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The sudden influx of precious metal from the New World colonies had negative effects on Spain's economy. Huge inflation which made Spanish goods too expensive, both at home and abroad, and the excess of ready funds made the importation of foreign goods far easier, to the detriment of Spanish industry. The expulsion of the Muslims and Jews also hurt industry, as did the colonies (population decreased significantly)

Continual wars also drained the treasury; during Philip II's reign military expenditures reached 60% of all spending. Over the years Spain defaulted on it's debts numerous times (13 believe), basically declaring bankruptcy and forcing bankers to renegotiate the debt. By the end of Philip IV's reign (1665) Spain was completely destroyed by foreign and internal wars, crappy industry and arable land not being cultivated because there was no one there to actually cultivate it.

My question is - how could the economy best be turned around?
Were foreign dependencies like the Netherlands, Naples, etc, money-sinks or lucrative sources of income?
Were the colonies more prejudicial than profitable?
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