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The monetary reform known as the bankruptcy of the state

After 1810 wartime inflation escalated so strongly that the value of money in relation to silver had to be written down drastically. In January 1813 this led to a new monetary reform, in which connection a new banknote-issuing bank, the Rigsbank, was established. It held the bank mortgage, i.e. cover for the new banknotes. This was a first-priority mortgage for 6 per cent of the value of all properties in Denmark. It was either deposited with the bank as a lump sum or paid in instalments. A maximum limit to the issue of notes was fixed and the old notes, the "kurantrigsdaler", were converted into new "rigsbankdaler" in the ratio 6:1. The same ratio was applied to government securities to be redeemed with the new notes. Since the state thus could not cover its liabilities, the monetary reform is known in history as the bankruptcy of the state.

The Rigsbank could not maintain the value of the new banknotes. Private means of payment flourished, and the value of the banknotes in relation to silver reached its lowest point, at 9 per cent, in September 1813. During the following years the price fluctuated strongly.

Last update: 05/04/2011

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