Did the huge amount of Gold that the Spanish were shipping from South America and central America to Spain during the 16th and 17th century, cause so much inflation that Gold became virtually worthless as there was so much of it? or is this a myth?
Second question, where did all of that Gold go?
What essentially happened was that the Spanish became importers as opposed to exporters. Spain was so wealthy, that they simply paid for all of the goods they required from other European nations including textiles, weapons, ships even. Spain would simply buy it since they had enough wealth to outsource any internal development. This eventually led to their downfall as well, because at the turn of the industrial revolution Spain was so far behind the rest of Europe in terms of industry that they lost a lot of their stature and prestige.
I wouldn't say it became worthless, because they were using it to purchase all of their needs and the rest of Europe was more than happy to provide those services for Spain, but it eventually did lead to stunting the advancement of the nation itself. However, I am not an export in economics, so it may have had a larger economic affect than I am aware of