Encyclopedia of Money: Sweden’s Copper Standard

Like most European countries, Sweden emerged from the medieval period on a silver standard. In 1625, however, Sweden monetized copper and switched to a

bimetallic standard based on copper and silver. As often happened under bimetallic systems, one metal currency drove out the other metal currency, and in Sweden’s case copper currency displaced the silver currency in domestic circulation, putting Sweden on a copper standard. Sweden’s copper standard remained technically in effect until 1776, but its operational importance ended in 1745 when Sweden introduced an inconvertible paper standard.

Sweden turned to a copper standard not because of any perceived commercial advantage, but because copper mining was an important industry in Sweden, and the Swedish government sought to increase the demand for copper. Gustavus Adolphus, king of Sweden from 1611 to 1632, felt that drawing copper into use as circulating money would reduce the supply of copper in world markets and lead to an increase in copper prices. Spain, then the foremost power in Europe, had furnished a recent precedent for the monetization of copper when it debased its own silver coinage with a copper alloy. Vellon was the name given to Spain’s debased silver coinage, which in the first half of the seventeenth century became virtually all copper in content. Spain’s de facto copper standard supplied the first stimulus to the copper industry, causing the Swedish government to look to the copper industry, which it controlled, as its main source of revenue.

Because the purpose of the copper standard was to create a domestic demand for copper, it would have served no purpose to reduce the copper weight of the copper coinage relative to face value. Therefore, the copper coins were full-valued coins, with the face value of the coins close in value to the bullion value of the copper. Because copper per unit of weight was equal to about one-one-hundredth the value of silver, copper coins on average had to be about 100 times the size of silver coins, and the sheer size of the copper coins seems to have been the major drawback of Sweden’s copper standard. In 1644 the Swedish government issued probably the heaviest coins in history, 10-daler copper plates weighing over 43 pounds each. In 1720 a Danish diplomat wrote home somewhat humorously about Sweden’s copper coinage:

A daler is the size of a quarto page … many carry their money around on their backs, others on their heads, and larger sums are pulled on a horsecart. Four riksdaler would be a terrible punishment for me if I had to carry them a hundred steps; may none here become a thief. I shall take one of these dalers back to you unless it is too heavy for me; I am now hiding it under my bed.

(Heckscher, 1954)

The transportation of any sizable sum of copper coins required the use of wagons, and problems associated with the transportation of the tax revenue came to the attention of the highest councils in Sweden’s government.

The copper standard failed to increase world prices of copper, apparently because Sweden increased domestic copper production to meet the increased demand for copper as coinage. Nevertheless, Sweden’s copper standard did lead to Europe’s first peacetime flirtation with paper money. Copper mines discovered that it was easier to pay miners in copper bills, representing ownership of copper, rather that the bulky copper itself. In 1661 Sweden saw its first bank notes based upon the copper coinage. These bank notes, the first in Europe, were an immediate success, being much more convenient than the bulky copper coinage. In 1656 Johan Palmstruch had received royal permission to form a bank and five years later his bank started issuing bank notes. Paper money experiments, however, seem to be especially vulnerable to the pitfalls of success. Palmstruch’s bank overissued bank notes, the public staged a run on the bank, and the bank failed. The failed bank,

however, was purchased and reorganized as the Riksbank, now the oldest central bank in Europe.

Despite the fear inspired by the collapse of Sweden’s first note-issuing bank, in 1745 Sweden suspended its copper standard and issued irredeemable bank notes. Monetary disorder marked Sweden’s paper-money experiment until 1776 when Sweden returned to a pure silver standard.