General History of Swedish Krona

Sweden has been using Krona as their national currency since 1873. Previously riksdaler was used as the national currency of Sweden. The name riksdaler came from a German word “thaler”. Many other European countries like Germany, Austria, Hungary, Denmark and Norway also made their currency name according to this word.

Like most other European countries Sweden used silver currency from the medieval period. But in 1625, Sweden introduced copper currency and switched to a bimetallic standard based on silver and copper. It is very common in bimetallic system that one metal drive out the other and in case of Sweden copper currency drove out the silver currency.

Sweden did not monetize copper currency because of any advantage of copper currency. Rather they wanted to make the demand and the price of copper higher. Sweden had numerous copper mining industries. Gustavus Adolphus, king of Sweden thought that if he could circulate copper as their currency, then the demand of copper will increase in the world market and so is the price. Unfortunately, this idea of the king failed to increase the price of the copper as Sweden increase copper production to meet the demand of domestic copper coinage system.

In 1661, banknotes were introduced for the first time in Sweden. Johan Palmstruch received the royal permission to form a bank in 1656 and after five years, his bank started issuing notes. But the paper money experiment seemed to be vulnerable. Johan Palmstruch’s bank over-issued banknotes and the bank failed. However, this bank was purchased and re-established as Riksbank which is the oldest bank in Europe now. 

Though Sweden’s first banknote issuing experiment failed, in 1745, Sweden postponed its copper standard and issued irredeemable banknotes. The issuance of notes was continued for subsidies to manufacturers. By 1745, Sweden imposed an inconvertible paper standard. The public did not panic this time but the inflation rose so much that it became their number one economic problem. Their currency depreciated in comparison to others making foreign product costlier in their market and Swedish products cheaper in the world market. In 1776 Sweden returned to a pure silver standard currency system.

In 1873 Sweden joined the “Scandinavian Monetary Union” with Norway and Denmark and replaced their currency by Krona. They adopted the gold standard to tame the inflation rate and also to avoid currency depreciation as gold standard was more stable than silver at that time. This union lasted up to World War I. After the war the union broke and the countries returned to their own currency system. Sweden chose to keep krona as their currency and still continuing this currency even though the other two countries have replaced their currency by Euro.