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Reintroduction of the gold standard

The price increases during World War I and the crises in the following years made it difficult to restore the krone's gold parity from before 1914, i.e. kr. 2,480 per kg fine gold. There were countless discussions of whether the krone should be written up to its par value – the honest krone where the gold value of 1 krone was 1 krone – or stabilised at a lower value. The Currency Act of 1924 adopted a gradual return to par from the level at that time, where the gold value of 1 krone was 65 øre. However, the measures to tighten the economy, to support the gradual return to par, contributed to very rapid appreciation of the krone, and the gold parity was restored already in December 1926. The reintroduced gold standard was a gold-bar standard, i.e. Danmarks Nationalbank was only obliged to encash amounts equivalent to the value of one bar of gold.

The deflation after the restoration of the krone's gold parity from before World War I affected the business sector very severely and brought unemployment up to 21-22 per cent. This was also a time of numerous crises in the banking sector.

Last update: 05/09/2011

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