Knut Wicksell: Selected Essays in Economics - Vol. 2

By Knut Wicksell; Bo Sandelin | Go to book overview

19

THE GOLD RESERVE OF THE RIKSBANK

In the issue of the Economist dated 5 September 1914, there was a note that was said to come from ‘a high authority in Stockholm’ to the effect that it would be desirable if Swedish businessmen could be granted English credit on a temporary basis, in order to relieve the present shortage of currency available for use in foreign transactions. For at present, he explains, it is impossible to export gold from Sweden: ‘the 103 millions of kronen in the Swedish Riksbank are needed for the banknote issue, though our bank has suspended gold payments, following the example of all other countries except England.’

The point is presumably supposed to be that these hundred millions are intended to make the redemption of notes possible at that point in the future when convertibility can be resumed without risk.

Of course this may sound quite plausible, but is it correct? Has the size of our gold reserve any real significance for the convertibility of our notes into gold? If one looks over the figures on the size of the stock of banknotes and the gold reserve that have been published in Ekonomisk Tidskrift every month for the past 14 years, one discovers the remarkable fact that while the stock of notes undergoes continuous, significant fluctuations, often by 10 per cent, indeed up to 15 per cent or even more, from month to month, the gold reserve remains well nigh totally steady month after month, for years on end; the variations are so small that on a medium-sized diagram, they are hardly even perceptible. Yet at the same time, the gold reserve undergoes repeated expansions, generally by a million or a couple of million crowns at a time, obviously at the initiative of the Riksbank itself and with the intention of bringing the gold reserve into the ratio prescribed by law to the quantity of notes, which on average, for all its oscillations, has steadily gone up. As a result of these measures, in the period referred to, the balance of gold present in the country has gradually risen from less than 40 millions in 1899 to the current sum of upwards of 100 millions, while at the same time the quantity of notes outstanding has increased from 130-140 million crowns (the total note issue of the Riksbank and the private banks at that time, taken together)

Originally published as ‘Riksbankens guldkassa’, Ekonomisk Tidskrift, 1914.

-53-

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