Until the year 1873, silver had been used for centuries as the main currency for global trade. However, leading up to the year 1873, silver began gradually losing its hegemony as money to gold. The Latin monetary unit that was based upon gold was established in 1865 between several European countries. Germany and England which were both major trading partners for the Nordic countries switched to the gold standard: Germany in 1871 with the introduction of the gold mark and England with the gold sovereign in the early 1800s. The reason gold became the currency of choice was because of gold’s higher value-to-weight ratio, which meant that the cost of shipping and handling gold was less than silver. As countries began to exchange their monetary reserves by selling silver and buying gold, silver in relation to gold was becoming less valuable.
It was in this background that the three Nordic countries: Sweden, Denmark, and Norway, whose monetary system was based on silver, began to contemplate to switch to a gold standard. Thus, the Scandinavian Currency Union (SCU) was formed by Sweden and Denmark in 1873, which Norway joined in 1875. However, the fact that the three Scandinavian countries had a different system of counting, coupled with the different sizes and metal constitutions of their silver coinage complicated matters further. For example, Sweden used silver ‘riksdaler‘ that was based on the decimal system, while Denmark with the ‘rigsdaler’ and Norway with the ‘speciedaler’ based their system on fractions. These differences caused additional exchange costs and were a burden for merchants because of the significant regional trade that was conducted between these 3 countries.
Consequently, in 1873, Sweden and Denmark decided to create the first Scandinavian currency union based on the gold standard. The new system stipulated that the “krona” in Swedish and “krone” in Danish (crown in English) was to become the new unit of account, with it being divisible into 100 öre. The denominations of 20 and 10 kronor were made of gold, with 1 kg of gold being equal to 2,480 kronor. In other words, 1 gold krona was set to equal 0.403 grams of gold. In conjunction with krona gold coins, silver kronor and, later, banknotes were introduced in the three countries. All Scandinavian kronor were deemed legal tender and were freely interchangeable at par at either of the central banks that were part of the SCU. An important aspect of this system was that whoever held silver kronor or banknotes was entitled to have them exchanged for gold at the central bank.
Even though the SCU (Scandinavian Currency Union) system was standardized and the money in circulation was set to have uniformity of value, it was still decentralized. This meant that no central bank in the union-controlled the flow of gold. For example, if Norway had a trade deficit with a country outside the union (the value of its imports was higher than the value of its exports), it then meant that to bridge this difference, the country had to pay in gold. Thus, gold would flow out of Norway. It is here that the remarkable beauty of the self-adjustment mechanism of the gold standard came into play. With gold flowing out of Norway, the country’s money supply(gold) would shrink, leading to deflation, i.e. lower prices. With Norway now having lower prices of its goods (in terms of gold), other countries would then be interested in acquiring Norwegian goods, thus gold would flow back into the country, reasserting the balance between the country’s output and its money supply.
This system worked so well that the three central banks did not even intervene in the financial markets (in contrast to today) for almost four decades, and besides proving to be extremely efficient and easy to maintain, it also helped to foster trade, and thus prosperity.
However, the golden era of the near-perfect monetary harmony did not last forever. With WWI raging, Sweden’s central bank though it would be prudent to safeguard the nation’s gold and to temporarily suspend the free movement of gold and the convertibility of paper kroner into gold kroner. Norway and Denmark’s central bank followed suit. This decision was the first nail, in a series of many, that eventually led to the Union’s break-in 1924.
You can now buy the Swedish gold coins, Swedish 20 kronor Oscar II and Swedish 10 kronor Oscar II at Tavex AB. This is your chance to own a piece of Swedish history! It also makes for a great idea for a gift.
The obverse portrays King Oscar II. Around his effigy is the text “OSCAR II SVERIGES OCH NORGES KONUNG” which translates as “Oscar II King of Sweden and Norway”. Under the king’s neckline is the year of mintage.
The reverse depicts the coat of arms of Sweden. It is extremely rich in detail and contains a shield draped with an ermine cape and topped with a crown. The coat of arms is half encircled by the text “BRÖDRAFOLKENS VÄL”, and the denomination “10 kronor” or “20 kronor”.
Gold price in SEK has risen more than 25% in the last year (from 10 982 SEK/oz on 2018/11/09 to 14185 SEK/oz on 2019/11/11, at the time of writing this article.
As a special offer, Tavex is now selling Swedish Oscar gold coins with a free delivery offer which you can avail by typing in the code: OSCAR, when you check out from our webpage!
You are also welcome to shop at any of our 4 offices in Stockholm or to get a free consultation with our gold experts! Book your consultation today by calling us on 08-678 2030 or email us firstname.lastname@example.org