scholarly journals The Sustainable Debts of Philip II: A Reconstruction of Castile's Fiscal Position, 1566–1596

2010 ◽  
Vol 70 (4) ◽  
pp. 813-842 ◽  
Author(s):  
Mauricio Drelichman ◽  
Hans-Joachim Voth
Keyword(s):  
Sixteenth Century ◽  
Early Modern ◽  
Sovereign Debt ◽  
Archival Data ◽  
Short Term ◽  
Philip Ii ◽  
Debt Crises ◽  
Liquidity Crises

The defaults of Philip II have attained mythical status as the origin of sovereign debt crises. We reassess the fiscal position of Habsburg Castile, deriving comprehensive estimates of revenue, debt, and expenditure from new archival data. The king's debts were sustainable. Primary surpluses were large and rising. Debt-to-revenue ratios remained broadly unchanged during Philip's reign. Castilian finances in the sixteenth century compare favorably with those of other early modern fiscal states at the height of their imperial ambitions, including Britain. The defaults of Philip II therefore reflected short-term liquidity crises, and were not a sign of unsustainable debts.

The Sustainable Debts of Philip II

2017 ◽  
Author(s):  
Mauricio Drelichman ◽  
Hans-Joachim Voth
Keyword(s):  
Sixteenth Century ◽  
Strong Evidence ◽  
Military Expenditure ◽  
Debt Service ◽  
Fiscal Sustainability ◽  
Short Term ◽  
Systematic Analysis ◽  
Philip Ii ◽  
Long Run

This chapter addresses the sustainability of debt. A systematic analysis based on the International Monetary Fund's (IMF) methodology to evaluate fiscal sustainability shows that Castile was able to service its debts in the long run. While liquidity was scarce during periods of intense warfare, years of relative peace brought large surpluses. The data collected from Castile's annual fiscal accounts produced new yearly series of revenue, military expenditure, short-term debt issues, and short-term debt service. The resulting database spans a full 31-year period—enough to employ modern quantitative techniques. This analysis provides strong evidence that Castile's fiscal position in the second half of the sixteenth century was on a solid footing. The chapter then assesses whether the events that led to major downturns in Castile's financial fortunes could have been anticipated.

Lending to the Borrower from Hell

2017 ◽  
Author(s):  
Mauricio Drelichman ◽  
Hans-Joachim Voth
Keyword(s):  
United States ◽  
Sixteenth Century ◽  
Sovereign Debt ◽  
Risk Sharing ◽  
The United States ◽  
Philip Ii ◽  
Loan Contracts ◽  
The Right ◽  
Intelligent Model ◽  
New Evidence

Why do lenders time and again loan money to sovereign borrowers who promptly go bankrupt? When can this type of lending work? As the United States and many European nations struggle with mountains of debt, historical precedents can offer valuable insights. This book looks at one famous case—the debts and defaults of Philip II of Spain. Ruling over one of the largest and most powerful empires in history, King Philip defaulted four times. Yet he never lost access to capital markets and could borrow again within a year or two of each default. Exploring the shrewd reasoning of the lenders who continued to offer money, the book analyzes the lessons from this historical example. Using detailed new evidence collected from sixteenth-century archives, the book examines the incentives and returns of lenders. It provides powerful evidence that in the right situations, lenders not only survive despite defaults—they thrive. It also demonstrates that debt markets cope well, despite massive fluctuations in expenditure and revenue, when lending functions like insurance. The book unearths unique sixteenth-century loan contracts that offered highly effective risk sharing between the king and his lenders, with payment obligations reduced in bad times. A fascinating story of finance and empire, this book offers an intelligent model for keeping economies safe in times of sovereign debt crises and defaults.

Philip ii of Spain and His Italian Jewish Spy

2017 ◽  
Vol 21 (4) ◽  
pp. 318-342
Author(s):  
Flora Cassen
Keyword(s):  
Sixteenth Century ◽  
Early Modern ◽  
Jewish Identity ◽  
North Africa ◽  
Information Networks ◽  
Intelligence Agency ◽  
Philip Ii ◽  
Secret Information ◽  
History Of ◽  
Jewish Families

A bitter conflict between the Spanish and Ottoman empires dominated the second half of the sixteenth century. In this early modern “global” conflict, intelligence played a key role. The Duchy of Milan, home to Simon Sacerdoti (c.1540-1600), a Jew, had fallen to Spain. The fate that usually awaited Jews living on Spanish lands was expulsion—and there were signs to suggest that King Philip ii (1527-1598) might travel down that road. Sacerdoti, the scion of one of Milan’s wealthiest and best-connected Jewish families had access to secret information through various contacts in Italy and North-Africa. Such intelligence was highly valuable to Spanish forces, and Philip ii was personally interested in it. However, this required Sacerdoti to serve an empire—Spain—with a long history of harming the Jews, and to spy on the Ottomans, widely considered as the Jews’ supporters at the time. This article offers a reflection on Simon Sacerdoti’s story. Examining how a Jew became part of the Spanish intelligence agency helps us understand how early modern secret information networks functioned and sheds new light on questions of Jewish identity in a time of uprootedness and competing loyalties.

The Making of the Indebted State

2019 ◽  
pp. 84-94
Author(s):  
Jerome Roos
Keyword(s):  
Fiscal Policy ◽  
Early Modern ◽  
Sovereign Debt ◽  
Early Modern Period ◽  
Sovereign Default ◽  
Philip Ii ◽  
International Lending ◽  
Modern Period ◽  
Financial Power ◽  
Distributional Conflicts

This chapter illustrates a number of basic points that will help contextualize the postwar decline in the incidence of sovereign default by setting this development against a broader historical canvas. It begins by locating the origins of financial power firmly within the state's structural dependence on credit, which has historically given rise to a powerful creditor class. Then, it shows how sovereign debt repayment has always been a highly contentious affair from the very beginning, regularly resulting in intense distributional conflicts between creditors and taxpayers, and protracted power struggles over fiscal policy and democratic representation. Finally, it draws on two early-modern examples—Genoese lending to King Philip II of Spain and the development of the Amsterdam capital market—to show how international lending was made possible in the early-modern period despite the regular recurrence of default and the contested nature of repayment.

Risk Sharing with the Monarch

2017 ◽  
Author(s):  
Mauricio Drelichman ◽  
Hans-Joachim Voth
Keyword(s):  
Sovereign Debt ◽  
Risk Sharing ◽  
Cash Flows ◽  
Short Term ◽  
Philip Ii ◽  
Debt Accumulation ◽  
Different Types ◽  
Institutional Solution

This chapter analyzes the role of contingent scenarios and nature of the defaults. Over the last 800 years, many periods of debt accumulation have been followed by default. Despite these disruptions, the market for sovereign debt did not disappear. At least, in the case of asiento lending to Philip II, excusable defaults were an important factor. Studying the loan documents directly, the chapter shows that a significant share of short-term loans contained contingency clauses. It then explores the different types of loan modifications along with their impact on cash flows and loan maturity. These modifications allowed effective risk sharing between king and bankers—an institutional solution that offered many of the desirable properties that contingent debt would have today.

A New World Order: the Spanish Campaign for Precedenge in Early Modern Europe

2002 ◽  
Vol 6 (3) ◽  
pp. 233-264
Author(s):  
Michael J. Levin
Keyword(s):  
Sixteenth Century ◽  
Early Modern ◽  
New World ◽  
World Order ◽  
Early Modern Europe ◽  
New World Order ◽  
Philip Ii ◽  
Charles V ◽  
Modern Europe

AbstractDuring the period 1558-1566, a major conflict erupted between Spanish and French ambassadors in Rome over the issue of national and monarchical precedence. This conflict reflected confusion about the transition of power between Charles V and Philip II and, more importantly, Spain's newfound sense of its greatness and destiny in the sixteenth century. Spanish ambassadors waged a propaganda campaign to try to change the accepted ranking of European crowns, with the Spanish Habsburgs moved to the top, but in the end their efforts failed. This failure exposes the limits of Spanish power, especially in Italy, where they have traditionally been considered dominant in this period.

FINANCIAL REPORTING AND STEWARDSHIP ACCOUNTING IN SIXTEENTH-CENTURY SPAIN

1986 ◽  
Vol 13 (2) ◽  
pp. 65-76 ◽  
Author(s):  
Patti A. Mills
Keyword(s):  
Sixteenth Century ◽  
Early Modern ◽  
Financial Reporting

This paper examines an early modern contribution to the literature on stewardship accounting, the Tratado de Cuentas or Treatise on Accounts, by Diego del Castillo, a sixteenth-century Spanish jurist.

Sign in / Sign up

Export Citation Format

Share Document