1738 - New policy creates inflation

In 1711, Johan Thegner became chairman of the board of the Bank of the Estates of the Realm (Sveriges Riksbank), which he then led for three decades. During this period, the bank and the government together conducted a cautious economic policy. Their aim was to restore the national finances and stabilise the value of money. But when the Hats took power in the Riksdag of the Estates, they decided that the bank's lending should increase. They gave strong economic support to the manufacturing industry and expended great amounts of money on wars against Russia and Prussia.

They arranged funding for this by allowing the Bank of the Estates of the Realm (Sveriges Riksbank) to print banknotes again. When the banknote printing presses started rolling, inflation began to soar. Venturesome speculators took advantage of this and purchased property, ironworks and valuable goods with borrowed money. They then held onto their purchases while inflation rose even further. After this, they sold the assets, repaid their devalued loans, and made a tidy profit on the deal.

Facts

The Hats and the Caps were the political parties that alternated in power in Sweden over most of the Age of Liberty of the 1700s.