<P> When Philip IV succeeded his father in 1621, Spain was clearly in economic and political decline, a source of consternation . The learned arbitristas sent the king more analyses of Spain's problems and possible solutions . As an illustration of the precarious economic situation of Spain at the time, it was actually Dutch bankers who financed the East India merchants of Seville . At the same time, everywhere in the world Dutch entrepreneurship and settlements were undermining Spanish and Portuguese hegemony . The Dutch were religiously tolerant and not evangelical, focusing on trade, as opposed to Spain's longstanding defense of Catholicism . A Dutch proverb says, "Christ is good; trade is better!" </P> <P> Spain badly needed time and peace to repair its finances and to rebuild its economy . In 1622, Don Balthasar was replaced by Gaspar de Guzmán, Count - Duke of Olivares, a reasonably honest and able man . After certain initial setbacks, the Bohemians were defeated at White Mountain in 1621, and again at Stadtlohn in 1623 . The war with the Netherlands was renewed in 1621 with Spinola taking the fortress of Breda in 1625 . The intervention of Christian IV of Denmark in the war threatened the Spanish position, but the victory of the Imperial general Albert of Wallenstein over the Danes at Dessau Bridge and again at Lutter (both in 1626), eliminated that threat . </P> <P> There was hope in Madrid that the Netherlands might finally be reincorporated into the Empire, and after the defeat of Denmark the Protestants in Germany seemed crushed . France was once again involved in its own instabilities (the Siege of La Rochelle began in 1627), and Spain's eminence seemed clear . The Count - Duke Olivares asserted, "God is Spanish and fights for our nation these days". </P> <P> Olivares realized that Spain needed to reform, and to reform it needed peace, first and foremost with the Dutch United Provinces . Olivares aimed for "peace with honor", however, which meant in practice a peace settlement that would have restored to Spain something of its predominant position in the Netherlands . This was unacceptable to the United Provinces, and the inevitable consequence was the constant hope that one more victory would finally lead to "peace with honor", perpetuating the ruinous war that Olivares had wanted to avoid to begin with . In 1625, Olivares proposed the Union of Arms, which aimed at raising revenues from the Indies and other kingdoms of Iberia for imperial defense, which met strong opposition . The Union of Arms was the sparking point for a major revolt in Catalonia in 1640 . This turmoil also seemed a propitious moment for the Portuguese to revolt against Hapsburg rule, with the Duke of Braganza proclaimed as John IV of Portugal . </P>

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