The Swedish crisis under Charles XII

During the reign of Charles XII (1682–1718), the metallic currency of Sweden was heavily devalued to finance war.

Prelude
The Scandinavian lands including Sweden used the mark introduced by the leading Hanseatic cities, first in coins of 1/3 an 2/3. 1 Swedish mark was 8 Öre, like the shilling from Lübeck. Later were produced 8-, 4-, 2- and 1-mark pieces, the 4-marks were called in the 17th century "Daler Carolin" or "crowns", like the crowns made in Denmark and Norway. The 2-marks were named "Carolin". Under Gustav Wasa was introduced the riksdaler similar to the German Thaler. Gustav Adolph began to use the wealth in copper for coinage. After their devaluation to a half in 1635 people started to calculate in Silvermynt and Koppermynt (S.M. and K.M.), using two parallel currencies. In 1633-1643 was a daler-silvermynt equal to 2 daler koppermynt, in 1643-1662 2 1/2, from 1664 3 daler koppermynt. Queen Christine brought copper in large plates into circulation, the "Platmynts" from 1 to 10 talers - the 10 talers weighed 19,7 kg. Under Charles XII was 1 riksdaler = 3 daler S.M. = 9 daler K.M.

Sweden was by the year 1715 in a difficult situation. After twenty years of war and loss at the battle of Poltava was the country exhausted. It lost important territories in Northern Germany and the Baltic, but it still had a wealth of copper and iron. But the king Charles XII was not interested in peace. Returning to his country after fifteen years, there was little enthusiasm for war. He found an eager helper and advisor in baron Georg Heinrich von Görtz, a man of great financial knowledge, but few scruples. To mask his authorship of the unpopular decrees, that followed, the king has left the announcements to the "Contribution Rent Office", an institution created by the Swedish Riksdag.

War and inflation
The taxes were raised, but didn't bring much income, foreign loans were also limited. Instead of slowly devaluing coins, Görtz aimed for pure credit money. First were introduced 'wage notes' as payment of state officials, that should be accepted as money. Later came obligations as payment for supplies, especially war supplies. First only for large sums, but smaller denominations were soon introduced as well.

The king borrowed in Netherlands 2 million riksdaler in exchange for obligations, the right to make Swedish coins and trade with Sweden's most important export goods - esp. copper, brass, iron, tar, etc. Their buying price was set by the king, and all goods had to be delivered to royal warehouses. Instead of payment were given 'weight bills', later also given the status of currency. The goods were exported for silver and gold. But it was the new coinage, that brought the real income.

The introduction of pure credit coins took a full year to realize due to resistance of many officials. Finally, it was issued in May 1716. For a lack of sound currency and to "prevent the export of silver coins" was issued 1 million dalers from copper, denominated as silver (S.M.). The coins would be used to pay taxes, and were promised to be repaid.

In October 1716 it was announced, that these coins, marked with the symbol of a crown, would be withdrawn and exchanged for coins inscribed with the words "Publica Fide". The king, worried about the wellbeing of his subjects, wanted to prevent counterfeiting or imports from other lands. The coins with the crown, withdrawn until May 1717,were reissued as token coins of 3 Öre K.M. or 10 Öre S.M. to "avoid waste". The "Publica Fide" coins were issued in over 3.800.000 pieces until June 1717. Meanwhile, another issue was announced, marked with the image of a knight and designated as "Wett och wappen", also to replace the previous issue. Over 9 million of them were made. The old coins were again reused as token coins, first as 4 Öre K.M., later were both types of coins set to 6 Öre K.M. and 6 Öre S.M. In January 1718 was announced another issue, with the image of a knight and a lion and the inscription "Flink och färdig". Over 7.300.000 were issued. In June 1718 were announced five more issues with images of Saturn, Jupiter, Mars, Phoebus and Mercury, to replace the previous coins.

At the time of king's death (November 1718) were 24.527.000 coins denominated to 1 S.M. in circulation. In addition there were 2.6 million dalers in money notes and 15 millions in obligations. Compare this to Görtz' estimate of currency in circulation from 1715 - 2 million dalers (which was probably too low - the state income of that year was 4 to 5 million).

The value of copper platmynts was raised in 1715 by 50%. Speculators made a lot of money on the revaluation, while debtors suffered, but all complaints were ignored by the king. Passed ostensibly to prevent their export, the measure worked and some platmynts were even re-imported. In 1718, copper was set to the original value, but could be in the meantime exchanged for notes, obligations or token coins, to aid in their circulation. Shortly after the devaluation, the platmynts had to be stamped under threat of confiscation, and then were to be revalued again. But the tricks did not bring the desired income as Görtz declared during his trial.

The export of gold and silver was already banned. The ban was renewed in 1717 with serious punishments. By March 1718 no private person could own the silver "Carolins" or foreign silver coin. From July could no one own any coins or unprocessed silver, all had to be exchanged for obligations and token coins, or confiscated.

But the new coins were not welcome. Punishment awaited those unwilling to accept them as early as 1717. The officers complained, that nobody wanted them, and copper miners could not buy anything from the peasants. At the end of 1717 had all trading to be supervised by soldiers and able folk, informants were richly rewarded. The peasants were duty-bound to bring their wares into cities. In Stockholm, trading except on public places and markets was banned. Withdrawing of wares from the market was punished and anyone's home could be searched. In 1718 were introduced price controls, for the goods bought by the army, the prices of bakers, brewers and all grains. The number of breweries and inns was reduced. Mining has suffered, but fines had to be paid if the planned production was not fulfilled.

In July 1717 was the agio of the token coins against sound coin reported as 22-24%. In May 1718 it was written, that 4 daler koppermynt buy more than 6 token dalers - which would be over 50%. After king's death were the token coins in 1719 devalued, the reports speak of 200 to 400%. A private report speaks of prices rising twentyfold, an official of 6-, 8- and 12-fold increases.

End of inflation
After the unclear death of Charles XII (there are claims of a conspiracy by his own soldiers) there were more attempts to issue new money, but these were eventually stopped. The token coins were to be exchanged from 1719 for half of their nominal value. But most of it was paid in debt obligations, the repayment of which took decades. Many of their owners got nothing in the end.

Görtz was successful in establishing a pure credit money and giving the king the means to wage a war. Even the economy was upheld for some time, though it had to became a planned economy of a sort, the freedoms of the subjects severely limited. After the king was dead, he was arrested and blamed for all the ills of the country. Without due process he was quickly sentenced to death and executed.

Links

 * The History of the Swedish Monetary System by Hans Högman, 2007
 * The multiple currencies of Sweden-Finland 1534-1803 (pdf) by Rodney Edvinsson, 2009