Social Science History Seminar

In the 16th century, Castile created a large nation-wide domestic public debt. A new view of that fiscal system is presented. The main part of the public debt was in perpetual redeemable annuities and its credibility was enhanced by decentralized funding through taxes administered by cities making up the Realm in the Cortes. As in other countries since then, accumulations of short-term debt would be refinanced by long-term debt. Financial crises occurred when the service of the long-term debt reached the revenues of the taxes that funded the domestic long-term debt. They were resolved after protracted negotiations in the Cortes by tax increases and interest rate reductions.