Recently I had the opportunity to read some letters from the Napoleonic period in Westphalia. Now I am curious, how special such documents from this era are, and how much information from say the 16th century is forever lost due to lack of surviving primary sources. How much does the historical understanding degrade from proven facts to educated guesses going back in time?
Well, with regards to the quantity the German archival situation doesn't present itself as radically different than everywhere else: The later you get, the more sources you will be able to work with. You can see this with the statistics given by historical bibliographies. The British Library's Incunabula Short Title Catalogue numbers some 28,000 incunabula editions, i.e. books published between 1452 and 1500. Even there you can see a rapid growth in numbers: The Catalogue numbers on 51 titles/editions in the time from 1452-1560 vs. 13,004 in the 1490s. The VD16 catalogue on the other hand aims to record all prints published in German-speaking Europe throughout the 16th century, and it already arrived at about 100,000 items. VD17 and VD18 cover the following centuries and as of now catalogue some 300,000 and 600,000 items, respectively - and I know for a fact that substantial amounts of literature haven't been included yet.
The same applies to non-printed records. I don't have any numbers on hand, but I know that generally speaking, archives carry way more documents from the 18th century than from the 16th or even 17th. This is not only because more stuff got published (although that is probably the main contributor), it is also because damage from war, flooding, fire, mould or sheer neglect obviously gets more likely as time goes on.
This development wasn't uniform, of course. This graph shows the number of prints published in Germany and covered by VD16&17 throughout the years, and you can see a sharp dip during the 30 Years' War as well as notable spikes e.g. during the Reformation. External influences can drastically change the archival situation: Almost all extant records of the Prussian War Archive got destroyed during allied air raids in World War II and many ecclesiastical archives suffered large losses during early 19th century secularisation, for example.
As for the quality: That's hard to judge, really. Depending on what you want to know as a historian, different sources can have different a different value. Napoleonic-era letters might be very interesting indeed, but if my aim is to research, say, the economic situation of Tyrolean farmers in the years leading up to the 1848 revolution, then letters from Westphalia probably won't be of much use to me. Of course, some sources are more unique than others, but that doesn't necessarily translate into greater historical value either.