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The following is collection of short articles on the history of money

"Monetary Episodes From History"

Author : Paul Tustain 

    Article Table of Contents:

The monetary cycle

Ionia - Riches without strength [700BC]

Sparta - Gold prohibition in a collapsing economy [600BC]

The Carthaginian national state lottery [450BC]

Byzantium - Early fiscal indiscipline [410BC]

Athens - Housing the Gods (on borrowed money) [500 - 300BC]

Rome - Monetary expansion & republican militarism [200BC]

Chinese credit derivatives after Genghis Khan [1200AD]

John Law - The Royal Bank of France [1716AD]

Why Sweden’s central banker was beheaded [1719AD]

The US greenback [1870AD]

The Weimar inflation in Germany [1923AD]

What can we learn ?

Gold at the junction of monetary systems

Gold as a money of choice 

Back to previous page

Scandinavian copper money - 1600 AD to 1700 AD

Sweden in the 17th century was not the peaceable country of today.  The Swedes were masters of a considerable and now mostly forgotten European empire.

In the early 17th century revolution in (Dutch) Amsterdam had caused the citizens to gain control of the issue of coinage. The seafaring Dutch were returning precious metals by the boatload as a result of their dominance of worldwide trade. The Swedes presumed that the inflow of this bullion was related to the Dutch's ability to coin money privately.

So in 1604 an equivalence of (silver) bullion to coined money was enacted in Sweden, but it established a 15% premium on coins.

This was a steep cost and it made the scheme ineffective. Swedish silver bullion simply exited to Amsterdam to be coined by Dutch banks into Florins, which were used to buy trade goods which were in turn sold back in Sweden. Sweden's silver reserves quickly disappeared overseas.

A follow up enactment by the Swedish king Charles IX in 1607 decreed that silver could be deposited ounce for ounce in return for redeemable dalers, the Swedish currency. The invitation was not widely taken up, presumably because the public understood the value of custody. Nonetheless an unlimited statutory right existed to coin privately owned bullion. It became known as a "Patent of Free Coinage". In effect there was now a two way capability of transfer between bullion and coin in unlimited amount - even if there was still little in the way of precious metals in Sweden.

There were yet more silver depletions through the treaty of Alvsborg, under which the Swedes paid pretty much everything they had in ransom for the return of a fortress lost to the Danes in war. Thereafter, in the absence of anything better, and because Sweden controlled the world's best copper mines, an old currency of highly overvalued copper coins started to circulate.

The Swedes may have been running on empty as regards precious metals, but they were still a mighty military force, and these copper coins were further issued in large numbers by Gustavus II in 1625 to finance war against the vengeful and expansionist Ferdinand II of Germany. It was Sweden's Gustavus who destroyed Ferdinand's catholic armies in four campaigns and finally secured northern Europe for its predominantly protestant population.

But now the military debts of the state combined with a substantially overvalued copper coinage and a legislative structure designed for commodity money to launch Sweden into an absurd copper currency system. Copper came in, was minted to achieve its overvalued status, and promptly sunk the money to its commodity production cost - which in a country rich in copper mines was tiny.  The monetary reserves of the majority of the population were wiped out.

Gustavus' daughter Christina who ascended the throne aged 6, had 12 years of childhood to comprehend these monetary mysteries before her majority at 18, whereupon she instructed the issue of copper backed exchequer bills called assignats which circulated as money, and then a bank was incorporated which took in copper and issued receipts called transport notes which were the origin of the modern banknote. The notes were pleasing to use and - a problem with early paper - easy to forge.

To begin with this popular paper filled the bank with copper.  But the paper lost credibility and demand swerved back to the solidity of metal. So the copper was cut into sheets, stamped not very elegantly, and issued back into circulation as money in lumps weighing as much as 15 kilograms [the example shown, from the British Museum, is dated 1658 and about 65 cm long] 

People had to walk the streets carrying these great slabs balanced on their heads. 

It was only inconvenient at first, but then the world market dumped the commodity copper price as Swedish mines lost their dominance and the money became useless as well.

It eventually fell to Baron George Heinrich de Goertz to offer his services as central banker to this copper rich, but otherwise now poor country.

He minted a representative currency in copper, validated with the kings head and a legal tender face value of a daler. He did not limit the issue, nor ensure the quality of the coins which were beneath the technical capabilities of the day. Moreover he attempted this exercise on behalf of an administration which had lost virtually all financial credit with its population, and compounded the error by allowing to develop a widely held belief that at some unspecified time in the future collectors would refuse the coins as legal tender payment of taxes.  In other words he broke every rule in the central banker's book. The coins were detested, and sloshed around the Swedish economy depreciating rapidly.

Goertz had been a successful minister in other areas of government and he never profited from the debacle, but he was still blamed for the financial misery and the associated evaporation of Swedish power.

By all accounts in defense to the charge of "ruining public credit with imaginary money" he put up a brave and articulate defense - on his own behalf because he was denied counsel. It was not enough. He was the modern world's first central banker to be beheaded, on March 3rd 1719, and the punishment was popular.

The Greenback - 1860 to 1880 - The United States of America .................     (Click here to continue to next page)   

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Copyright  © 2004 Paul Tustain

 Reprinted with permission and thanks to source- www.galmarley.com

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