In 1654 Christina, the young Swedish queen, caused upheaval when she abdicated and became a convert to the Roman-Catholic faith. Her extravagancy and the recently ended Thirty years’ war (1618-1648) had left her country with enormous debts. To make financial matters worse, her successor and cousin, Charles X Gustavus, continued warfare with Poland and Denmark. These lasting conflicts were a serious threat to the economy and caused a depreciation of the copper plate money or kopparplätmynt.
This money which was used for the first time in 1644 may well be called unique, because it was not exactly what we use to call small money. A plate with a value of 10 daler silvercoin measured 30 by 70 cm and had a weight of almost 20 kg. Such was the situation when Johan Palmstruch obtained 30th November 1656 the royal privilige to found a bank in Sweden.
Johan Palmstruch was born in Riga in 1611. As a young man he moved to Amsterdam but ended up in jail for a few years. He was arrested in 1639 because his creditors declared him insolvent and they feared he might flee the country without paying his debts. After his release however Palmstruch gave another version of the story and asserted he had enough money to settle his accounts. If this were true, other reasons might have been decisive. A plausible hypothesis is economic espionage, especially because later on in his carreer he often referred to the Bank of Amsterdam as example.
Palmstruch started his bank, the “Stockholm Banco”, in 1657. Formally this bank was a private enterprise but through various measures taken by the government it acted more or less as a government office. It was e.g. ordained that half of the net profits belonged to the Crown and that all customs revenues were to be paid through the bank. Consequently the bank became involved in the administration of the finances of the realm. During the first years the bank was very succesful, but later on a few shortcommings became obvious. There was a considerable cash deficit, the books were not well kept and the bank made loans too liberally, paying out the sums granted in the form of kreditivsedlar or credit notes.
What brought Palmstruch to issuing these credit notes?
Because the large and heavy copper plates were extremely unwieldy to say the least, paper currency had already found its way to Sweden: These were not kreditivsedlar or credit notes but intrest-free deposit accounts from the Exchange Department, cashier notes and promissory notes. Much of the copper plate money was deposited by customers in vaults of the Stockholm Banco in exchange for paper money. But in 1660 the copper money depreciated versus the silver daler and new plate money was produced with a weight of about 83% of the old plates. A rush to the bank was the result and people wanted to retrieve their old plates in order to sell them for their intrinsic value. Palmstruch feared a bank without assets and asked permission to issue kreditivsedlar. A draft Royal Decree enabled the bank to issue notes. They were to be legal tender and not to be issued to persons not holding cash deposits in the bank. They were to be issued in four currencies: ducats, riksdalers specie, dalers silver money and dalers copper money and each currency in diffeent denominations from 100 to 1000. Currencies and denominations were partly handwritten for the very practical reason there were no less than 76 denominations, i.e. 19 per currency. So far the draft. When this draft was debated in the Royal Council it was decided the credit notes were to circulate without any compulsion except for the tax-collector. In other words, the government looked on the notes as legal tender, although there was no offical publication saying so. In practice, notes were also issued to persons other than depositors, since loans agreed by the bank were paid in credit notes.
The first notes were issued in daler copper coinage and daler silver coinage in 1661 but not a single copy survived. Between 1662 and 1664 several series were issued but the most famous notes, the so-called Palmstruchers, date from 1666. The notes were made of thick, white handmade paper with the word “BANCO” as watermark. The front is printed in black and text, signatures and seals are within a figured frame. Also the copy shown in the museum dates from the same year: An 1666, 30 January. The first three digits of the date are printed, the rest is handwritten just like the number of the note. Apart from the personal seals of the signers, the seal of the Stockholm Banco appears in three different formats on the note: twice between the signatures and once in front of the number. On the back of the note there is a handwritten number, denomination and signature. Wafers of paper are attached to the back of the impressions to give the note extra strenght. The notes were issued in paper envelopes of which only one has been preserved.
The invention of kreditivsedlar offered Johan Palmstruch a place in the history of money and banking. Though there has been paper money long before his invention, the kreditivsedlar may be considered as banknotes in the modern sense of the word: they were on printed paper forms in round denominations and without specifying a depositor, a deposit or any intrest demand. The notes were payable to bearer, possession of the note was sufficient to constitute a claim to the bank. Finally, the notes were issued by an institution having the status of a central bank. Belgium had to wait until the Société générale pour favoriser l’industrie nationale issued its first notes denominated in Belgian francs in 1837.
Ingrid Van Damme
- Wiséhn I., Sweden’s Stockholm Banco and the first European Banknotes in Hewitt, V., The Banker’s Art. Studies in Paper Money, London, British Museum Press, 1995.