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handling.”
    The success of this innovation led to a great inflow of deposits into the bank—400,000 copper daler
by 1660, just three years after its opening, the equivalent of $76 million in today’s dollars . And even sooner, the leaders of the bank came up with another financial innovation. As Palmstruch would later testify, Gustaf Bonde—the shareholder in the bank who was also its chief government inspector—“came to the exchange bank towards spring 1659 in the morning, stood there looking around, and exclaimed with these words: ‘I see here in the exchange bank good stores of money and it seems to me to be best now to make a beginning with the loan bank.’” That is: Hey, guys, we have all this money just sitting around. Why don’t we lend it out and actually make a return on it!
    Stockholms Banco began lending money to companies to finance their inventories of tar, salt, and sugar. And to noblemen and -women and holders of high government office, it began guaranteeing the loans with all manner of collateral. Land was the most common, but less conventional lending occurred as well: One woman borrowed 2,700 daler
against a silver candelabrum. And some loans weren’t collateralized at all, but were given only on the personal guarantee of one noble or another.
    The system worked great for a while. The country’s nobility enjoyed cheap access to credit and was able to live more comfortably than it might have otherwise. Merchants were able to borrow money to invest in the future. No longer reliant on their own savings to fund expansion, they could use somebody else’s savings for that purpose, with Stockholms Banco as the intermediary. Commerce flourished.
    That is, until King Karl X Gustav died in 1660, and the council that replaced him to lead the country—the new ruler was a small child at the time—decided to devalue the daler
.
The new currency had less copper in it than the old currency did, so the old plates were worth more than their official value would suggest. It would be as if the value of paper suddenly skyrocketed so that a dollar bill contained $1.10 worth of paper. The people of Sweden had a logical response: They all showed up at Stockholms Banco en masse to withdraw their old daler
.
    Palmstruch, of course, had lent out much of the money; it was no longer sitting in the vault waiting for depositors to show up. He dealt with this by trying to call in loans. This caused further problems: His clients, of course, had become accustomed to living in part off of borrowed money, and they either wouldn’t or couldn’t readily pay the bank back. Palmstruch wrote that people were showing up “every day in large numbers not only while the Bank is open but even extraordinarily at my home to assail me morning, afternoon, and evening, presenting their pledges and entreating me to be allowed to borrow money, which so moves me to Christian compassion and troubles my heart that also the burden of my office feels almost too great and unbearable.”
    One can almost imagine a distressed Palmstruch standing at the doors of his bank on the winding, narrow streets of central Stockholm, buffeted by the cold Scandinavian wind, crying like George Bailey in
It’s a Wonderful Life:
“You’re thinking of this place all wrong, as if I had the money back in a safe. The money’s not here.
Why, your money’s in the Petersson estate! And in Mr. Nilsson’s inventory of pickled herring! And in Mrs. Kristensson’s silver candelabrum!”
    Then, in 1661, Palmstruch found a solution that changed the course of finance forever.
    He might not always have had enough copper in the vaults to meet the demands of his depositors, but he could always print paper. He would issue paper notes that the holder could redeem for daler at will. He got the idea from paper receipts that copper mines issued to their workers and traded in their communities like modern currency. China had used paper money centuries earlier, but this was the