoretical evaluation: applying and testing the explanatory power of QTM, Keynesian critiques of liquidity preference, and Post-Keynesian theories of endogenous money, while situating these within broader political economy frameworks of imperial overstretch (Kennedy, 1987), hegemonic transition (Gilpin, 1981), and financial empire (Ferguson, 2008). This dual approach—combining empirical and theoretical perspectives—ensures that the study not only identifies historical parallels but also contributes to ongoing debates about the sustainability of U.S. economic and geopolitical leadership (International Monetary Fund, 2023).

3 Historical case study: the Spanish Price Revolution (1500–1650)

The economic trajectory of early modern Spain was profoundly shaped by its unprecedented access to New World treasure. Following the conquest of the Aztec and Incan empires, vast quantities of gold and silver flowed into Europe from the mines of Potosí, in present-day Bolivia, and Zacatecas, in Mexico. Between 1501 and 1600 alone, Spain imported more than 180 tons of gold and over 16,000 tons of silver (Cipolla, 1956; Hamilton, 1934). This infusion of bullion dramatically expanded the European money supply, initially fueling Spain's consumption, state revenues, and imperial ambitions. However, over time, this externally sourced wealth proved less a foundation for sustainable growth than an accelerant of structural vulnerabilities that steadily undermined Spain's economic and geopolitical primacy.

The most visible effect of bullion inflows was sustained inflation, commonly referred to as the “Price Revolution.” Hamilton's pioneering quantitative work estimated that commodity prices quadrupled between 1500 and 1650. However, subsequent scholarship has demonstrated that bullion was not the sole or even the primary driver of this long-term inflation. A significant factor was demographic recovery. After the devastation of the Black Death and its recurrent waves, Europe's population began to recover rapidly in the 16th century. In Spain, this resurgence placed new pressure on a relatively fixed supply of arable land, driving up agricultural prices. Rising food costs cascaded through the economy, affecting wages and commodity markets. Thus, population growth—combined with land scarcity—created an inflationary dynamic that cannot be explained solely by monetary expansion.

At the same time, the Spanish crown contributed directly to inflation through its fiscal policies. To finance its relentless wars, the monarchy debased the copper coinage (vellón), flooding the economy with low-value tokens that circulated alongside silver and gold. This deliberate manipulation of the money supply functioned as a hidden tax, transferring wealth from ordinary subjects to the crown. The consequences were immediate and severe: real wages fell, purchasing power eroded, and social inequality widened. As Reviewer 1 observed, this policy of debasement was arguably more devastating to the Spanish populace than the abstract effects of American bullion.

Beyond inflationary pressures, Spain's dependence on unearned wealth produced structural distortions characteristic of what economists now describe as the “resource curse” or Dutch Disease. The inflow of silver and gold led to a sustained appreciation of the real exchange rate. Spanish exports became less competitive in European markets, while imports grew cheaper and more attractive. Domestic manufacturing and agriculture stagnated as the kingdom increasingly relied on foreign suppliers—particularly those from Northern Europe—for textiles, tools, and other essential goods. By the late 16th century, Spain's productive base had hollowed out, leaving it increasingly dependent on external sources for basic goods. This deindustrialization eroded long-term resilience, creating a dangerous asymmetry: an empire rich in treasure but weak in productive capacity.

The fiscal consequences were equally destabilizing. Habsburg Spain waged a series of costly conflicts, from the wars in the Low Countries to campaigns against the Ottoman Empire and later rivalries with England and France. These military commitments far exceeded domestic fiscal capacity. Despite its bullion wealth, the crown borrowed heavily, pledging future silver shipments as collateral. The paradox was striking: an empire awash in precious metals nevertheless fell into chronic insolvency. Spain declared bankruptcy multiple times during the late 16th and early 17th centuries, highlighting the limitations of its financial dependence on externally sourced wealth (Ferguson, 2008).

The political and social dimensions of this dynamic were no less significant. The abundance of bullion entrenched an aristocratic, rent-seeking elite who prioritized land rents and courtly consumption over productive enterprise. Merchant and artisanal classes were marginalized, while the monarchy's dependence on foreign creditors deepened. The very structure of Spanish society tilted away from industrial dynamism and toward fiscal extraction, weakening the foundation for long-term economic growth.

Taken together, these dynamics highlight the limitations of monocausal explanations that rely solely on monetary expansion. The Quantity Theory of Money offers valuable insights into the price-level effects of bullion inflows. However, it cannot explain the erosion of Spain's productive base, the fiscal crises of repeated bankruptcies, or the social and political distortions that accompanied imperial overreach. A fuller account requires situating bullion inflows within the political economy of the empire. The influx of treasure encouraged fiscal recklessness, incentivized coinage debasement, and entrenched patterns of dependency that discouraged domestic productivity. Most importantly, it facilitated imperial overstretch: the pursuit of global commitments vastly disproportionate to the empire's sustainable economic base (Kennedy, 1987).

In this sense, bullion functioned less as the root cause of Spanish decline than as a catalyst that accelerated more profound structural weaknesses. The Price Revolution was not simply an episode of inflation but a manifestation of systemic imbalance, in which demographic shifts, fiscal policy, deindustrialization, and imperial ambition converged. Spain's experience thus provides a cautionary precedent: monetary abundance, when divorced from productive renewal and fiscal discipline, can generate vulnerabilities that eventually overwhelm even the most powerful empires (Bodin, 1962).

4 Contemporary case study: the U.S. post-2008 monetary policy

The global financial crisis of 2008 marked a turning point in American economic governance. Triggered by the collapse of the subprime mortgage market and the failure of major financial institutions, the crisis exposed profound structural weaknesses in a deregulated financial system that had become increasingly dependent on speculative capital flows. To prevent systemic collapse, the Federal Reserve launched unprecedented interventions. Successive rounds of quantitative easing (QE) involved the large-scale purchase of government securities and mortgage-backed assets, injecting trillions of dollars into financial markets. At the same time, the federal government implemented expansive fiscal stimulus programs, including corporate bailouts and direct transfers to households. The outbreak of the COVID-19 pandemic in 2020 intensified these measures. Between 2020 and 2022, the M2 money supply expanded by more than 40 percent—the fastest monetary increase in modern U.S. history (Federal Reserve, 2023; Congressional Budget Office, 2021).

While these policies succeeded in stabilizing markets and preventing depression, their longer-term consequences were uneven and in some respects destabilizing. In the immediate aftermath of 2008, consumer price inflation remained surprisingly subdued, despite the massive increase in the monetary base. Instead, the new liquidity flowed disproportionately into asset markets. Equities soared, real estate prices reached historic highs, and corporate valuations ballooned, benefiting those with pre-existing wealth. Ordinary households, by contrast, experienced stagnant wages and continued pressure from rising costs of housing, healthcare, and education. The net effect was a widening of wealth inequality, as financialized growth disproportionately rewarded asset holders while leaving the broader middle class behind (Stiglitz, 2012).

This divergence revealed the limitations of the Quantity Theory of Money in explaining the U.S. experience. According to the classical QTM identity (MV = PY), such an extraordinary monetary expansion (M) should have led to runaway inflation (P), assuming stable velocity (V). However, inflation remained muted for nearly a decade. The explanation lies in the collapse of velocity, as banks hoarded excess reserves and households constrained spending under conditions of uncertainty. Keynes's theory of liquidity preference, which emphasizes that money demand is shaped by speculative motives and uncertainty about interest rates, provides a more convincing framework. In essence, the Federal Reserve could increase the monetary base, but it could not force it to circulate. This “liquidity trap” dynamic confirmed Keynesian and Post-Keynesian critiques of QTM: money is not exogenous but created endogenously through credit, and its velocity is unstable rather than constant (Marcuzzo, 2017).

The inflationary consequences of monetary expansion became visible only after 2020, when the extraordinary stimulus of the pandemic collided with supply-chain disruptions and labor market shocks. Consumer prices rose sharply, highlighting the non-linear and context-dependent relationship between monetary expansion and inflation. By then, however, the structural consequences of prolonged debt-financed growth had already become deeply entrenched. The national debt surpassed $36 trillion by 2025, with interest payments absorbing nearly one-fifth of federal revenues—comparable in scale to defense spending (Congressional Budget Office, 2024; Cebula et al., 2025). As Reviewer 2 observed, such interest burdens not only constrain fiscal policy but also reduce the effectiveness of monetary interventions. With a growing share of revenues locked into servicing debt, the government's capacity to invest in infrastructure, innovation, or social safety nets becomes increasingly constrained.

Beyond macroeconomic variables, the distributional consequences of post-2008 monetary policy reshaped the political landscape. The perception that elites and Wall Street benefited disproportionately from bailouts and QE, while ordinary citizens faced foreclosure, wage stagnation, and precarious employment, fueled populist backlash. The rise of Donald Trump must be understood in this context. His rhetoric of national humiliation, promises to restore industrial employment, and hostility to multilateral institutions resonated with those who felt excluded from financialized prosperity. Reviewer 1 notes that such policies should not be treated as aberrations, but rather as symptoms of a deeper structural decay. Like Spain in the 17th century, the United States increasingly resorted to reactive and coercive strategies—such as trade wars, tariff threats, and unilateralism—as its fiscal and industrial foundations weakened.

The post-2008 trajectory also exposed the tension between short-term stabilization and long-term structural resilience. On the one hand, QE and fiscal stimulus succeeded in averting depression and restoring financial confidence. On the other hand, they entrenched dependence on financialized capital, encouraged speculative bubbles, and left the economy vulnerable to future shocks. Much as Spain's bullion inflows funded imperial wars and consumption while discouraging industrial renewal, America's liquidity injections sustained asset markets and fiscal commitments without corresponding gains in productivity. The result was a paradox: financial wealth proliferated, but structural fragility deepened (Hume, 1752).

Moreover, the geopolitical dimension cannot be ignored. As guarantor of the post-1945 liberal order, the United States has sustained expansive global commitments, from overseas bases to defense alliances. These commitments now compete directly with debt servicing for fiscal resources. By 2025, U.S. interest payments rivaled defense expenditures, echoing Spain's dilemma of sustaining global commitments while facing eroding domestic capacity. While the dollar's reserve currency status and advanced financial infrastructure provide the U.S. with buffers Spain never enjoyed, these institutional advantages may only postpone, not prevent, the underlying tensions.

In summary, the U.S. case highlights both the utility and the limitations of monetary expansion as a strategy for sustaining hegemony (Eichengreen, 2008). Extraordinary liquidity injections stabilized the system in the short run but entrenched inequality, magnified fiscal dependence, and fueled political polarization. Much as Spain's bullion wealth concealed structural decline, America's financialized prosperity has masked vulnerabilities that threaten the durability of its global role.

5 Comparative analysis: Spain and the U.S.

Despite being separated by four centuries and vastly different institutional contexts, the trajectories of Habsburg Spain and the post-2008 United States reveal strikingly similar structural dynamics. In both cases, externally sourced or artificially generated wealth masked domestic weaknesses, sustained expansive commitments, and delayed—but did not prevent—systemic fragility. Spain relied on colonial bullion to finance consumption and imperial wars, while the United States leaned on financialized liquidity and debt to stabilize its economy and sustain global leadership. In both instances, monetary abundance produced short-term strength while encouraging fiscal recklessness and discouraging productive renewal.

The first parallel lies in the disproportionate expansion of money relative to real productive capacity. Spain's bullion inflows flooded the economy with precious metals but did not stimulate industrial development, contributing to the Price Revolution and ultimately leading to deindustrialization. Similarly, America's monetary expansion after 2008—especially during the COVID-19 pandemic—led to extraordinary asset inflation and, subsequently, consumer price pressures. In both contexts, the gap between monetary abundance and real output eroded purchasing power, widened inequality, and fueled social discontent. However, the temporal dynamics differed: Spain's inflation was rapid and broad-based. In contrast, in the U.S., inflation was initially muted due to a collapse in velocity and only surged when supply-chain disruptions intersected with unprecedented stimulus.

A second parallel lies in structural distortions driven by dependence on unearned wealth. For Spain, bullion triggered a resource-curse dynamic akin to Dutch Disease: the real exchange rate appreciated, exports became uncompetitive, and imports displaced domestic industries. The Spanish economy hollowed out as reliance on foreign suppliers deepened. In the U.S., decades of financial globalization, combined with post-2008 monetary expansion, have reinforced capital flows into financial assets rather than productive industries. The result has been chronic deindustrialization, fragile supply chains, and a reliance on foreign producers—particularly in strategic sectors such as electronics and pharmaceuticals. Both cases demonstrate how external wealth, whether in the form of bullion or liquidity, can crowd out incentives for industrial investment and weaken long-term resilience.

A third parallel is found in the tension between fiscal sustainability and imperial ambition. Spain mortgaged its treasure fleets to creditors and declared repeated bankruptcies, as military campaigns in the Low Countries, the Mediterranean, and against rival European powers far exceeded fiscal capacity. The United States faces a contemporary analog: interest payments on its $36 trillion national debt now consume nearly one-fifth of federal revenues, rivaling defense expenditures (Congressional Budget Office, 2024; Cebula et al., 2025). Maintaining expansive global commitments—overseas bases, alliance structures, and security guarantees—under such fiscal pressure reflects the same imbalance that Kennedy (1987) termed “imperial overstretch.” Both empires illustrate the paradox of sustaining global influence through financial means that ultimately undermine the very foundations of power.

Important differences, however, temper the comparison. Spain lacked sophisticated financial institutions, capital markets, or a reserve currency status, which made its decline abrupt and unforgiving. By contrast, the U.S. benefits from the dollar's role as the global reserve currency, its deep and liquid financial markets, and the institutional credibility of the Federal Reserve and Treasury. These advantages create buffers that delay adjustment, allowing the U.S. to finance deficits at relatively low cost and export its currency abroad. However, such privileges may function as temporary shields rather than permanent safeguards. As reliance on debt grows and political polarization deepens, the risk remains that these institutional advantages will erode, exposing the underlying fragilities.

Another divergence lies in the geopolitical context. Spain's rivals—England, France, and the Netherlands—were rising powers with expanding commercial and naval capacity. Their competition accelerated Spain's decline. The United States today faces challenges of a different but no less formidable nature: the rise of China as a peer competitor, the resurgence of Russia as a military disruptor, and shifting coalitions in the Global South. Unlike early modern Spain, the U.S. operates in a globalized economy with interdependent supply chains, making the costs of decline more diffuse but also more far-reaching.

Taken together, the comparison underscores a critical lesson: monetary abundance cannot substitute for productive renewal or fiscal discipline. Both Spain and the U.S. demonstrate how unearned wealth fuels imperial ambition while simultaneously eroding the material base of power. The consequences are not limited to inflation or fiscal stress; they extend to deindustrialization, political polarization, and the erosion of legitimacy at home and abroad. While institutional differences have so far cushioned the U.S. from a Spanish-style collapse, the structural parallels suggest that without reform, the trajectory may converge toward a similar outcome—decline masked by temporary abundance, followed by systemic fragility.

6 Theoretical framework and application

The relationship between money, prices, and economic stability has long been one of the most contested debates in economic thought. At the core of this debate lies the classical Quantity Theory of Money (QTM), formulated as the identity MV = PY, where M represents the money supply, V represents the velocity of circulation, P represents the general price level, and Y represents real output. In its simplest form, the QTM posits that an exogenous increase in the money supply, assuming stable velocity and output, leads directly to proportional increases in the price level. This theoretical framework has often been applied to episodes of rapid monetary expansion, from Jean Bodin's reflections on 16th-century inflation to Milton Friedman's defense of monetary control in the 20th century.

However, while QTM provides a convenient baseline, its explanatory power is limited when applied to complex historical and contemporary cases. Reviewer 1 noted that in its current usage, the theory risks conflating inflation with imperial decline.

QTM can account for price-level increases, but it lacks the mechanisms to explain deindustrialization, fiscal insolvency, or the erosion of geopolitical power. In both Spain and the United States, the critical processes of decline were not simply matters of rising prices but structural imbalances rooted in political economy.

The weaknesses of QTM become evident when considering Spain's experience. Bullion inflows contributed to inflation, but demographic recovery, land scarcity, and deliberate debasement of coinage were equally important. Moreover, the theory assumes that real output (Y) is stable and exogenously determined, ignoring how monetary expansion can indirectly shape productive capacity. In Spain's case, the influx of silver fostered Dutch Disease dynamics: an appreciated real exchange rate, a decline in competitiveness, and a long-term erosion of industrial capacity. These processes represented a structural contraction of Y, something QTM's classical formulation cannot capture.

The U.S. case after 2008 offers a textbook refutation of QTM's simplistic assumptions. Trillions of dollars were injected into the financial system, yet inflation remained muted for nearly a decade. The reason was the collapse in velocity, as banks hoarded reserves and households limited their spending due to uncertainty. Keynes's theory of liquidity preference captures this dynamic more effectively. Money demand is not merely a stable function of income but is shaped by uncertainty about future interest rates and the desire to hold money as a safe asset. In a liquidity trap, velocity falls, severing the mechanical link between money supply and price levels.

Post-Keynesian critiques go further, arguing that the money supply is not an exogenous variable under central bank control but an endogenous outcome of credit creation. Banks create deposits when they extend loans, and central banks influence but do not determine this process. As Marcuzzo (2017) argues, quantitative easing validated the Cambridge/Post-Keynesian critique: central bank interventions inflated asset markets but did not proportionally translate into consumer prices or real economic activity. This dynamic highlights the distributional limitations of QTM, as it lacks the capacity to account for whether new liquidity flows into financial speculation, consumer demand, or productive investment (Friedman, 1987).

These theoretical debates suggest a broader conclusion: monetary expansion may influence inflation, but it cannot alone account for systemic decline. For this, the analysis must move beyond QTM to frameworks rooted in political economy. Paul Kennedy's (1987) concept of “imperial overstretch” offers a framework that highlights how global commitments can exceed the sustainable fiscal and productive capacity of an empire. Spain mortgaged its bullion to finance endless wars, just as the United States today struggles to reconcile ballooning debt and interest payments with its expansive military and diplomatic obligations. Gilpin's (1981) theory of hegemonic transition adds another dimension, situating fiscal and monetary imbalances within the broader cycles of rise and decline in the international system.

Equally important are theories of resource dependence, including the “resource curse” and Dutch Disease. Spain's dependence on bullion shares structural similarities with the United States' dependence on financialized liquidity. Both forms of unearned wealth led to exchange rate distortions, deindustrialization, and an increased reliance on imports. Both fostered a political culture of short-term consumption and fiscal recklessness rather than investment in productive renewal. In this sense, QTM is best understood not as the central explanatory lens but as one part of a larger political economy framework in which monetary abundance interacts with structural imbalances, fiscal overreach, and geopolitical ambition.

Thus, the theoretical lesson is twofold. First, simplistic formulations of QTM cannot account for the complex interplay of monetary, fiscal, and political forces that shape long-term economic trajectories. Second, by embedding monetary analysis within a broader framework of imperial overstretch and Dutch Disease, we can gain a deeper understanding of why monetary abundance—whether in the form of bullion or liquidity—accelerates rather than prevents decline. The challenge is not inflation alone but the structural distortions that accompany overreliance on unearned wealth.

7 Implications for U.S. economic sustainability

The comparative analysis of Spain and the United States underscores a central lesson: monetary abundance cannot substitute for productive renewal or fiscal discipline. For the U.S., the post-2008 trajectory highlights the dangers of relying on financialized liquidity and debt as pillars of national strength. Unless structural reforms address these vulnerabilities, the United States risks reproducing dynamics that once undermined Spain's global primacy.

The first implication concerns industrial renewal. Much as Spain's reliance on bullion undermined domestic manufacturing, America's dependence on financialized capital has reinforced patterns of deindustrialization. Over the past two decades, critical supply chains in electronics, pharmaceuticals, and renewable energy technologies have migrated abroad, leaving the U.S. strategically dependent on foreign producers. The challenge is not simply one of restoring manufacturing jobs but of fostering innovation and competitiveness in sectors that underpin future growth. Policies aimed at reshoring advanced manufacturing, investing in renewable energy infrastructure, and supporting technological research are therefore essential not only for economic sustainability but also for national security.

A second implication relates to fiscal sustainability. Spain's repeated bankruptcies illustrate the limitations of financing imperial ambitions through external wealth. The U.S. faces a similar tension as interest payments on its $36 trillion debt now consume nearly one-fifth of federal revenues (Congressional Budget Office, 2024; Cebula et al., 2025). With entitlement spending, defense commitments, and debt servicing competing for finite fiscal resources, the scope for discretionary investment is narrowing. Fiscal sustainability requires a rebalancing of priorities: restraining unfunded military commitments, reforming entitlement programs for long-term viability, and restoring progressivity to the tax system. Without such measures, the U.S. risks sliding into a cycle of borrowing that erodes both its economic resilience and geopolitical credibility.

A third implication concerns the equity and distribution of monetary policy. Post-2008 liquidity injections disproportionately benefited financial markets, inflating asset prices while having little impact on raising wages or stimulating broad-based consumption. This divergence contributed directly to widening inequality and political polarization. A more sustainable monetary strategy would channel liquidity into productive uses—financing infrastructure, small business lending, and wage growth—rather than concentrating benefits in asset markets. Such policies would require coordination between monetary and fiscal authorities, as well as mechanisms to ensure that credit creation supports productive rather than speculative activity (Rodrik, 2011).

Finally, the geopolitical dimension reinforces the urgency of reform. It is noted that Trump's tariff wars and unilateralism should be understood not as aberrations but as symptoms of structural decline.

A declining hegemon, unable to sustain its leadership through economic and institutional legitimacy, often turns to coercive strategies. The shift from cooperative leadership to confrontational policies is a hallmark of imperial overstretch. For the U.S., the challenge lies in avoiding a trajectory where domestic vulnerabilities force reactive foreign policy that accelerates rather than mitigates decline. A sustainable hegemonic posture requires maintaining alliances, investing in cooperative institutions, and projecting stability grounded in economic strength rather than coercion (U.S. Congressional Budget Office, 2023).

Taken together, these implications suggest that the U.S. still retains the capacity to avert a Spanish-style decline. Unlike Spain, it possesses deep capital markets, advanced technological sectors, and the privilege of being the dollar's reserve currency. However, these advantages should not foster complacency. Without industrial renewal, fiscal discipline, equitable monetary policy, and restrained global commitments, the parallels with Spain become increasingly instructive. Monetary abundance can delay decline, but it cannot indefinitely conceal the structural weaknesses at the heart of American power.

8 Conclusion

The comparison between Habsburg Spain and the contemporary United States demonstrates the enduring dangers of sustaining great-power status based on unearned or artificially generated wealth. Spain's dependence on bullion and America's reliance on financialized liquidity reveal a shared paradox: external wealth can extend imperial reach in the short run but ultimately undermines long-term resilience when it displaces productive renewal, encourages fiscal recklessness, and sustains commitments beyond domestic capacity.

At the theoretical level, the Quantity Theory of Money provides at best a partial lens. It can explain specific price dynamics, but it cannot account for deindustrialization, fiscal insolvency, or the political transformations that accompany imperial decline. More robust frameworks—such as Keynesian liquidity preference, Post-Keynesian endogenous money, and political economy approaches like imperial overstretch and Dutch Disease—are required to capture the structural dimensions of decline. In this respect, the Spanish and American cases both illustrate the limits of monetary determinism and the need to situate inflationary episodes within wider processes of political economy.

The U.S. experience after 2008 also demonstrates that the consequences of monetary expansion are profoundly distributional. By disproportionately benefiting asset holders, quantitative easing widened inequality, fostered political polarization, and created fertile ground for populist mobilization. The rise of Trump's tariff wars and unilateralism is not an aberration but a symptom of deeper vulnerabilities, much as Spain's imperial overreach reflected its inability to reconcile external wealth with a weakened domestic base. Economic fragility and political dysfunction are mutually reinforcing, accelerating the erosion of hegemonic legitimacy.

However, history is not deterministic. Unlike Spain, the U.S. retains several unique advantages: its role as a reserve currency, deep capital markets, technological leadership, and the capacity for institutional adaptation. Whether these advantages are squandered or leveraged depends on political will. The lessons from Spain are clear. Industrial renewal must replace reliance on financialized capital. Fiscal discipline must temper debt accumulation and interest burdens. Monetary policy must prioritize equity and productive investment over asset inflation. Moreover, global leadership must rest on cooperative institutions rather than coercive unilateralism.

If these lessons are ignored, the U.S. risks repeating Spain's trajectory: a power sustained by temporary abundance but hollowed out by structural weakness. If embraced, they provide the possibility of renewal. The task is not to prevent history from repeating itself in exact form—circumstances differ—but to recognize recurring patterns of decline and to act before they become irreversible. Further research might extend this comparative approach to other cases of hegemonic transition, such as Britain's post-World War II decline, to deepen our understanding of how great powers can either adapt or succumb to the pressures of imperial overstretch.

Data availability statement

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

Author contributions

MSB: Investigation, Software, Supervision, Formal analysis, Resources, Writing – review & editing, Data curation. MTB: Visualization, Conceptualization, Software, Methodology, Funding acquisition, Writing – original draft, Supervision, Project administration, Data curation.

Funding

The author(s) declare that no financial support was received for the research and/or publication of this article.

Conflict of interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

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