Lending to the Borrower from Hell: Debt, Taxes, and Default in the Age of Philip II (The Princeton Economic History of the Western World)

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Lending to the Borrower from Hell: Debt, Taxes, and Default in the Age of Philip II (The Princeton Economic History of the Western World) Page 38

by Mauricio Drelichman


  Fugger, Hans, 95, 169–70

  Fugger, Marx, 169

  Galletto family, 183–86, 184t

  Garnica, Francisco, 168n47

  GDP: bonds indexed to, 213; effect of defaults on, 139, 213; estimates of for Castile, 117–18, 123–24; growth of and resource curse, 263–69, 264f, 265f, 266t; and IMF sustain-ability standard, 120–22; international comparisons, 43, 125, 248–52, 248t, 263–64, 264f; ratio of debt to (generally), 23, 32–33, 32t, 138–39, 213. See also debt-to-GDP ratio

  Gelabert, Juan E., 101

  Gennaioli, Nicola, 262

  Genoese bankers: animosity against, 133; attempted transfer stop by, 37, 143, 151–59, 152t, 171, 274; attempts to undermine cohesion among, 167; co-lending among, 160–66, 166f, 240; control of the market for juros by, 92, 97; financial innovations by, 89, 96–98; intermarriage among, 165–66, 166f; network of, 36, 134–35, 160–66, 162f, 162t, 163f, 166f; profitability of lending to Philip II by, 183–86, 184–185t, 207; rates of return of, 188–90; and swapping of juros to increase return of asientos, 98. See also asientos; bankers; juros; lending to Philip II; network lending; transfer stop; individual families

  Gentil family, 145–46, 161, 162f, 165

  German bankers: and Charles V, 93, 182; and mercury mines at Almadén, 255; Philip II settling old debts with, 95, 181–82; rates of return earned by, 188–90; as repeat lenders, 149; and transfer of funds during suspension, 152–53. See also Fugger (Fucar) banking dynasty; Welser banking dynasty

  Germany, 26–27, 137; military enrollment of (1914), 26; as nation-state, 30; princes of, 52, 52n18. See also Charles V (Charles of Habsburg, Carlos I); German bankers; Holy Roman Empire

  Gersovitz, Mark, 139–40, 142, 144t

  Ghent, Pacification of, 63, 102–3, 151, 159

  Ghent, revolt of, 61–63

  Gillard, Lucien, 96n35

  Giráldez, Arturo, 267

  gold, 53–56, 68, 85, 211, 266t

  Golden Bull, 51–52

  González de Cellorigo, Martín, 263

  Gopinath, Gita, 138–39

  Grafe, Regina, 68, 73n53, 259, 260n22, 280

  Granada, 39, 76, 85, 91, 206

  Grande y Felicísima Armada. See Armada, Invincible

  Gravelines, Battle of, 58, 65

  Great Britain. See Britain

  Greece, 38n76, 135n4, 213

  Grillo family, 146, 161, 162f

  Grimaldo family, 164; and anticipation of default, 239; co-lending and network cooperation by, 161–66, 162f, 166f; as major lenders to Philip II, 146–47; and private negotiations with king, 167

  Grossman, Herschel, 140, 142, 213n3, 231

  Guipuzcoa, 258

  gunpowder and warfare, 26. See also military revolution

  Gustav Adolph of Sweden, 26

  Gutiérrez de Cuéllar, Francisco, 239–40

  Gutmann, Myron, 30n65

  haircuts, 6–7, 32–33, 32t, 111, 182, 191. See also defaults of Philip II; medio general; renegotiation

  Hamburg, 24

  Hamilton, Earl, 87n24, 244–45, 278

  Havana, Cuba, 54, 86–87

  Heim, Carole E., 246n4

  Henry II of France, 58, 60

  Henry IV of Castile, 45–47

  Henry IV of France, 66

  Henry VIII of England, 28, 48, 265, 268

  Henry “the Chaste” of Portugal, 69

  hermandades, 47

  Herrera, Juan de, 22

  Heyn, Piet, 211

  hidalgos, 79. See also nobility, Castilian

  Hispaniola, 54

  Hoffman, Philip, 246, 253n18

  Holland (province of): attempts by Castile to conquer, 127; Rentmeisterbriefe issued by, 129n12; tax revenues collected in, 129, 129n12; value of peace with, 158. See also Netherlands

  Holy League, 19, 57, 60, 62n34, 107

  Holy Roman Emperor, 20, 25, 48, 51–53, 56, 57, 77. See also Charles V (Charles of Habsburg, Carlos I); Ferdinand I of Habsburg; Rudolph II

  Holy Roman Empire, 25, 51

  Horn, Count of, 38n75, 62, 133

  Huascar, 55

  Huayna Capac, 54, 55

  Hundred Years’ War, 28

  Iberian Union, 70–71

  IMF sustainability standard, 35, 106, 120–22

  imperial overstretch theory, 7, 42–43, 71–73, 280

  Inca Empire, 54, 55–56, 85

  income taxes, 28, 261

  Indies: Council of, 68, 76; Crown revenues from (1555–96), 88f, 98, 102, 121, 272. See also Aztec Empire; conquistadores; fleets; Inca Empire; New World; royal fifth (tax); silver

  Inquisition, 48, 81–82

  institutionalist interpretation of history, 42, 246, 279

  insurance, 137; contingent lending as a form of, 218, 234, 241; de facto 39, 140, 277; excusable defaults as a form of, 140; premiums, 220. See contingent lending to Philip II; default (generally): excusable; risk sharing

  interest rates: before and after 1575 default, 234f; and contingency clauses, 217; of juros, 90, 92, 204, 268; and lack of penalties for default, 32t, 33, 279; modification of, 39, 95, 111, 241; and rolling over debt, 97; in sixteenth century, 207f; variation in, 187–88; warfare and, 245. See also asientos; IRR (internal rate of return); juros; MIRR (modified internal rate of return); profitability of lending to Philip II; rate of return

  intermarriage among European royalty, 49, 69

  intermediation services, 194–95, 206; cost of, 11, 96, 192–94, 203–4; Genoese quasi-monopoly over, 160

  Irigoín, María Alejandra, 68, 73n53, 260n22

  IRR (internal rate of return), 175–77. See also MIRR (modified internal rate of return)

  Isabella of Castile, 45–49, 259, 263

  Isabel of Valois (Isabel of the Peace), 60

  Italian Wars, 19, 47, 58–60

  Italy: disbursement of loans in, 147–48t; as nation-state, 30; republics in, 23; revenue from, 107; and Spanish Road, 19, 72. See also Genoese bankers

  Jeanne, Olivier, 214

  Jews, 48, 52, 132–33

  Joanna of Castile (Joanna the Mad), 48, 51, 69

  John of Austria, Don, 63, 156, 159

  Johnson, Simon, 41n79, 50n13, 74n1

  Judice family, 161

  Junta del Decreto, 16–17

  jurisdictional fragmentation, 253–54. See also market fragmentation; state capacity

  juros, 22, 89–94, 92t, 95, 114t; in 1577 medio general, 110; archival records on, 91; as collateral (de resguardo), 98, 110–11, 145, 180, 217; as compensation for seized silver, 103–4; continuous servicing of, 22, 99, 272; de contratación, 95, 110–11; cost of servicing, 114t; forced conversions of, 159n32; in good standing swapped for others of lesser value, 98, 109; lifetime, 90n29, 111, 174–75, 197; origins of, 24n55; outstanding by year, 114t; redeemable, 111; secondary market for, 106, 225; swaps of as part of contingent clauses, 39, 220, 226; swaps of as part of settlements, 17, 111, 196, 204. See also collateral; debt instruments of Crown; debt service

  Kamen, Henry, 72, 278

  Kantorowicz, Ernst, 25

  Karaman, K. Kivanc, 254

  Karnehm, Charles, 169n49

  Kehoe, Patrick, 142, 238

  Kennedy, Paul, 42, 280

  Kingdom, 76. See also Cortes

  The King’s Two Bodies (Kantorowicz), 25

  Kletzer, Kenneth, 140n12; and anarchic environment, 36, 159; and “cheat-the-cheater” mechanism, 36, 141–42, 144t, 170, 171; and intertemporal barter, 167, 213

  Knights Templar, 132–34

  Kovrijnykh, Natalia, 167, 172, 214

  Krugman, Paul, 264

  Lahiri, Amartya, 264

  Landes, David, 279n5

  Lane, Phillip, 138

  Laredo-Antwerp sea route, 96n35

  Leicester, Earl of, 63

  lending moratoriums, 134–37, 141, 166–71, 230; attempts to ship money to Flanders during, 155–58. See also defaults of Philip II; network lending; transfer stop

  lending to Philip II, 9–10, 206–10, 207f, 209f; asiento data on, 144–48, 146
t, 147f, 148t; compared to alternative borrowers, 207–8; contingent and noncontingent, 98–99, 214–20, 216f, 219t; excess returns of compared to 1850–2001, 208, 209f; flexibility of contracts in, 38; by Genoese network, 161–72; history of scholarship regarding, 3–4; knowledge of fiscal position and, 213–14; by multiple lenders, 22, 134, 161–72, 274f; overall profitability of, 37–38, 180–83, 192–94, 274f; profitability of, by family, 183–86, 184t–185t; profitability of compared with other sixteenth-century interest rates, 207f; profitability over time, 190–92, 191f, 192t; retail financing for, 96, 194–206; sustainability of and incentives, 35–37, 161–72. See also asientos; “cheat the cheater” strategy; contingent lending to Philip II; default: excusable; defaults of Philip II; Genoese bankers; German bankers; insurance; juros; Portuguese bankers; profitability of lending to Philip II; Spanish bankers

  Lepanto, Battle of, 15, 19, 60, 117, 126, 243

  Lercaro family, 161, 186

  leverage, risks of, 3

  Levy-Yeyati, Eduardo, 139n11

  liberties (fueros), 258–59

  Lindert, Peter, 33, 136

  linguistic fragmentation, 261–62

  liquidity shocks, 152–54, 157, 204, 213, 220, 225–27, 239, 273

  Lombards, 132–33

  Lomelín family, 145, 161, 164

  London, 64, 253, 260

  long-term debt service. See debt service: of juros

  lordships, sales of, 78n13

  Louis XI of France, 45

  Louis XII of France, 11n8

  Louis XIV of France, 27n59, 74, 257

  Lovett, A. W., 151, 239n30

  Low Countries: debt-service-to-revenue ratio of, 247; and Duchy of Burgundy, 53, 61; expulsion of Spanish troops from, 151–52; Fugger funds transfer to, 157, 168, 170, 171; Spanish Road to, 19, 72; traditional resistance of to outside rule, 61–63; value of victory in, 126–29. See also Dutch Rebellion/Revolt/War (Eighty Years’ War); Flanders; Ghent, Pacification of; Holland (province of); Netherlands; Zeeland

  Macaulay, Thomas Babington, 254

  maestrazgos (military orders), 95

  Magellan, Ferdinand, 68

  Maluenda family, 161, 164, 173–80, 179t, 193

  Manila, 68

  Margaret of Parma, 62

  Marín family, 161, 164

  market fragmentation, 23, 59, 65, 258–61; and growth, 23, 258–61, 280. See also jurisdictional fragmentation; state capacity

  market power, of lenders, 159–60, 170–72

  Mary of Burgundy, 61

  Maurice of Nassau, 63

  Medina, Bartolomé de, 86

  Medina-Sidonia, Duke of, 13, 65, 262. See also Armada, Invincible

  medio general, 6, 32, 110–11, 124–25, 161, 167. See also Compañía del Medio General

  The Mediterranean and the Mediterranean World (Braudel), 3–4, 34n72, 79, 105, 143, 144t, 148, 171, 205, 253, 279

  Mehlum, Halvor, 265

  Mendoza, Bernardino de, 31n67

  Mendoza, Pedro González de, 45

  mercury, 53, 86, 95, 182. See also Almadén, mines of

  Mexico/New Spain, 54–55; 1994–95 crisis in, 238; local administration of, 68; silver extraction in, 86. See also Aztec Empire; Cortés, Hernán; New World

  military revolution, 26–31, and importance of money in winning wars, 31, 262; and use of cannon, 26

  millones. See servicio de los ocho millones (tax)

  mineral-rich countries. See resource curse

  Mirowski, Philip, 246n4

  MIRR (modified internal rate of return), 125, 175–80; by banking family (1566–1600), 183–86, 184t–85t; by contingency type, 187f, 224t; correlates of, 186–89, 187f, 188f, 189t, 236. See also debt service; IRR (internal rate of return); profitability of lending to Philip II; rate of return

  “misma moneda” principle, 3, 16, 204

  mita (forced labor), 89

  Moctezuma, 54

  Moene, Karl, 265

  Mommsen, Theodor, 133n2

  monarchs: comparative powers of European, 257–61; “consensually strong” position of, 257, 269–70; demesne income of, 24, 28, 74–75, 78, 133; and fate of empires, 245; limits on absolute power of, 74–75; opportunistic defaults by, 36; personal debt of, 24–25; and predation, 253, 278–79; and putting of enemies to death, 38n75, 78, 132–33, 133n2; refusal of to pay back debts, 35–36, 132. See also absolutism; property rights; state capacity

  monasteries, 28, 74, 80

  Monroe Doctrine, 138. See also Roosevelt Corollary

  Mook, Battle of, 127–28

  Morineau, Michel, 67n43, 87n25

  Morisco rebellion, 39, 85n22, 91

  Morton, Peter, 33, 136

  Moura, Cristóbal de, 13–15

  Mousnier, Roland, 74, 257

  Mühlberg, Battle of, 52, 57

  mutinies in Flanders: and attempted transfer stop, 37, 143, 151–59, 152t, 171, 274; death of Requesens and, 37, 62, 156; determinants of, 154t; frequency of in the Army of Flanders 153, 155; loss of life during, 155; Sack of Aalst, 159; Sack of Antwerp, 37, 63, 151, 155–56, 156f, 159; start of 1575 mutiny after siege of Zierikzee, 155; as a form of wage bargaining, 153. See also Conklin, James; Council: of State of Flanders; transfer stop

  Naples, 53, 258

  Napoléon, 28, 43

  national accounting, 21, 112–13. See also fiscal position of Philip II

  Neri, Enrica, 111

  Netherlands: and Armada, 64, 108; comparative fiscal indicators of, 247–49, 248t, 279; counterfactual of victory in, 128–29; and “Dutch disease,” 264; as merchant empire, 70; withdrawal of Spanish troops from, 62. See also Dutch Rebellion/Revolt/War (Eighty Years’ War); Holland (province of); Low Countries; Zeeland

  network lending, 36, 160–66, 162f, 163f, 166f, 171; and sustainability of debt, 161–65. See also bankers; “cheat-the-cheater” strategy; lending to Philip II

  New Granada, 56, 68

  New Spain. See Mexico/New Spain

  New World: early exploration of, 53–56, 66; intercolonial transfers in, 73n53; rise of bureaucracy in, 66–69; salaries in, 68; and silver trade, 20, 63, 85–88, 229, 263; and treaty of Tordesillas, 46. See also Aztec Empire; conquistadores; Inca Empire; Indies; Portugal; silver

  nobility, Castilian, 47, 51–52, 70, 78–79, 81. See also hidalgos

  noche triste, 54. See also Cortés, Hernán

  Nonsuch, Treaty of, 63

  Non sufficit orbis, 243

  North, Douglass, 41n79, 278–79

  O’Brien, Patrick, 30n66, 246, 249

  Oestrich, Gerhard, 257

  Olivares, Count-Duke of, 257–58

  opportunistic defaults. See defaults: opportunistic

  Ottoman Empire: and government debt, 23; response to westward push of, 72–73; tax revenue of, 28; and War of the Holy League, 19, 60. See also Lepanto, Battle of

  Palencia, Alonso de, 45

  Pamuk, Sevket, 254

  Panizza, Ugo, 138, 139n11, 280n6

  Parker, Geoffrey: on Armada, 64, 126–27; on Army of Flanders’s mutinies, 153–55; on costs of Battle of Lepanto, 60n31; on domino theory of Spanish imperial policy, 72, 209; on military revolution in Europe, 26–31; on Philip’s erratic behavior, 62n34; and Philip’s military strategy, 232; on Sir Francis Drake’s raid on Santo Domingo, 243

  Parma, Duke of, 63–65, 128, 212. See also Armada, Invincible; Dutch Rebellion/Revolt/War (Eighty Years’ War)

  patio process, 86

  payment stops. See defaults of Philip II

  peace dividend, 117, 126–29

  pechos (tax), 82

  Peri, Giovanni Domenico, 16n27, 205

  prelados y cabildos (tax), 217

  perpetuities. See juros

  Persson, Torsten, 256. See also state capacity

  Peru, 20, 54, 55, 68, 86

  Peruzzi family, 24

  Philip I of Castile (Philip the Handsome), 48, 69

  Philip II, 59f; accession of to Castilian crown, 57–60, 95; accession of to Portuguese throne, 49, 69–70; aims of in Low Count
ries, 155–59; bureaucracy under, 21–23; and the Catholic Church, 48; common views of, 143, 148, 271–72; and Cortes of 1575, 77; debt/default of compared to general pattern, 31–34, 32t; documents and data of, 21–23; European conflicts under, 56–66; financial sophistication of, 40–41, 57; historical reputation of, 3–4, 155n29, 278–79; as king consort of England, 65; management of Armada by, 13n16, 65–66; military expenditures of, 11, 19–20, 66, 106–8, 108f; military strategy of, 58–60, 71–73; no defaults on long-term debt by, 22; nonmilitary expenditures of, 115; as “the Prudent King,” 19, 57; reassessment of, 272–77; territories and possessions of, 19–20, 56, 66–71; treatment of bankers by, 105, 133, 143, 173–210; victories of, 19; work habits of, 13, 57. See also contingent lending to Philip II; lending to Philip II; sustainability of debt of Philip II

  Philip III of Spain, 66, 99

  Philip IV of France, 132–34, 148

  Philip IV of Spain, 22n49, 73, 101

  Philip V of Spain, 49

  Philippines, 68–69

  Pichenotti Brothers (Lazaro and Benedetto), 11–12, 18, 194, 203–5, 208. See also Di Negro-Pichenotti partnership

  Pinto, Brian, 120

  Pitt, William, 261

  Pizarro, Francisco, 54, 55. See also conquistadores

  playing card monopoly, 255

  Poland, 30, 253, 255–56f

  poll taxes, 82. See also state capacity; taxes

  population losses from war, 30

  Portes, Richard, 136

  Portugal: decline of Asian trade of, 70–71; and the “Invincible Armada,” 13, 70; Philip II’s invasion of, 19, 49, 70, 243; rebellion and independence of, 244, 258, 260; royal succession in, 45–46, 49, 69–70; and treaty of Tordesillas (1494), 67; union of Castile with, 45–46, 70–71, 259. See also Armada, Invincible; Iberian Union; Philip II; Portuguese bankers

  Portuguese bankers, 148, 196, 208, 280

  Posa, (Marquis of): as fictional character in Friedrich Schiller’s Don Carlos, 14n18

  Potosí, 56, 86, 263

  Poza (Marquis of), 12, 14; and debt from Cádiz defeat, 14; pressure placed on bankers by, 12; as an example of the importance of access to the ruler, 14n18; on the Genoese bankers, 133; initial plans of for stopping payments, 14–15; overestimation of debt by, 17, 21; relationship of with bankers, 14–15, 133

  Prados de la Escosura, Leandro, 7, 123–24, 124t, 280

  Prebisch, Raúl, 263

  primary surplus, 113, 117–19, 119f, 120–22, 249–52, 251f

  principal reductions, effect on profitability, 124–25, 180–83. See also profitability of lending to Philip II; renegotiation

 

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