Financial Folly and Spain’s Black Legend

This epilogue argues that Castile was solvent throughout Philip II's reign. A complex web of contractual obligations designed to ensure repayment governed the relationship between the king and his bankers. The same contracts allowed great flexibility for both the Crown and bankers when liquidity was tight. The risk of potential defaults was not a surprise; their likelihood was priced into the loan contracts. As a consequence, virtually every banking family turned a profit over the long term, while the king benefited from their services to run the largest empire that had yet existed. The epilogue then looks at the economic history version of Spain's Black Legend. The economic history version of the Black Legend emerged from a combination of two narratives: a rich historical tradition analyzing the decline of Spain as an economic and military power from the seventeenth century onward, combined with new institutional analysis highlighting the unconstrained power of the monarch.