Financing War

The sixteenth century marked the beginning of superior Western military technology. All armies grew in size and their firepower became ever more deadly, increasing the cost of war. Heavier artillery pieces meant that the rectangular walls of medieval cities had to be transformed into fortresses with jutting ramparts and gun emplacements. Royal revenues could not keep up with war expenditures. To pay their bills, governments routinely devalued their coinage (the sixteenth-century equivalent of printing more paper money), causing prices to rise rapidly.

Charles V boasted the largest army in Europe, supported by the gold and silver coming in from the New World. Immediately after conquest, the Spanish looted gold and silver objects, melted them down, and sent the precious metals to Spain. Mining began with forced Indian labor in the 1520s, and the amount of silver extracted in Mexico and sent to Spain increased twentyfold in the 1530s and 1540s. Nevertheless, Charles could never make ends meet because of his extravagant war costs: the debt of 37 million ducats accumulated during his forty years in power exceeded by 2 million ducats all the gold and silver brought from the Americas. His opponents fared even worse. On his death in 1547, Francis I owed the bankers of Lyon almost 7 million French pounds—approximately the entire royal income for that year. Foremost among the financiers of war debts was the Fugger bank, based in the southern German imperial city of Augsburg. The enterprise began with Jakob Fugger (1459–1525), who became personal banker to Charles V’s grandfather Maximilian I. By the end of his life, Maximilian was so deeply in debt to Jakob Fugger that he had to pawn the royal jewels. In 1519, Fugger assembled a consortium of German and Italian bankers to secure the election of Charles V as Holy Roman Emperor. For the next three decades, the alliance between Europe’s biggest international bank and its largest empire remained very close. Charles stayed barely one step ahead of his creditors; in 1531, for example, he had to grant to the Fuggers eight years of mining rights in Spanish lands south of Peru (present-day Bolivia and Chile).