As you may know, after a while Stockholms Banco began issuing more banknotes than they had cover for in precious metals. After a while, distrust of Stockholms Banco began to spread and people wanted to redeem their banknotes for precious metals. We now had Sweden's first bank run, which one might say was Sweden's first financial crisis. Stockholms Banco was taken over by the Riksdag (Swedish parliament) and later became the Riksbank. It must be said that the banknotes were very popular and highly-valued as long as people trusted in their worth. Compared with coins, they weighed very little and could easily be carried around. They were also considered to be worth more than the corresponding amount in coins. It was not until 1904 that the Riksbank was given a monopoly on issuing banknotes. Prior to this some commercial banks issued their own banknotes. The banknote monopoly meant two things. Firstly, it resolved the trust problem. Unlike commercial banks, a central bank like the Riksbank cannot normally go bankrupt. The holder of a banknote issued by the Riksbank can always be certain that it has a worth corresponding to its nominal value. Secondly, the banknote monopoly established a unique payment standard that is set by the state; in Sweden the legal tender is banknotes and coins issued by the Riksbank. The use of having a uniform standard for payments, and having this standard accepted by all, saves time and energy for individuals to expend on other things.

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