This article commemorates the grisly end of Baron George Heinrich de Goertz - a good man who found himself in the central
banker's hot-seat at the wrong time.
in the 17th century was not the peaceable country of today. Enjoying the best
metalworking and gunmaking technology of the day
the Swedes were the military masters of northern Europe. There were frequent
wars against Russia, Denmark, Poland or Germany. They were expensive too.
1604 an equivalence of bullion to coined money was enacted in Sweden, but it
established a 15% premium on coins, a profit which would have accumulated to
the treasury and helped to finance the Swedish army.
This was a steep cost and it made the scheme
ineffective. Swedish silver bullion simply exited to Amsterdam to be coined
by Dutch banks into Florins, which were used to buy trade goods which were in
turn sold back in Sweden. Sweden's silver reserves quickly disappeared
A follow up enactment by the Swedish king
Charles IX in 1607 decreed that silver could be deposited ounce for ounce in
return for redeemable dalers, the Swedish currency.
The invitation was not widely taken up, presumably because the public
understood the value of custody. Nonetheless an unlimited statutory right
existed to coin privately owned bullion. It became known as a "Patent of
Free Coinage". In effect there was now a two way capability of transfer
between bullion and coin in unlimited amount - even if there was still little
in the way of precious metals in Sweden.
There were yet more silver depletions through
the treaty of Alvsborg, under which the Swedes paid
pretty much everything they had in ransom for the return of a fortress lost
to the Danes in war. Thereafter, in the absence of anything better, and
because Sweden controlled the world's best copper mines, an old currency of
highly overvalued copper coins started to circulate.
The Swedes may have been running on empty as regards
precious metals, but they were still a mighty military force, and these
copper coins were further issued in large numbers by Gustavus
II in 1625 to finance war against the vengeful and expansionist Ferdinand II
of Germany. It was Sweden's Gustavus who destroyed
Ferdinand's catholic armies in four campaigns and finally secured northern
Europe for its predominantly protestant population.
But now the military debts of the state
combined with a substantially overvalued copper coinage and a legislative structure
designed for commodity money to launch Sweden into an absurd copper currency
system. Copper came in, was minted to achieve its overvalued status, and
promptly sunk the money to its commodity production cost - which in a country
rich in copper mines was tiny. The monetary reserves of the majority of
the population were wiped out.
Gustavus' daughter Christina who ascended the throne aged 6,
had 12 years of childhood to comprehend these monetary mysteries before her
majority at 18, whereupon she instructed the issue of copper backed exchequer
bills called assignats which circulated as money,
and then a bank was incorporated which took in copper and issued receipts
called transport notes which were the origin of the modern banknote. The
notes were pleasing to use and - a problem with early paper - easy to forge.
To begin with this popular paper filled the
bank with copper. But the paper lost credibility and demand swerved
back to the solidity of metal. So the copper was cut into sheets, stamped not
very elegantly, and issued back into circulation as money in lumps weighing
as much as 15
kilograms [the example shown, from the British Museum,
is dated 1658 and about 65
People had to walk the streets carrying these
great slabs balanced on their heads. It was only inconvenient at first,
but then the world market dumped the commodity copper price as Swedish mines
lost their dominance and the money became useless as well.
It eventually fell to Baron George Heinrich de
Goertz to offer his services as central banker to
this copper rich, but otherwise now poor country.
He minted a representative currency in copper,
validated with the kings head and a legal tender
face value of a daler. He did not limit the issue,
nor ensure the quality of the coins which were beneath the technical
capabilities of the day. Moreover he attempted this exercise on behalf of an
administration which had lost virtually all financial credit with its
population, and compounded the error by allowing to develop a widely held
belief that at some unspecified time in the future collectors would refuse
the coins as legal tender payment of taxes. In other words he broke
every rule in the central banker's book. The coins were detested, and sloshed
around the Swedish economy depreciating rapidly.
Goertz had been a successful minister in other areas of
government and he never profited from the debacle, but he was still blamed
for the financial misery and the associated evaporation of Swedish power.
By all accounts in defence to the charge of
"ruining public credit with imaginary money" he put up a brave and
articulate defence - on his own behalf because he was denied counsel. It was
not enough. He was the modern world's first central banker to be beheaded, on
March 3rd 1719, and the punishment was popular.