Asientos and public finance in Castile under Philip II

All the work here is in collaboration with Carlos Álvarez-Nogal (Universidad Carlos III, Madrid).

This ongoing project analyzes some aspects of the debt and tax finances of Philip II of Spain who reigned over the the largest European empire in the second half of the XVIth century. So far, the archival basis for the analysis is the documentation on and in relation to the asientos which were financial short- to medium-term contracts between Philip II and men of finances, most of them from Genoa.

Asiento never exceed 15 percent of the total debt (which reached 60% of Castile's GDP), which was for the most part in redeemable annuities, juros, but they played a critical role in the financing of wars and they provide important insights on the financial and political structure of a distributed pre-modern state. The three temporary payment suspensions by Philip II on asientos provide important evidence.

Our research method is to follow the texts. We make them available, as much as possible, as copies of the original, transcriptions and translations. This research is presented here in a logical order.

The first task is the complete analysis of a "textbook" asiento.

This asiento has an incredible documentation in the archives of Simancas, including the monitoring of the implementation of the contract. The purpose of the contract is to convert various sources of income of the Crown into a constant flow of income for the army in Lisbon for about a year. (Regular disbursements are important for an army). The contract leaves some flexibility for the payments of the Crown and applies a constant interest rate of one percent on the current balance that is written specifically in the contract. (The contract therefore refutes the analysis of Drelichman and Voth who compute such a rate through imputed payment flows). All ex post computations are reported in the archives. As a most important feature, the contract includes an option, for about half the total amount, to convert the debt into funded long-term juros. Such an option illustrates the interactions between asientos and juros 

All the payments in the contract are in one currency, the ducat.

  • Blog post (June 19) in positive check, blog of the European Historical Economics Society

The main documents are available here.

  • Previous version: "Equity short-term finance under Philip II, with an option to long-term funded debt," (2015), with Carlos Álvarez Nogal, IED working paper 265.  
  • The sources in the archives of Simancas, AGS, CCGG, leg. 92-1, asiento 07/13/1595. The help and the authorization to post are gratefully acknowledged. (España. Ministerio de Educación, Cultura y Deporte. Archivo General de Simancas). The contract  (14 pages). Transcription.  
  • Attachments (47 pages), next to the contract: they have been written by the royal accountants who monitored the implementation of the contract. See Table 3 in "Analysis" for a list of the attachments.

The next paper analyzes an asiento that was issued at about the same time as the Maluenda contract and with the same purpose of converting scattered tax revenues into a constant flow for the army, this time in Flanders. The contract therefore combines two currencies. Disbursements are in escudos and payments by the Crown are made in ducats. One also finds degrees of flexibility and options for the conversion in long-term funded debt. 

An asiento with foreign exchange: Tomás Fiesco on April 3, 1591

  • "Reexamining an asiento between Philip II of Spain and Tomás Fiesco" with Carlos Álvarez-Nogal (February 8, 2017).

The asiento between Philip II of Spain and Tomás Fiesco (April 3, 1591) is a textbook contract for steady monthly disbursements (mesadas) towards the army of Flanders in foreign currency (escudos), and reimbursements by the Crown in domestic currency (ducats). This asiento is also the main verifiable evidence that is provided in Drelichman and Voth (2015), “Risk sharing with the monarch: contingent debt and excusable defaults in the age of Philip II, 1556-1598.”  There is in the contract no contingent debt, excusable default or penalty.

The contract (copy of the original in the archives of Simancas)


Political conflict on taxation between the Crown and the Cortes

It reflects on the state of economic history that Carlos and I had to write this:

  • "Answer to 'Duplications by Drelichman and Voth' (with Carlos Álvarez-Nogal), September 5, 2015 (pdf). 

War of attrition between the parliament and the executive in Castile, 1575

The paper discusses more evidence for the interpretation (2014 EHR article) of the three financial crisis under Philip II by the political economy inside of Castile between the Crown and the Cortes. Focusing on the main crisis (1575-77), additional archival evidence: the financial education of Philip II and his use of the financial weapon against the Pope at the beginning of his reign, the financial intermediation of the Genoese bankers inside of Castile, the stop of the commercial fairs in Medina del Campo in 1575-77, the legal protection of the bankers by the Crown against the claims of their creditors in Castile, the numerous petitions by the creditors of the asentistas to the Crown for the recovery of their deposits.

  • Data available upon request.
  • Soft version (VoxEU: October 21, 2013)

The recent showdown over the US debt ceiling can be thought of as a game of chicken over the repayment of sovereign debt, with potentially severe consequences. This column describes an analogous historical episode in 16th century Spain, in which city delegates in the Cortes resisted tax increases, and Phillip II responded by suspending payments on a portion of the sovereign debt. By the time the cities caved to a doubling of their tax contribution two years later, the resulting bank failures and credit freeze had caused lasting economic damage.