Palmstruh and Paper Money in Sweden

History is a fragment of biology – the human moment in the pageant of species. It is also a child of geography – the operation of land and sea and air, and of their forms and products, upon human desire and destiny.

Will and Ariel Durant in The Age of Louis XIV

It’s been a little while since I’ve read Money by Jacob Goldstein, but I remember a fascinating vignette about goldsmiths in Britain being the first to create proto-paper money in Europe. Goldstein also discusses this in a Planet Money podcast that “China had actually used [paper money] hundreds of years earlier, but it’s a new thing in Western Europe.” He then goes on to discuss a charming ruffian, John Law, that used paper money to ruinous effect in France. I highly recommend giving the story a listen!

I guess Western Europe is not a super well-defined entity, but I was interested to come across this passage in the Durants’ The History of Civilization when reading about the zenith of Swedish power in the latter half of the 17th century:

To supplement the coinage of silver and gold, Charles [X Gustavus] commissioned Johann Palmstruh to establish a national bank and issue paper money (1656) – the first such currency in Europe.

Charles X Gustavus succeeded Christina, the daughter of Gustavus Adolphus in 1654. When Charles ascended to the throne, the Swedish monarchy was in a precarious financial state. Charles solved this problem by “reducing” (e.g. seizing) the holdings of the nobility. To further expand the economy, Charles also ordered chartered the first national bank, the Stockholms Banco (1657), and the first paper banknotes issued by a central bank (1661). These were managed by Johan Palmstruch (sometimes Palmstruh), a Latvian-born Dutch entrepreneur.

Initially, these paper banknotes were certificates of deposit for copper. Abundant domestic copper supply from the Falun mines lead to Gustav Adolphus ordering the minting of dalers, large copper coins. The value of these coins plummeted after competition from copper producers from East Asia, forcing the Swedish government to issue heavier copper coins to maintain the parity between dalers and silver coins. This quickly became impractical, with a 3kg sheet of copper being equivalent to two silver dalers. When the Banco opened, depositors eagerly exchanged these sheets of copper for certificates. In 1661, Palmstruch decoupled the value of deposited copper from the value of certificates issued, creating the first “modern” banknote.

Swedish riksdaler - Wikipedia
A sheet of copper weighing almost 20 kilograms worth 10 pieces of silver.

This experiment ultimately failed within 3 years. Predictably, the increased money supply initially stimulated the economy, but the overzealous issuing of paper money lead to inflation, a run on the bank, bankruptcy, and abandonment of the experiment by 1664.

Palmstruch was charged with irresponsible book-keeping and was sentenced in 1668 to a loss of title, loss of banking privileges, and a choice of eternal exile or death. This was later commuted to a life sentence, although Palmstruch died in prison by 1670.

As a side note, the Durants are an ample source of GRE vocabulary. Can you define?

  1. Celerity
  2. Seignorial
  3. Propitious


  1. Durant, Ariel and Durant, Will. The Story of Civilization 8: The Age of Louis XIV. Page 365-367.
  2. Goldstein, Jacob. Money. Atlantic Books, 2020.


  1. Celerity – Swiftness of movement. “Charles marched his army westward with Napoleonic celerity…”
  2. Seignorial – Relating to or befitting a nobleman. “By this reduction of seignorial holdings the state regained three thousands homesteads, and solvency.”
  3. Propitious – Favorable, indicating a good chance of success. “He [John III] had a propitious origin as the son of the castellan (military governor) at Cracow…”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: