Deflation Made Simple (Part II)

A falsely vilified phenomenon (Entry 138)

In order to understand the rapid deterioration in the finances of The Estates of Holland and the creation of the Bank of England — the ultimate target of our recent discussion —, a little more history is in order.

In 1686 — three years before William III was crowned King of England with his wife Queen Mary — Leopold I (1640-1705) of Austria, the current Holy Roman Emperor, formed an alliance with Sweden and Spain, as well as the German states of Bavaria, Saxony, and the Palatinate. This alliance was known as the League of Augsburg. Its primary purpose was to keep Louis XIV in check.

The exclusion of England and the Dutch Republic are noteworthy in this regard.

During the Franco-Dutch War (1672-1679) in which England and France united against the Dutch Republic, William III had appealed to Leopold I and others to ally with the United Provinces against France on the continent. Leopold I obliged and Louis XIV was chased out of the United Provinces. The Treaty of Nijmegen (1678-79) that took two years to accomplish and put an end to the hostilities (Entries 117 and 136) had left an important question unanswered — the fate of the Kingdom of Spain, an important domain of the Holy Roman Empire.

James II had only assumed the English throne in 1685, and the fate of his reign was difficult to predict. In addition, the members of the League of Augsburg were suspicious of William III’s intentions. With these two matters in mind let us seek to understand the unanswered fate of the Kingdom of Spain and thereby obtain better insight into the formation of the League and the resulting magnitude of the Nine Years War (1688-1697).

You may recall that Louis XIV had married Maria Theresa (1638-1683) in 1660, the same year that Charles II of England assumed the English throne for a second time, and the English Restoration began (Image 89).

You may also recall that Maria Theresa was the daughter of Elisabeth (1602-1644) who was the daughter of Henry IV of France and Marie de Medici. In addition, you may recall that Marie de Medici gave birth to Henrietta Maria (Image 89).

Whereas Elisabeth would marry Philip IV (1605-1665) and become Queen Consort of Spain, Henrietta Maria (1609-1669) would become Queen Consort of Charles I of England and give birth to Mary Henrietta Stuart (1631-1660), the mother of William III.

Elisabeth died in 1644 and Philip IV remarried in 1649. His new wife, Mariana of Austria (1634-1696), gave birth to Charles (Carlos) II (1661-1700) of Spain. When Philip IV died in 1665, Carlos inherited his father’s throne, and Mariana of Austria became his regent (guardian and mentor). Carlos had not yet reached his fourth birthday. More importantly, Carlos II was genetically malformed at birth and would never make an adequate leader. Mariana of Austria continued as his regent until her death. It is believed that Carlos’s condition was the product of incestuous inbreeding. Phillip IV was Mariana’s uncle. In the end, Carlos II would leave no heir.

Mariana of Austria was also the daughter of King Ferdinand III (1608-1657) and sister of Leopold I.

Both Mariana of Austria and Leopold I enjoyed a direct bloodline to Ferdinand I, the brother of Charles V, King of Spain and Holy Roman Emperor of whom we have already spoken many times beginning with Image 9. In fact, the bloodline between Ferdinand I and Leopold I formed an unbroken line of successive Holy Roman Emperors. Rudolf II (1552-1612) and Mathias (1557-1619) were the only exceptions, and they were brothers!

By the way, Charles V was the son of Philip I (1478-1506) who was married to Joanna I of Castile (1479-1555), the daughter of Queen Isabella (1451-1555) of Castile and Ferdinand II (1452-1516) of Aragon who ruled jointly over Spain from 1479 until 1504. It was Ferdinand and Isabella who sponsored Christopher Columbus in his first voyage to the New World in 1492.

Alas, Philip I was the son of Maximilian I (1459-1519) whom Charles V succeeded as Holy Roman Emperor in 1519. Have you understood the problem? Maybe not. Do not feel bad. Those who concluded the Treaty of Nijmegen could not resolve the problem either.

Both Leopold I and Louis XIV were Catholic, and both had a legitimate, formal claim to the Spanish throne. Leopold I was a Hapsburg and Holy Roman Emperor. Louis XIV was a French Catholic and Bourbon king. France and the empire had been at odds since Otto, der Große (912-973).

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