Upvote:1
It is worth refuting the assumption made by OP that the European money supply in 1763 was solely specie, quoting from the conclusion of The Seven Years War and the Old Regime In France: The Economic and Financial Toll, by James C. Riley.
It is true that this war, like other old regime wars, temporarily reversed the flow of specie and changed the composition of the money stock, enlarging the portion in paper and cutting the part in specie. After the war, however, the specie stock quickly regained its prewar level. And in this instance much of the paper put into circulation during the war remained in circulation, without the larger overall money supply leading to immediate inflation. Only in 1766 did prices begin to rise, and then the cause seems realβharvest shortfallsβrather than monetary.
Further, from The Price of Empire: Britain's Military Costs During the Seen Years War by Jeremy Land (2010) we find:
In the 16th century, monarchies started to utilize various forms of public debts more widely, for example in the form of rentes in France. Yet, it was the birth of the consol in Britain that marked the beginning of the history of modern public debt. Consols were redeemable at par but otherwise perpetual, enabling the government to raise large amounts of capital in a crisis situation. Ultimately, a nation also had to introduce other institutional and organizational innovations, such as stock markets and central banks, to be able to tap into its financial resources more effectively. This Dutch/British model became the cornerstone for the emerging fiscal states, and the British system of public debt was emulated throughout the Western world in the 19th century.