In 1517, Martin Luther, an obscure Catholic priest in central Germany, initiated the Protestant Reformation by publicizing his criticisms of the Catholic Church. Luther’s ideas won the sympathy of many Catholics, but they were considered extremely dangerous by church officials and by monarchs such as Charles V, who believed that just as the church spoke for God, they ruled for God.

Luther preached a doctrine known as “justification by faith”: Individual Christians could obtain salvation and life everlasting only by having faith that God would save them. Giving monetary offerings to the church, following the orders of priests, or participating in church rituals would not bring believers closer to heaven. The only true source of information about God’s will was the Bible, not the church. By reading the Bible, any Christian could learn as much about God’s commandments as any priest. Indeed, Luther called for a “priesthood of all believers.”

In effect, Luther charged that the Catholic Church was in many respects fraudulent. Luther declared that the church had neglected its true purpose of helping individual Christians understand the spiritual realm revealed in the Bible and had wasted its resources in worldly conflicts of politics and wars. Luther hoped his ideas would reform the Catholic Church, but instead they ruptured forever the unity of Christianity in western Europe.

Charles V pledged to exterminate Luther’s Protestant heresies. The wealth pouring into Spain from the New World fueled his efforts to defend orthodox Catholic faith against Protestants, as well as against any other challenge to Spain’s supremacy. As the most powerful monarch in Europe, Charles V, followed by his son and successor Philip II, assumed responsibility for upholding the existing order of sixteenth-century Europe.

American wealth, particularly Mexican silver, fueled Spanish ambitions, but Charles V’s and Philip II’s expenses for constant warfare far outstripped the revenues arriving from New Spain. To help meet military expenditures, both kings raised taxes in Spain more than fivefold during the sixteenth century. Since the wealthy nobility were exempted from taxation, the tax burden fell mostly on poor peasants. The monarchy’s ambitions impoverished the vast majority of Spain’s population and brought the nation to the brink of bankruptcy. When taxes failed to produce enough revenue to fight its wars, the monarchy borrowed heavily from European bankers. By the end of the sixteenth century, interest payments on royal debts swallowed two-thirds of the crown’s annual revenues. In retrospect, the riches from New Spain proved a short-term blessing but a long-term curse.

Most Spaniards, however, looked upon New Spain as a glorious national achievement that displayed Spain’s superiority over Native Americans and other Europeans. They had added enormously to their own knowledge and wealth. They had built mines, cities, Catholic churches, and even universities on the other side of the Atlantic. These military, religious, and economic achievements gave them great pride and confidence.