The first European banknote

Cité de l’Économie et de la Monnaie is to exhibit a fac­simile, a gift by Stockholm’s Myn­tkabin­ettet, of one of the first ever European bank­notes – a 100 daler note, issued by Stock­holms Banco in 1666.

 

Bank­notes first appeared in China around 1000 AD. They did not emerge in Europe until 600 years later, in Sweden.

As early as the beginning of the 17th century in the Neth­er­lands, the Bank of Ams­terdam began issuing bills to mer­chants in exchange for the deposit of cash, thus enabling them to trade amongst them­selves without having to phys­ically exchange their gold or silver coins, which remained at the bank. However, these bills were not yet bank­notes in the strict sense of the word in that they had no impact on the amount of money in cir­cu­lation: they were simple sub­sti­tutes for the deposited coins.

In Europe, the first real banknote was issued in 1661 by Johan Palm­struch, the founder of Stock­holms Banco, a private bank under State charter. Although the bank con­tinued to guar­antee repayment of the bank­notes in cash, it no longer main­tained strict parity between the amount of notes issued and the amount of cash deposited, as Johan Palm­struch con­sidered it unlikely that all the holders of bank­notes would ask to be repaid at the same time. And so the banknote was born, as a com­ple­mentary means of payment to coins.

17th century Sweden’s mon­etary history largely explains this rel­at­ively pre­mature emer­gence of the banknote in this country. The abundant supply of domestic copper pro­duced by the Falun mines had led King Gustav Adolph to order the issuance of dalers, large copper coins. Com­pet­ition from copper pro­ducers in the Far East then led to a depre­ci­ation in copper’s value as from the middle of the century, obliging the gov­ernment to issue heavier copper coins to maintain the parity between copper and silver coinage. To do so, it forged huge sheets of copper, weighing up to 19kg or more for plat­mynts, which were worth ten silver dalers. Other sheets, worth two silver dalers, weighed in at more than 3kg. The incon­venient size and weight of these coins nat­urally encouraged their owners to deposit them with the banks and the banks to ini­tially issue cer­ti­ficates of deposit, as in the Neth­er­lands. These cer­ti­ficates would become bank­notes as from 1661, when Johan Palm­struch decided to dis­so­ciate the amount of the notes issued by his bank from the amount of cash that his cus­tomers deposited.

While there are no remaining examples of the first bank­notes from 1661, a few notes have sur­vived from a slightly later issue, in 1666, including the 100 daler note men­tioned above.

Excessive issuance of bank­notes led Stock­holms Banco quite rapidly into bank­ruptcy. In 1668, a new insti­tution, Riksens Ständers Bank (the Bank of the Estates of the Realm, which would later become the Riksbank, Sweden’s central bank) was created to replace it, under the super­vision of Par­liament. Heedful of the exper­ience of Stock­holms Banco, however, the new bank refrained from issuing bank­notes until the early 19th century.

For more information about the Myn­tkabin­ettet collections.

 

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