Abstract
From 1716 to 1718, Sweden experienced a shock of liquidity when the absolutist regime of Charles XII issued large amounts of fiat coins (mynttecken) in order to finance the Great Northern War. After the death of the king in November 1718, the new parliamentary regime decided to partially default on the coins. In international literature, this episode is largely unknown, and in Swedish historiography, scholars have often claimed that the country's currency collapsed in hyperinflation. We assess the performance of the new coins by studying how prices of commodities in various geographic locations developed. We also study bookkeeping practices in order to see how accountants treated the new coins. Our results show that there was a complex relationship between prices and liquidity. Prices of products in high demand by the military increased more than other prices. Accountants did not treat mynttecken and other currencies differently in 1718. It was only after the death of the king that accountants started to differentiate between different types of coins. The value of the fiat coins was linked to the actions and the legitimacy of the royal regime, which is in line with the State theory of money.
Highlights
From the early spring of to the late autumn of, Sweden experienced a shock of liquidity
We will assess the performance of the mynttecken by studying how prices of a number of commodities in various geographic locations developed from around to
We study bookkeeping practices, in order to learn whether accountants treated the new coins differently from other means of payment
Summary
Heckscher, writing at a time when the gold standard appeared necessary to maintain financial stability and with the hyperinflation in Germany of the early s a fresh memory, claimed that the effect of the massive release of new coins naturally led to massive inflation He asserted that prices increased on all products during this period. Later economic historians working on long-term trends and the functioning of markets have noted price increases in the period – on a number of goods. The state urged the Gothenburg and Stockholm magistrates to establish tariffs on imported rye and salt, in order to ensure that peasants could buy them at reasonable prices.
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