Danish state bankruptcy of 1813

England attacked Denmark in 1807 during the Napoleonic wars, bombarded Copenhagen and made off with the fleet. Denmark became the ally of France and England declared war on Denmark. Rearmament resulted in soaring wartime inflation, since the state financed its military expenses by excess issue of banknotes. The war ended in 1814.

After 1810 wartime inflation in Denmark escalated so strongly that the value of money in relation to silver had to be written down drastically. In January 1813 this led to a new monetary reform, in which connection a new banknote-issuing bank, the Rigsbank, was established. It held the bank mortgage, i.e. cover for the new banknotes. This was a first-priority mortgage for 6 per cent of the value of all properties in Denmark. It was either deposited with the bank as a lump sum or paid in instalments. A maximum limit to the issue of notes was fixed and the old notes, the "kurantrigsdaler", were converted into new "rigsbankdaler" in the ratio 6:1. The same ratio was applied to government securities to be redeemed with the new notes. Since the state thus could not cover its liabilities, the monetary reform is known in history as the bankruptcy of the state.

The Rigsbank could not maintain the value of the new banknotes. Private means of payment flourished, and the value of the banknotes in relation to silver reached its lowest point, at 9 per cent, in September 1813. During the following years the price fluctuated strongly.

Inflation in numbers
In the entire period from 1660 to 1810, the wage for a day´s work was surprisingly constant, namely around 20 shillings (skilling). The Napoleonic wars and the bankruptcy of the state treasury in 1813, however, led to tremendous inflation, which brought the numerical value of a day's wage up to around 200 shillings. From 1820, the situation again stabilized, and a day's wages fell to a level of about 30 shillings, rising to about 50 shillings by 1850.

(During the entire Absolutist period, the currency system consisted of rigsdaler, mark and skilling. 1 rigsdaler = 6 mark and 1 mark = 16 skilling. That is, 1 rigsdaler corresponded to 96 shillings.)