~ Las Reformas Pelagianas ~
Part II:
- "Gobernar es prestar" -
While the Castilian middle class of the early 16th century and its native industries were underdeveloped in comparison to much of Western Europe, this was not representative of the financial expertise that was to be found in the kingdom of Castile. Both the craft of handling money and the theorization of its principles and usage enjoyed a healthy deal of attention from the scholarly and bourgeois circles of not only Castile, but also of Portugal and Aragon. The robustness of Spanish fiscal science is most evident in the ways it was able to overcome both the age-old restrictions left over from the increasingly outdated Medieval economic model as well as the new, mind-boggling problems that were emerging with the advent of globalized trade and easier access to precious metals. Perhaps the most influential early Spanish statesman to attempt a solution to these new problems was Francisco de los Cobos y Molina, the secretary and treasurer of the Crown of Castile from 1526 to 1548.
While he is more popularly known for his patronage of the arts - sponsoring and even importing artists such as Titian - Cobos also bears the distinction of having been the first Spaniard in a policy-making position to address the foreboding trends in the Spanish economy that were mounting with troubling speed during the 16th century. Owing to his intellect and the status of his uncle, Diego Vela Allide, as treasurer and secretary to Queen Isabel, Cobos had steadily risen through the ranks of the royal bureaucracy, ultimately being tapped by the powerful Cardinal Cisneros himself to receive the position of royal secretary in 1517.
"El Gran Contador"
Francisco de los Cobos y Molina, Marqués de Camarasa
Much of the extensive bureaucratic system that came to define the government of Early Modern Spain was Cobos’ doing, with the organization of different advisory councils begun at his behest, starting in 1538 with the creation of the Council of State (Consejo de Estado). This council, like all the others, was loose in structure and initially consisted of the Archbishop of Toledo, the Dukes of Alba and Béjar, and the Bishop of Jaén, together with the royal confessor and Cobos himself. The most important of the new councils built by Cobos, however, would be the Council of Finance (Consejo de Hacienda), established later that same year. Cobos also pushed for the creation of permanent repositories for bureaucratic records, choosing the castle of Simancas (10 kilometers from Valladolid) as the archive for the Council of Castile as well as the councils of State and Finance. Gradually, the conciliar system that emerged under Juan Pelayo - in tandem with the existing councils of Castile, Aragon, Portugal, and the Indies - provided the Spanish monarchy with an understanding of its subjects and the territories containing them that was without equal in any other national administration at the time. If governance is to be measured by the extent of discussion concerning national problems and the amount of paper expended trying to remedy them, then the realms of Spain were the most well-governed in the world. Despite the corruption that went unchecked amongst royal officials and the Byzantine intricacy that would inevitably weigh it down, the expanded bureaucracy of Cobos’ reforms allowed for Castile’s deficiencies - and by extension the deficiencies of Spain - to be documented more thoroughly and consequently receive a more intensive focus than before.
What was slowly and dimly revealed by this improved focus was unsettling. As it became more apparent that the quantity of American silver being imported was incalculably huge, it became equally apparent that its influx was doing relatively little to improve the material well-being of Spain, or even of Castile in particular. Even the Spanish monarchy, which collected as much as 40% of the treasure carried across the Atlantic through a variety of taxes and debt collections, was practically in a state of penury by the late 1530s. What had also become noticeable in the 1530s was that prices for basic commodities had already begun to be affected by the casual introduction of an ocean of precious metals, outpacing any increase in wages. Meanwhile, departure for the colonies, intermittent outbreaks of plague, and chronic warfare had all meant that Castile’s population - and thus its number of taxable heads - had only increased marginally. Despite climbing expenditures, the stream of tax revenue from the lower classes had not kept pace at all, with freehold farmers showing the worst returns. “I fear as though in our greed the golden apple that has been given us may turn to mud,” remarked Cobos in a letter to his king in 1539.
Initially, the most worrying aspect of the influx of precious metals into the Crown's treasury was not one of quantity, but of retention. Juan Pelayo could do as his father had and pour American gold into the hands of innumerable architects, laborers, and goldsmiths to construct and re-fashion colossal, ornate churches, or pay off droves of soldiers and sailors to maintain his ever growing empire, all with relative ease and money to spare. As usual, warfare consumed an exorbitant amount of royal funds, with the wars against France and the Turks as well as smaller campaigns and maintenance of military installations in North Africa and in Spanish colonial possessions all taking up no less than 70% of the Crown’s revenue from 1520 to 1575. Likewise, while there was no doubt that the Lord would surely repay the generous donations the Crown had made to the Church - in this life or the next - it also seemed that the gold used to adorn the many altars and crucifixes was content to remain fastened in place. However, the change left over was still profuse, and the Spanish monarchy found itself with a freedom to spend rarely seen before in history, and hardly ever seen again. Yet this freedom was being wasted, in Cobos’ opinion, by careless, wasteful spending policies.
The main altar of the Cathedral of Sevilla, gilded entirely with Inca gold
Even with the Crown capable of taking on seemingly bottomless expenditures, many of its subjects were still suffering while a great number of theoretical solutions were available with just a little monetary assistance. Castilian agriculture remained under intolerable pressure, with the realm unable to feed itself and needing to import gigantic shipments of grain on a regular basis. Similarly, distances across the Iberian peninsula were immense and the terrain was prohibitive, rendering communications poor and transportation costs astronomical so long as the standing road and postal system remained. To give one an idea as to how difficult and expensive overland transportation was in 16th century Spain, it is estimated that the cost to transport spices from Lisbon to Toledo during the reign of Miguel da Paz was higher than the cost to move the spices to Lisbon from their original location in the East Indies - a trip spanning almost 20,000 kilometers.
What Cobos and his protégé successors suggested was a massive investment in infrastructure - something which ended up one of the great successes of Juan Pelayo’s reign. Over multiple periods from 1538 through the 1570s, Juan Pelayo funded the construction of public works on a grand scale not seen since the days of Roman Hispania. Port facilities - quays, piers, breakwaters, warehouses, and drydocks - were planted in coastal towns, with Sevilla, Lisbon, and Valencia receiving the largest expansions. As service to the Church was, of course, the primary commitment for the Crown, innumerable existing convents, monasteries, and church structures were renovated and expanded, and grand and sumptuous new chapels and cathedrals were erected and lavishly decorated in the grave yet exuberant style peculiar to Early Modern Spain. However, this also meant a great many new hospitals and almshouses - which required the administration of a religious order - were granted charters and constructed. Many improvements to Spanish infrastructure under Juan Pelayo also alleviated the issues of low population growth and insufficient crop yields, with many irrigation projects finally given their much needed capital and many wells, aqueducts, and cisterns restored or built anew.
Despite all this, Juan Pelayo’s most lasting infrastructural contribution was the system of new roads paved under his rule. Juan Pelayo laid down more roads in Spain than any of his predecessors - whether Christian, Islamic, Gothic, or Roman - dwarfing even the ambitious north-south highways funded by his father. Gradually, the three kingdoms of Spain began to experience an across the board population boom, which peaked in the 1560s and left the Iberian Peninsula supporting between 13 to 15 million inhabitants by the end of the century. Improved irrigation and the consequent increase in cereal production reduced the severity of the occasional subsistence crisis, greater access to fresh water and sick care in towns and cities brought about a period of unusually few outbreaks of disease, internal migration - the greatest motor of population growth in Early Modern Europe - accelerated with the planting of more roadways, and endless construction projects kept royal silver flowing into the pockets of the most fertile of the lower classes - menial laborers - who enjoyed enough financial security to sire and care for a few extra children.
Roadways constructed during the reigns of Miguel da Paz and Juan Pelayo (1517-1579)
(Blue: under Miguel Da Paz, Orange: under Juan Pelayo,
Black circles: important towns and cities linked)
These administrative reforms and spending programs spearheaded by Cobos were intrinsically mercantilist - devised with the intention of benefiting the kingdom of Castile rather than out of an enthusiasm for safeguarding against the unprecedented economic problems that were hanging forebodingly over the Iberian Union. Cobos, like any good Castilian, was conscious of the rampant exploitation of his homeland by indifferent foreigners, and wished to see the tables firmly turned. Many of Cobos’ investments and changes were beneficial in both the long-term and short term, such as his decision to favor native merchant families in the distribution of privileges. While the Italians may have dominated the southern and eastern parts of the Iberian peninsula, the rest of Spain’s trade links were still mostly in the hands of able Spanish entrepreneurs, with the northern half of Castile in particular holding some very influential native banking families such as the Maluenda, Salamanca, Miranda, and - most importantly - the Ruiz of Medina del Campo, who were given the exclusive rights to the cinnabar mines of Almadén.
Of great significance was Cobos’ decision to reform the workings of the Casa de Contratación (House of Trade), 16th century Castile’s most important mercantilist instrument. The Casa was originally established as a crown agency intended to administer every facet of overseas trade - the collection and processing of all tariffs, colonial taxes and the quinto real (the “royal fifth” of all bullion mined in the Americas), the chartering of vessels, the commissioning and certification of pilots and navigators, and the always underappreciated task of expanding and correcting maps and charts all fell under the purview of the Casa de Contratación. But for an institution intended to oversee virtually the entire outward projection of Castilian interests, the Casa was woefully insufficient. By the 1530s it was still highly disorganized considering its enormous responsibilities; a loose web of cartographers, conquistadors, shipping magnates, and bureaucrats who primarily served to connect the much more tangible Council of the Indies and its legislative powers with the also very tangible merchant guilds of Sevilla - the latter of which later coalesced under royal oversight into the “Consulado de Mercaderes” in 1539. While technically located in Sevilla, the Casa de Contratación itself possessed no physical headquarters until 1552, when they were housed in a new building that replaced the old
Casa Lonja de Mercaderes in Sevilla. The Casa seemed to perform its duty with little to no hiccups, it was not devised for long-term, intensive management of a sprawling, complicated overseas empire, and more closely resembled an auction house where the rarities of Spanish America were parceled off with worrying speed.
The Casa Lonja, to the right of the Cathedral of Sevilla
Part of the difficulty in consolidating or aggrandizing the Casa de Contratación lay with the fact that at a time when the other European powers were beginning to consider looser approaches to industrial organization, Spanish industry was growing more rigid. As mercantile and artisanal guilds were extremely important to the economic life of the Crown of Aragon and enmeshed in its style of governance, the status of guilds in Castile had improved due to Fernando II of Aragon’s influence. The Avís-Trastámara monarchy would be decidedly un-Aragonese in this respect, attempting to pry back Spanish commerce from the stranglehold of guild privileges, with the Revolt of the Germanies being the first example of this. In most areas guild privileges were so impenetrable, however, that modernization of the Castilian and Aragonese economies would have to be achieved through a subtle manipulation of guild practices rather than a suppression of guilds outright. Under Cobos the Casa de Contratación provided the means for this by introducing a bureaucratic network intended to co-opt the Castilian guilds and re-orient them towards a more collaborative approach to their industries. This network involved the grouping of numerous different guilds in important Castilian cities and towns into “consulados,” akin to the Consulado de Mercaderes in Sevilla.
The establishment of a formally approved consulado was sold by the Casa to any chartered towns within the kingdom of Castile for a reasonable fee. In exchange, said towns had their specific interests made more readily apparent to the Casa de Contratación and received bureaucratic assistance in having their goods and services advertised and linked to both domestic and overseas investors - particularly in the highly profitable American markets. After the structure and budget of the consulado was formalized in early 1540, its licenses sold steadily. In the north: in Gijón in 1541, A Coruña in 1549, Pontevedra and Ferrol in 1558, Vigo in 1562, Avilés in 1570, and Santander in 1576; further south: in Córdoba in 1544, Cartagena in 1552, Murcia in 1561, Almería in 1565, and Málaga in 1571; and in the important towns of central Castile: in Valladolid in 1542, Toledo in 1545, Ávila and León in 1548, Astorga in 1561, Ponferrada in 1562, Albacete in 1563, Guadalajara in 1565, and Medina del Campo and Cuenca in 1571. The consulados of the Casa de Contratación were a delicate attempt to mellow out the still-resolute guild system, but they provided the Casa with extensive domestic influence as well as a foot in the door in the business of managing international credit.
However, Cobos’ expanded royal bureaucracy would pay a heavy price for its convenience. One early issue was that many of the executive councils very quickly acquired a narrow minded and clannish character. Those promoted to conciliar positions - especially in the Council of Finance - were very often the progeny of former members, and for many years these promotions required little to no prior experience or university education, ensuring that state bureaucrats would unfortunately be experts in the art of bureaucracy and nothing else. Likewise, while the Councils of State and Finance were technically institutions of the Spanish monarchy rather than of any one Spanish kingdom, for their first two decades they were staffed entirely by Castilians, leaving the administrations of Portugal and Aragon in a comparatively haphazard state. Likewise, Cobos, along with his contemporaries, was certainly diligent in his work and clever with money, but the extent to which he was genuinely interested in economic theory or financial innovation is unsure. Cobos could not, for instance, provide a solution or even an explanation to the most worrisome development of the time: why an investigation begun in 1535 into what effect the wealth of the Americas was having on the kingdom of Castile revealed that the buying power of the silver real - which was almost pure silver - was gently but steadily diminishing.
The seemingly inexorable rise in prices with the continuous injection of precious metals into Castile sparked an important debate amongst the Spanish intelligentsia and bourgeoisie and jumpstarted serious discussion in the field of monetarist theory. By the late 1530s, there was an emergent school of “Iberian monetarism” that was unique to similar schools in the rest of Europe in that it was derived from firsthand experience and was built upon an intellectual tradition distinct from the “New Learning” of the time. Renaissance thought of the kind found in the palaces and urban centers of Italy and France certainly bore an influence on the intellectual atmosphere of the Iberian peninsula, and in certain arenas formed the dominant undercurrent, but Renaissance humanism was something almost completely alien to Spanish thought in the 16th century. Rather, the dominant Spanish school of economic, political, and ethical thought was a revision of Thomistic scholasticism as defined by the preeminent School of Salamanca - particularly by its founding member, the Dominican Francisco de Vitoria, who wrote a great number of treatises on not only theology, but also on jurisprudence and economics.
Martín de Azpilcueta, "Doctor Navarrus"
The first informal member of the School of Salamanca to seriously consider the ill effects of superfluous access to bullion was a certain Martín de Azpilcueta. Navarrese by origin, Azpilcueta had begun to theorize by the early 1530s that “money is worth more when and where it is scarce than when and where it is abundant,” noting that the rapid lowering of the overall value of coinage by superfluity could also cause the cost of necessity goods such as food, labor, and manufactures to skyrocket to grossly unaffordable levels. It was thus catching on amongst the Iberian monetarists that it would be beneficial for Spain to redirect the flow of some of its American treasure to where it can be spent outside of the Spanish economy. Furthermore, with the Crown swiftly becoming the proprietor of what was far and away the largest supply of silver in the world, there were interesting avenues for it to explore in regards to using this peculiar gift to manipulate its opponents, possibly without any violence or even as much as a cross word. To remove specie from Spain for Spain’s sake was an almost absurd notion to those in charge, however. While Cobos had politely urged Juan Pelayo on a handful of occasions to perhaps tuck away some of the Crown’s silver as a rainy day fund, this was not a suggestion tied to any belief that it might be necessary to keep a certain amount of bullion out of the Spanish economy so as to avoid oversaturation and consequent devaluation. The separate spheres of economic theorization and actual economic policy would only meet once an outsider was brought into Cobos’ circle.
- Grilhões de Prata -
This outsider was a lowborn Portuguese administrator by the name of Vicente Adão Ferreira da Lousada. Prior to his appointment to the Council of Finance, Ferreira had had an interesting career: he had arrived in Portuguese Malaca in 1517 as a soldier, spending most of the following 10 years working as the captain-major’s bookkeeper - with a brief interruption spent serving a stint in the same position at Baçaim in India - after which he performed accounting and advisory duties for Portuguese customs stations in Moçambique, Cabo Verde, and the Gold Coast, and participated in diplomatic missions in China, Persia, and Siam, all before being given the office of customs collector for the Casa da Índia (Portugal's counterpart to the Casa de Contratación) in 1532, arguably the most important (and profitable) position afforded to a single person involved in the Portuguese spice trade besides the king himself.
As Ferreira functioned as a frequent liaison between the Portuguese Cortes and the Casa de Contratación, he had met with Francisco de los Cobos on many occasions and Cobos ended up taking him under his wing. Much like Cobos, Ferreira had had to work his way up, and likewise found himself benefiting from an important connection to the sitting treasurer, as Cobos’ mentorship guaranteed him a position as one of the young king Juan Pelayo’s secretaries in 1536, being promoted to the Council of Portugal the same year (after first being awarded the town of Matosinhos as comital title) and to the Council of Finance in 1538 - in part due to stirrings by the Council of Portugal for greater representation of Portuguese interests in the monarchy’s finances. Ferreira is significant, then, in that he was the first true money man to be brought on to the Council of Finance, rewarded his position almost purely due to his financial experience. What further set him apart from Cobos and his fellow councillors was that he was deeply involved with the nascent school of monetarism that had materialized around Martín de Azpilcueta, who had been an instructor at the Portuguese University of Coimbra since 1538.
It is surprising that Ferreira had spent his earlier years in such adventurous enterprises, as Cobos’ later assessment of him reveals a character more at home in a musty archive, poring over endless transaction records with a singular purpose: “He dresses simply, his diet and hygiene are poor and often of a quality unbecoming of his station … most fascinatingly, he seems to be devoid of any desire to acquire titles or wealth, and rather performs his work out of only a desire to solve the problems with which he is presented, and which he seeks out himself.” Nevertheless, Ferreira and Cobos enjoyed a fruitful working relationship, in spite of their differences and Cobos’ relative lack of enthusiasm for the wellbeing of the rest of the Iberian Union. Like most monarchs (especially young and untested monarchs), Juan Pelayo’s comprehension of economics was mostly limited to the implementation of new taxes, therefore he had to place his complete trust in Cobos and the Council of Finance when it came to investing and reorganizing the royal treasury. Ferreira was consequently given a blank check to pursue his vision over the course of a few years after his appointment, something which would have been impossible had it not been for the reworked powers and responsibilities of the Casa de Contratación, new developments in Spanish intellectual circles, and a galvanizing series of events that scholars refer to as the “Spice Crash.”
The Carreira da Índia and the route to Antwerp
Much like Castile, Portugal’s colonial administration was supervised by an agency dubbed the “Casa da Índia,” separated from the Casa da Guiné in 1506 and responsible for maintaining the crown monopoly on the spice trade, which alone brought the Crown more than a million cruzados annually by 1510. The largest market for the goods that Portugal imported from the Far East during the first half of the 16th century was to be found in the Netherlands; its sizeable middle class, well-established shipping corporations, and central location in Europe all ensured that the Flemings and Dutch would be the middlemen for virtually all business transactions in the Northern Atlantic. It was therefore deeply concerning for the Portuguese whenever the stability of the Netherlands was threatened, something which would make it apparent that Portugal’s woeful deficiency of raw bullion meant that there was little that could be done to recoup losses in the event of a serious recession.
The first disturbances in trade with the Netherlands came during the sporadic Guelders Wars of 1502-1538, fought between the house of Hapsburg and Charles II, the duke of Guelders and the last ruler of any import in the Netherlands not consigned to Hapsburg vassalage. Piracy from Frisian Protestants as well as from the Danish and French further harmed the profit margins of the Casa da Índia beginning in the 1530s, and the simultaneous destabilization of Northern France and Southern England effectively diminished Portuguese business ventures in those markets. The increasingly chaotic bloodshed that began to envelop Northern Europe showed no signs of dissipating by the time war broke out once again between the Hapsburgs and France in 1542, leading to the invasion of the Southern Netherlands. The effects were felt in Lisbon almost immediately. After the Casa da Índia was forced to close its offices in Antwerp in 1544, it found itself on the verge of bankruptcy in 1546.
The initial gold rush of the Portuguese spice trade had come to a screeching halt. The global apparatus the Portuguese Crown had propped up under Manuel I had already been flooded with fortune seekers by the early 1540s, with thousands of competing Portuguese merchants shipping massive quantities of eastern goods back to Lisbon, drastically reducing their worth in an already faltering market. During the worst point of the crash, the prices of pepper, clove, cinnamon, silk, and shellac all dropped to roughly a quarter of the value that they held in the 1520s. In an attempt to drive prices back up, a syndicate of Portuguese merchants reached an emergency agreement with the Crown to strong-arm some of the wealthier inhabitants of Lisbon and the surrounding countryside to buy up at least 1/10th of the goods returning from the Carreira da Índia and unloaded in the Terreiro do Paço. The mass unemployment that spread amongst Lisbon’s longshoremen also led to a strike in 1547, which was put down violently when it escalated into a full blown riot. However, the mounting agitation of both the noble and working classes of Portugal under these stimulus measures and the desperation of the merchant class would leave the whole fabric of their country open to exploitation by the Crown.
The Rua Nova dos Mercadores, the commercial hub of 16th century Lisbon
Beginning as early as 1540, Ferreira had pushed for using Crown silver for distributing interest-only loans, in the hopes that it might energize the Spanish economy, bend the will of foreign competitors, and keep the nobility and bourgeoisie docile through the promise of immediate cash and the threat of debt collection. Cobos was on board with this idea although he expressed frequent reservations as time went on, and royal loans began to be issued by the Casa de Contratación to Castilian businessman at fairs hosted by the Consulado de Mercaderes. This was eased by Cobos’ earlier decision to construct large bullion vaults under the administration of the Casa de Contratación in Sevilla (for convenient distance), Toledo (for royal oversight), and Medina del Campo (for its use in impressing investors in the local trade fair), although the volume of money being loaned out eventually meant that it had to be secured against the next expected treasure fleet. The dispensation of these royally-capitalized loans became so widespread and multi-tiered that the department of the Casa de Contratación responsible for lending would be split off in 1542 and expanded to form a new Crown agency - the Casa de Prestación (House of Lending) - which would share its offices with Casa de Contratación in Sevilla.
Ferreira's experience in the Portuguese colonial system was the formative experience convincing him that the Spanish Crown would do well to effect a dual integration of its Portuguese and Castilian resources. In Lisbon, as far as the colonial administrators, wealthy merchants, or plain old patriots were concerned, the less Castilians (or any kind of foreigner for that matter) trying to get a slice of the Oriental pie, the better. Things were different, however, on the front lines of Portugal’s colonial projects. By the 1550s, there were estimated to be fewer than 9,000 Portuguese adult males between the Cabo da Boa Esperança and the island of Luçon, with only 4,000 registered as “soldados” and serving - or supposed to be serving - in garrisons or naval patrols. Manpower was a serious issue for the Portuguese colonies, perhaps more serious than their chronic bullion shortages. For the feitorias and forts where continued profitability relied entirely on the ability of said posts to defend themselves - such as Malaca or Goa - the resident captains-major had no qualms about bringing in any number of Castilians, so long as they were willing to fight. In Ferreira's eyes the Portuguese could only profit, then, if they were to willingly dissolve their old independence and accept Castilian assistance in the form of immigrants and more importantly silver, even if it meant having to share a bit of the earnings. Such a concession would be inevitable, especially following Sebastián Caboto's discovery of an oversea passage between the West and East Indies, and it was therefore expedient to attempt to secure a favorable bargain before the Castilians decide to flood the Portuguese colonies on their own terms.
There were, however, still disquieting obstacles to this operation. Usury - the charging of unjust rates of interest - was considered both a sin in and of itself as well as an earmark of Jewry. As such, it was imperative that the proceedings of the Casa de Prestación be inspected carefully by the proper religious authorities, and the Holy Office of the Inquisition was thus tasked with interpreting the just limit for interest. This was an unofficial arrangement, with a group of 4 men approved by the Holy Office acting as secretaries for the Casa de Prestación. Even with this precaution, however, the strong Thomistic influences in Spain meant there would still be intense scrutiny. St. Thomas Aquinas’ opposition to not only usurious practices but to the charging of interest in general was clearly articulated, predicated upon reading implications of debt collection into Luke 6:35, which commands believers to “love your enemies, do good, and lend, expecting nothing in return.” The fact that the Crown had chosen to lower itself to direct involvement in this dubious practice was borderline disgraceful, with the added unsavoriness of having the Holy Office dip its hands into the whole business.
With preparations being made for both an intervention in the Ottoman-Mamluk war and the looming war with France, royal attention was momentarily diverted from the matter and Ferreira and those like minded had to fend for themselves. Luckily for Ferreira, the magisterial opinion of the School of Salamanca on loans and interest had been shifting in his favor. During this period, Domingo de Soto and Martín de Azpilcueta - both highly influential in the School of Salamanca - wrote treatises justifying the collection of interest and the supporting the viability of money lending and other financial services as legitimate, honest trades. Azpilcueta, in his “De intercambio” (“On exchange”) offered an early understanding of inflation as related to the accessibility of money, proposing that, without fail, currency loses its value over time and the charging of interest is therefore simply the recovering of that lost value. Ferreira was not as eloquent as De Soto or Azpilcueta, but he was energetic and a good negotiator, spending this time publishing his own responses, with the longest and most well-received being “De prestar de la asistencia del rey” - “On the lending of the king’s assistance” - written not in academic Latin but in Castilian. Directly associating the Crown with the Casa’s loans and interest, Ferreira argued that the king as “pater patriae” (“father of the nation”) had a duty to extend financial assistance to his struggling subjects as well as to dispense such aid for the purpose of facilitating industry, but for the Crown to relinquish its wealth with nothing to gain from its issuance and with unsurety as to its full return was equal parts profligacy, naiveté, and insult to the Crown’s subjects who had shed copious amounts of their own sweat and blood to acquire it. Ferreira further claimed that since the success of the loan’s investment lies with the recipient of the loan, interest is not repayment (“devoluciones”) for use of money - which is directly denounced by Aquinas - but the sharing of its profits (“rendimientos”).
Vicente Adão Ferreira da Lousada, Conde de Matosinhos
By 1544 the monarchy was finally able to step in, organizing a debate to take place at the University of Salamanca, wherein the Dominican judges and Juan Pelayo himself pronounced in Ferreira’s favor. It was thus that Ferreira - undertaking a three-way arbitration between the Council of Portugal (representing the Cortes of Portugal), the Council of Castile (primarily representing the Casa de Prestación), and the Council of Finance - was able to strike a deal with his former Portuguese colleagues in 1547: the Crown - operating through the Casa de Prestación - would refinance the moribund Casa da Índia (so as to avoid what might lead to a wholesale collapse of the Portuguese colonies) and buy up the debt of its investors, in return for, as Ferreira put it, “the loyalty of the good senhores of Portugal and the obligations pertaining thereto.” What these “obligations” implied was the Portuguese Cortes’ assent to new taxes and the dissolution of many of their privileges - a bribe in the form of a bailout.
This was a controversial requirement, and protestations sprang up anew. When similar deals were struck in 1548 with the different Cortes of the Aragonese Crown in return for the approval of new taxes and the raising of conscripts (something nearly impossible to acquire before), many of the grandees of Spain quickly felt that their ancient privileges might potentially be threatened by the greedier and weaker-willed of their compatriots. Apart from the expected objectors amongst Spain’s pervasive and influential mendicant orders, a number of Spanish magnates now materially indebted to the Crown found the prospect of either having to rubber stamp all of Juan Pelayo’s legislation or forfeit their wealthy holdings to the Casa de Prestación (and thence the Crown) quite distasteful, and made no attempt to hide their disapproval of this new system.
On top of this, there was significant concern over the Crown's decision to grant a massive loan of Castilian-taxed specie to its non-Castilian subjects. The Crown was not yet recognized as something fully autonomous within Iberia. When Miguel da Paz or Juan Pelayo made a proposal to the Cortes of Portugal or of Castile, they were doing so in their capacity as king of Portugal or king of Castile, respectively. A truly Spanish monarchy - not simply a Castilian, Portuguese, or Aragonese one - hovering over the three Spains and not bound in its function by their divisions was something that had not yet been fully realized. As such, the gold and silver mined in Nueva Castilla and Nueva Vizcaya was Castilian gold and silver, and the precious metals allotted by the quinto real - while belonging exclusively to the Crown - were still presumed to belong to Castile in a vague, national sense. A large number of members of the Castilian Cortes therefore raised an objection against the free dispensation of the wealth that should - in their understanding - be used solely for the betterment of Castile.
Many Portuguese also felt that their need for Castilian bullion would leave them utterly enslaved to Castile, as the magnates invested in the Carreira da Índia - many of them representing Portugal’s most powerful noble families - were forced to borrow loan after loan in Castilian specie to cover their losses and pay their way through hurdles in their Asian operations - where possession of silver promised greater submission of local potentates. Juan Pelayo’s silver-hungry Portuguese subjects had to choose between either abandoning their overseas empire or surrendering many of their political and financial freedoms to the Crown. To whomever this choice was offered, the latter option was almost always preferred. While the Crown did not possess an endless supply of American precious metals at any given time and was thus willing to allow private Castilian entrepreneurs to take up a fair share of this emerging debt market, it was through the Casa de Prestación that the majority of these loans were issued. It certainly did not help that the Inquisition’s advisory position regarding just rates of interest did not prevent the bureaucrats of the Casa de Prestación from quickly racking up a reputation for manipulative practices. The outward flow of much needed specie could be constricted or broadened through a plenitude of means, and the intensely secretive protocol that the Spanish crown enforced regarding its American possessions allowed the Casa to oversell certain aspects and thus ensnare innumerable clients. No small number of enterprises - many of which were held by the upper aristocracy - defaulted to the Casa’s ownership, and were almost immediately sold off to hordes of Spaniards from the burgher class or minor nobility.
A number of noble and clerical opponents that Ferreira had gathered worked to see the Portuguese financier removed from power. All the fears of Ferreira working with the monarchy to wipe out the liberties of the aristocracy or trying to siphon Castilian wealth into his native Portugal were combined with suspicions of him having Jewish heritage, which would suggest that Ferreira was part of a Judaizers’ plot to return usurious practices to Spain. Cobos, having resigned at the age of 71 in 1548 and died in 1550, was no longer around to shield his former assistant, and an attempt at organizing another formal debate in 1552 would be blocked by the Cortes of Castile. Ferreira would ultimately find himself loosely connected in a sweeping witch hunt against members of the administration which implicated the likes of Íñigo López de Mendoza y Zúñiga, the Archbishop of Burgos and ambassador to England, and Bartolomé Carranza, the Navarrese bishop of Cuenca. Both clergymen were associates of Ferreira through Martín de Azpilcueta and both had been accused of promoting crypto-Jewish and sometimes borderline Protestant ideas. These accusations were serious and could not be ignored, leaving Juan Pelayo - preoccupied with the renewal of hostilities with France and cautious not to further anger the nobility while he was attempting other domestic reforms - with no choice but to resign Ferreira and hand him over to the Holy Office in 1556. All the others arrested alongside Ferreira never ended up seeing a trial thanks to their connections, and the blame fell squarely on Ferreira. Nothing came of his own trial - he was confirmed to have Jewish heritage but all other claims against him were unsubstantiated - but Ferreira’s career in government was nonetheless ruined. He would spend the rest of his days resigned to his estate in Matosinhos, where he continued to write on economic theory, although his writings were at the time suppressed by his opponents.
- El rey plateado -
But this was a hollow victory for Ferreira’s enemies - the institutions he and Cobos established would endure and the hypotheses of the Iberian monetarists would continue to be proven correct with time. After returning from France in 1552, Juan Pelayo strongly considered dissolving the Casa de Prestación to avoid further unrest - the ceasefire with the French was not permanent, and the Crown’s American bullion was not plentiful enough to cover the many expenditures of war alongside the ongoing infrastructural projects and the liberal loan policy of Ferreira. Between 1503 and 1550, Castilian treasure fleets pulled in more than 6.4 million ducats for the Crown in silver - an average of 128,000 ducats a year - which was considerable but still lower than domestic tax revenues. After Ferreira’s forced resignation in 1556, the Casa de Prestación was shuttered indefinitely. However, by the 1560s, the mines of the Cerro Rico in Nueva Vizcaya and to the north of Nueva Castilla astronomically increased the quantity of American silver shipments due to the discovery in the 1550s by a certain Bartolomé de Medina of a new method for refining silver using a mercury amalgam - known as the “patio process.” With a sudden and massive increase in expendable bullion, the Casa de Prestación could properly sustain its lending business and continue digging the Portuguese out of their rut, and it fully resumed its services in 1562.
The Spanish monarchy would begin to see the Casa de Prestación pay dividends in return. Lacking financial acumen, more and more of the Spanish nobility found itself under the royal thumb as it made misguided investments with royally-loaned silver and accumulated unsustainable floating debt - greatly abetting the passage of Juan Pelayo’s deep-cutting reforms. Additionally, with control of the European gold and silver market approaching a vise grip, the Spanish Crown - through the Casa de Prestación - had become the moneylender of Europe, tying foreign private merchants to its vast debt network and reaping their assets when they were unable to make payments, with the Casa sometimes underhandedly compelling the surrender of collateral through a strong naval presence and a merciless corps of clandestine enforcers. These assets would be auctioned off to the now fast-growing Spanish middle class, who had long awaited such preferential positions in the most lucrative markets of Europe - all formerly dominated by Italians, Flemings, or others.
The Spanish Crown similarly became the chief moneylender for a multitude of powerful rulers in Europe, an arrangement which kept the peace between Spain and its many rivals and even ensured varying levels of deference to the Spanish monarchy in international disputes. For example, when Charles X of France was attempting to raise troops and procure weapons to fight the Protestants under the Prince of Condé in mid 1567, he was informed by his Superintendent of Finances, René de Birague, that “we may fleece every man, woman, and child in France for a spare ducat, but without Spanish coinage to sate your majesty’s creditors we will never see so much as another dagger to toss at Condé.” Likewise, French cooperation with Spain in fighting the Turks and Mediterranean corsairs (sometimes stamping out their own privateers as well) was owed more to the French monarchy’s need for specie than it was to friendly relations and the terms of the Treaty of Soissons. Even the Holy Roman Emperors Charles V and Philipp II - proprietors of Europe’s largest supply of copper and second largest supply of silver thanks to their Bohemian and Hungarian possessions - adopted a humbler tone out of step with their imperial pretension when addressing the Spanish monarch.
The Spanish fiscal conservatives had not attained the decisive victory that they momentarily celebrated in 1556 in either the political or the academic sphere, and the new, prevailing intellectual wave in Spain would side with Ferreira and Azpilcueta. Individuals such as Diego de Covarrubias, the Bishop of Ciudad Rodrigo, and the Dominican lawyer Tomás de Mercado would continue to put out treatises on interest and exchange, demonstrating that monetarism had become a respected scholarly field in Spain and that usury had become a much more narrowly defined and less grievous sin in the eyes of Spanish ethicists. While the significant runoff of the Crown's supply of precious metals during this period attests to the fact that both the administrative adjustments of Cobos and the financial innovations of Ferreira represented more of a groping in the dark for a solution than an astute remedy of Spain's financial ills - being unable to process the deeper issues of inefficient land ownership and a stiflingly large tax-free portion of society - the foundations had still been laid in Spain for a modernized approach to state finance and central banking, as well as for the infrastructure necessary to maintain it.