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The specific phenomenon that brought about the Protestant Reformation was the selling of indulgences by the Church. An indulgence was a certificate offered by the Church that offered the same spiritual power as the sacrament of confession and penance: to have one’s sins absolved. Each indulgence promised a certain amount of time that the individual would not have to spend in purgatory after death. Catholic doctrine held that even the souls of those who avoided hell did not go straight to heaven on death. Instead, they would spend years (centuries, usually) in a spiritual plane between earth and heaven called purgatory - there, their sins would be purged (note the overlap between the words "purge" and "purgatory") through fire until they were purified. Only then could they ascend to heaven. Naturally, most people would much rather proceed directly to heaven if possible, and so the Church found that the sale of indulgences to avoid time in purgatory was enormously popular.
At first, indulgences were granted by the pope for good acts that were supported by the Church; they were heavily associated with the crusades, both in terms of mitigating the normal spiritual consequences of the atrocities committed by the crusaders and in rewarding the crusaders for trying to recapture the Holy Land for the Church. Later, popes came to succumb to the temptation to sell them in order to raise revenue, especially as the Renaissance-era popes built up both their own secular power and patronized the art and architecture associated with the Vatican. By the early sixteenth century the practice was completely out of control. Roaming salesmen, contracted by the Church, sold indulgences without the slightest concern for the moral or spiritual status of the buyer, and even invented little jingles like “when the coin in the coffer rings, the soul from purgatory springs” – that was the jingle of John Tetzel, the specific indulgence salesman who infuriated the key figure in the Reformation, Martin Luther.
The concept of indulgences relied on the notion of a “treasury of merit” – a kind of spiritual bank – whose savings had been deposited by the sacrifices made by Christ and the saints. When someone bought an indulgence, she drew against that treasury in order to avoid time in purgatory. Another way to gain access to the treasury of merit was to possess, or even come into contact with, holy relics (typically the bones of saints). Thus, many rulers did everything in their power to create large collections. One German prince had his court preacher calculate the total number of years that his (the ruler's) large collection of relics would eliminate from his and his subjects' time in Purgatory; the total was 1,902,202 years and 270 days. There was another prince whose total was 39,245,120 years of get-out-of-Purgatory-free time. From this context, of widespread corruption and the fairly blatant abuse of the notion of spiritual salvation through the Church, Martin Luther emerged.