Debt and Empire

Does this sound familiar? From The Victory of Reason by Rodney Stark:

"Even so, the wealth of the empire was largely illusory when account is taken of its truly staggering debts. It began with Ferdinand and Isabella, who never managed to balance their budgets, so that Charles V assumed their very substantial debts at his coronation. Charles expanded these debts on a properly imperial scale, starting with a sum of more than half a million gold guilders borrowed from Jakob Fugger to gain the Holy Roman emperorship. This too was but a drop in the bucket. During his reign Charles secured more than five hundred loans from European bankers, amounting to about 29 million ducats. Much of this amount still had not been repaid when his son Philip II ascended to the throne in 1556, and a year later Philip declared bankruptcy. Nevertheless, only four years later imperial debt was again so high that 1.4 million ducats, more than 25 percent of the total annual budget, was paid out as interest on current loans. Worse yet, by 1565 the imperial debt in the Low Countries alone stood at 5 million ducats, and interest payments plus fixed costs of governing produced an additional deficit of 250,000 ducats a year. The same pattern held for the empire as a whole - debt dominated everything. During the first half of the 1570s, Phillip II's revenues averaged about 5.5 million ducats a year, while his total expenditures often nearly doubled that amount, with interest on his debts alone exceeding 2 million ducats a year. No one was too surprised when again in 1575 Phillip disavowed all his debts, amounting to about 36 million ducats. By doing so, however, he left his regime in the Netherlands penniless."

Of course the Spanish monarchs were constrained by a monetary system based on precious metals, so they had no choice but to honestly declare bankruptcy when they were, well, bankrupt. We have another option: Print our way out of debt!