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In the 1700s Sweden was a cash-free society – quite simply because cash was in short supply. Back then, money could actually run out. But there was an alternative: promissory notes, IOUs that stated how much money one person owed another.
The promissory note stated who had borrowed the money, how much, and from whom. Anyone who wanted a loan first had to find someone who would lend them the money. As security for these loans, people would give everything from a pair of trousers to silver, gold or real estate. Sometimes it was enough to have a good reputation.
The promissory note could then be used for a large or small purchase. The person who was given it could then pass it on, and this was repeated over and over. The person who first lent the money was still the one who could demand it back. The name of every person who was given the note was written down. This created a chain of trust between these people. But what happened if someone died, when disputes or uncertainties arose, or when someone could not pay the money back?
Finally managing the economy became so complex that the State intervened. Sweden’s central bank did not have enough money of its own to be able to lend to everyone who needed cash. The Swedish Parliament (the Riksdag) therefore decided that people could open private lending banks under the supervision of the central bank. These banks were called discount houses (diskonter). The first one opened in Stockholm in 1773 and others followed in Gothenburg, Malmö and Åbo (Turku). They were given a time-limited permit to run their business and then had to be inspected.