The bubble
At the beginning of the 1800s a number of countries in Europe were at war. France tried to force other countries to stop trading with Great Britain. When the French forced Denmark into this Continental System or Continental Blockade, the British bombarded Copenhagen. When Sweden was forced to join the system in 1809, many people were worried but in Gothenburg not a single shot was actually fired.
The British fleet used its ships to blockade the Gothenburg archipelago but permitted the harbour to remain open for trade. The ships lay at anchor on the sheltered stretch of water called “the roads” out to the island of Vinga. With 10,000 soldiers and as many men in the transport fleet, the British were sometimes more numerous than the city’s entire population. The British needed to eat and drink, so the demand for goods increased greatly and thereby also the prices. Living in Gothenburg became expensive.
For the city’s merchants, though, war was good for business. They began to borrow money so they could buy more goods and make more profit. In the space of one year, the private lending banks, Göteborgs diskont and Göta kanals diskont, lent no less than seven million kronor. Called discount houses, these banks were the forerunners of modern banks and were important in the trading city of Gothenburg. Merchants who traded goods had a great need for loans, which were called trade credit.
However, the bubble burst. When peace came to Europe in 1815 the city’s economy returned to its pre-war levels. Fewer merchant ships came here and Gothenburg suffered an economic crisis. The discount houses crashed and were forced to close. Once again it became hard for private individuals and companies in Gothenburg to borrow money.