Deflation Made Simple (Part I)

A falsely vilified phenomenon (Image 028)

Human value comes in many forms, and focusing on one to the neglect of others would likely lead us astray in our understanding of historical events and the vital role of money in same.

Between 1554 and 1556 Charles V retired from political life and left his several thrones to Philip II (1527-1598), Charles’s first son, and Ferdinand I (1503-1564), Charles’s brother. To this latter went the Holy Roman Empire and to the former went the Spanish Empire including the seventeen provinces of the Netherlands. At the time these provinces comprised modern Belgium, Holland, Luxembourg, Friesland in northern Germany, as well as part of modern, northern France.

What held these two imperial halves together was the Catholic Church and the Hapsburg Dynasty — a vast array of interlinking royal marriages extending from Lisbon (in modern Portugal) to Antwerp (in modern Belgium), Vienna (in modern Austria), and many more European capitols, as well as Tunis (in modern Tunisia).

Once Martin Luther (1483-1546) was declared an enemy-of-state by Charles V in the Edict of Worms in 1521, he became a political liability to those who supported him. Accordingly, he was captured by his own body guards and hidden in Wartburg Castle in modern Thüringen, Germany where he remained for more than a year before his release and return to Wittenberg, Germany, where he had been active before the Edict was put into effect.

During his time in hiding Luther completed his translation of the Holy Bible from the original Greek into German and severely challenged the Latin translation (the Vulgate) that had been propagated by the Catholic Church for many centuries throughout Europe and beyond. Luther’s completed translation circulated rapidly among the German-speaking member states of the Holy Roman Empire, and the Catholic Church’s monopoly of the Holy Word was broken.

The effect was spiritually monumental as direct access to the words of the Apostles and God himself was now available to anyone who could read German and afford a cheaply printed copy of Luther’s translation from a Gutenberg press. Other translations quickly came into being, and the political turmoil that resulted was profound.

Out of this mayhem arose the Dutch Republic and the Church of England.

King Edward VI (1547-1553) was the first English monarch who was raised as a protestant. He was also only nine years old when his father, Henry VIII (1491-1547), died, and Edward assumed the throne. To the chagrin of many King Edward would soon fall ill and die before his sixteenth birthday. Several years before Edward’s death, it had been arranged that Jane Grey (1536-1554), Edward’s regent (royal guardian and mentor), would assume the throne upon Edward’s death. This arrangement was intended to preserve the transition away from the Catholic Church already begun by Edward’s father when Pope Clement VII refused to annul Henry’s marriage with Catherine of Aragon in 1531.

Jane Grey, although of royal blood, was not first in line after Edward; it was Mary Tudor (1516-1558), the daughter of Henry VIII and Catherine, Henry’s first wife. Yes, the same whom Henry had eventually divorced. Some heads rolled, Mary Tudor rode into London, and Jane Grey was imprisoned after having served only nine days as a transitional queen. Whereupon, Mary I claimed her throne at the age of 37, and Jane Grey was tried for treason and executed. At the time one’s religious belief was a serious matter of state. Although the first female monarch of England within her own right, Mary was neither Protestant, nor married, and to the chagrin of many, and the elation of others, England inherited another Catholic monarch.

The year 1553 had proven to be an exciting year for British royalty. Unfortunately, what followed during the short reign (1553-1559) of Mary I proved far more exciting for many another, royal and non-royal, British subject. In just a few months Mary sought to restore the Catholic Church as England’s religion of preference and much bloodshed followed.

Tradition dies hard and for good reason, as we will continue to learn as we move forward through the many pages to come.

King Charles V saw in the events of 1553 an opportunity to wed the British and Spanish Catholic crowns, and arranged a marriage between Mary and his son, Phillip, in 1554. Prince Phillip (1527-1598) was only 26 and not pleased with the idea, but ceded to his father’s request. During the marriage Phillip remained distant from London, and Mary Tudor died five years later as an effective widow with a broken heart . . . . Now, you know the origin of the Bloody Mary — an alcoholic beverage made with tomato juice, Tabasco sauce, and a sprinkle of celery salt.

Before Mary I died, however, she bequeathed her throne to her half sister, Elisabeth, the daughter of Henry VIII’s second wife, Anne Boleyn, who had reigned from 1533 until 1536 at the side of Henry VIII until she was accused of adultery and beheaded with a French sword at Henry’s demand. It was likely a far better death than that offered by the much more unreliable British axe. The wound was clean.

Elisabeth I (1533-1603) was Protestant, and looking back on her sister’s religious scourge created the Anglican Church, a hybrid of Catholicism and the Protestant faith — somewhat analogous to Lutheranism on the continent and in Northern Europe — in an effort to establish religious compromise among the British elite. Although the break between the Catholic Church and the British Crown appeared permanent at the time, the Hapsburgs were still about.

Queen Elisabeth I would be England’s last Tudor queen, and the Stuarts would soon come into being.

Whereas the city of Seville was focused on trade with the Americas, the city of Bruges and eventually Antwerp, both located along today’s Belgian coast, served all of Europe’s western and northern perimeter as important trade hubs. Goods from the cities of Lisbon and Porto in Portuguese Spain were sent to these trading hubs where they were exchanged for goods emanating from the vibrant commercial cities of the North and Baltic Seas once dominated by the now struggling Hanseatic League (1356-1862).

By the time Phillip II assumed control of the Spanish Netherlands in 1556 the somewhat more inland, ocean port city of Antwerp had become the new primary commercial hub of Europe.

Although the seventeen provinces of the Netherlands were united under Spanish rule, each was relatively independent and in several cases, culturally speaking, very different. As Protestantism continued to spread from the German-speaking heartland into France and the Spanish Netherlands, there was political convulsion.

Unfortunately, Phillip II was not nearly as adept as his father in the rule of this region. Indeed, he lacked the cultural and linguistic depth and tact of his father, and his hard Catholic stance was not well-received. The northern and southern provinces of the Spanish Netherlands began to split apart, a new commercial center formed in Amsterdam, and many citizens of Antwerp fled thereto.

Finally, an alliance called the Union of Utrecht was formed between seven of the northern provinces and help from Queen Elisabeth I was sought. In 1581 the Union proclaimed independence from Spain.

Alas, Phillip felt it time to reclaim his long neglected right to the English throne and in 1588 sent an armada of some 130 Spanish ships to London. They never arrived. Rather, they succumbed to stiff British naval resistance and bad weather. The conflict marked the beginning of the end of the Spanish Empire. It also greatly assisted the Dutch in gaining their independence from the Spanish Crown and marked the beginning of one of the Western world’s most important commercial and financial success stories.

The Republic of the United Netherlands would result. Still, the road ahead would be very long, as Spain refused to recognize the Dutch Republic until 1648. During this period, however, the city of Amsterdam grew and replaced Seville and Antwerp as Europe’s commercial and financial capitol.

It is Amsterdam where we will continue our story of money in the Western world.

In liberty, or not at all,
Roddy A. Stegemann