Johan Palmstruch

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Johan Palmstruch (June 13, 1611 – March 8, 1671) was a Latvian-born Dutch entrepreneur, financier, and financial innovator. He is often credited with the introduction of paper money to Europe. [1]

Netherlands Constituent country of the Kingdom of the Netherlands in Europe

The Netherlands is a country located mainly in Northwestern Europe. The European portion of the Netherlands consists of twelve separate provinces that border Germany to the east, Belgium to the south, and the North Sea to the northwest, with maritime borders in the North Sea with Belgium, Germany and the United Kingdom. Together with three island territories in the Caribbean Sea—Bonaire, Sint Eustatius and Saba— it forms a constituent country of the Kingdom of the Netherlands. The official language is Dutch, but a secondary official language in the province of Friesland is West Frisian.

Financial innovation is the act of creating new financial instruments as well as new financial technologies, institutions, and markets. Recent financial innovations include hedge funds, private equity, weather derivatives, retail-structured products, exchange-traded funds, multi-family offices, and Islamic bonds (Sukuk). The shadow banking system has spawned an array of financial innovations including mortgage-backed securities products and collateralized debt obligations (CDOs).

Banknote Form of physical currency made of paper, cotton or polymer

A banknote is a type of negotiable promissory note, made by a bank, payable to the bearer on demand. Banknotes were originally issued by commercial banks, which were legally required to redeem the notes for legal tender when presented to the chief cashier of the originating bank. These commercial banknotes only traded at face value in the market served by the issuing bank. Commercial banknotes have primarily been replaced by national banknotes issued by central banks.

Contents

Biography

Johan (Hans) Wittmacher was born in Riga where his father was a merchant. Sometime in the 1630s, he moved to Amsterdam where he married Margareta von der Busch (1617-1677) before 1644. [2]

Riga City in Latvia

Riga is the capital and largest city of Latvia. With 637,827 inhabitants (2018), it is also the largest city in the three Baltic states, home to one third of Latvia's population and one tenth of the three Baltic states' combined population. The city lies on the Gulf of Riga, at the mouth of the Daugava river. Riga's territory covers 307.17 km2 (118.60 sq mi) and lies 1–10 m above sea level, on a flat and sandy plain.

Amsterdam Capital city of the Netherlands and municipality

Amsterdam is the capital city and most populous municipality of the Netherlands. Its status as the capital is mandated by the Constitution of the Netherlands, although it is not the seat of the government, which is The Hague. Amsterdam has a population of 854,047 within the city proper, 1,357,675 in the urban area and 2,410,960 in the metropolitan area. The city is located in the province of North Holland in the west of the country but is not its capital, which is Haarlem. The Amsterdam metropolitan area comprises much of the northern part of the Randstad, one of the larger conurbations in Europe, which has a population of approximately 8.1 million.

He became a commissioner in the National Board of Trade after his arrival in Sweden in 1647 and began submitting proposals for banking institutions to King Charles X Gustav in the 1650s. The first two such proposals were rejected but the third, which promised half the bank's profits to the crown, was accepted. He was made a Swedish nobleman under the surname Palmstruch and become a commissioner at the National College of Commerce.

Sweden constitutional monarchy in Northern Europe

Sweden, officially the Kingdom of Sweden, is a Scandinavian Nordic country in Northern Europe. It borders Norway to the west and north and Finland to the east, and is connected to Denmark in the southwest by a bridge-tunnel across the Öresund, a strait at the Swedish-Danish border. At 450,295 square kilometres (173,860 sq mi), Sweden is the largest country in Northern Europe, the third-largest country in the European Union and the fifth largest country in Europe by area. Sweden has a total population of 10.2 million of which 2.5 million have a foreign background. It has a low population density of 22 inhabitants per square kilometre (57/sq mi). The highest concentration is in the southern half of the country.

Charles X Gustav of Sweden King of Sweden

Charles X Gustav, also Carl Gustav, was King of Sweden from 1654 until his death. He was the son of John Casimir, Count Palatine of Zweibrücken-Kleeburg and Catherine of Sweden. After his father's death he also succeeded him as Pfalzgraf. He was married to Hedwig Eleonora of Holstein-Gottorp, who bore his son and successor, Charles XI. Charles X Gustav was the second Wittelsbach king of Sweden after the childless king Christopher of Bavaria (1441–1448) and he was the first king of the Swedish Caroline era, which had its peak during the end of the reign of his son, Charles XI. He led Sweden during the Second Northern War, enlarging the Swedish Empire. By his predecessor Christina, he was considered de facto Duke of Eyland (Öland) before ascending to the Swedish throne.

The first paper money in Europe (1666). Sweden-Credityf-Zedels.jpg
The first paper money in Europe (1666).

Stockholms Banco was thus founded in Stockholm during 1657 with Palmstruch appointed as bank director and general manager. The bank itself was nothing new as it was simply an imitation of the successful public deposit banks of Amsterdam and Hamburg, however Palmstruch himself added two important innovations. The first of these was to use money deposited into accounts at the bank to finance loans, however this soon became a problem as the deposits were usually short-term and the loans long-term, meaning that deposited money was unavailable to be withdrawn by account holders. [3]

Stockholms Banco in Sweden was the first European bank to print banknotes. The bank was founded in 1657 by Johan Palmstruch and began printing banknotes in 1661. It was to be the precursor to Sveriges Riksbank, the central bank of Sweden.

Hamburg City in Germany

Hamburg is the second-largest city in Germany with a population of over 1.8 million.

Loan transfer of money that must be repaid

In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations etc. The recipient incurs a debt, and is usually liable to pay interest on that debt until it is repaid, and also to repay the principal amount borrowed.

Palmstruch's second innovation, and his solution to this problem, was the introduction in 1661 of credit paper (Kreditivsedlar), the first European banknotes, which would be exchangeable at any time for the gold and silver coins they were replacing. [4] These were very successful, but the bank began lending more than it could afford and printed too many banknotes without the necessary collateral, leading to the bank's collapse in 1668. This led to the founding of the Sveriges Riksbank. [5] [6]

Sveriges Riksbank Sweden’s central bank

Sveriges Riksbank or simply the Riksbank, is the central bank of Sweden. It is the world's oldest central bank and the third oldest bank in operation.

Palmstruch was charged with irresponsible book-keeping and with not having the cash to repay these credit notes due to miscalculation and omissions in his book-keeping. He was unable to make up this shortage and in 1668 was sentenced to loss of his title, loss of his banking privilege, and eternal exile or death. The government reprieved the death penalty and Palmstruch was instead imprisoned. He remained in prison until 1670 and died the following year at the age of 60. [7]

Capital punishment, also known as the death penalty, is a government-sanctioned practice whereby a person is killed by the state as a punishment for a crime. The sentence that someone be punished in such a manner is referred to as a death sentence, whereas the act of carrying out the sentence is known as an execution. Crimes that are punishable by death are known as capital crimes or capital offences, and they commonly include offences such as murder, mass murder, terrorism, treason, espionage, offenses against the State, such as attempting to overthrow government, piracy, drug trafficking, war crimes, crimes against humanity and genocide, but may include a wide range of offences depending on a country. Etymologically, the term capital in this context alluded to execution by beheading.

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References

  1. Sven Fritz. "Johan (Hans) Palmstruch". Svenskt biografiskt lexikon. Retrieved April 1, 2019.
  2. "Palmstruch (Palmstruck), släkt". Svenskt biografiskt lexikon. Retrieved April 1, 2019.
  3. "Stockholms Banco 1657-1668". hem.passagen.se. Retrieved April 1, 2019.
  4. See Palmstruchska banken, Kreditsedel 10 daler silvermynt, 17 april 1666, alvin-record:47808 for a description and an image of such a banknote with Palmstruch's own signature
  5. Ingrid Van Damme. "The cradle of the European banknote stood in Sweden". Museum of the National Bank of Belgium. Retrieved April 1, 2019.
  6. "Historisk monetär statistik i Sverige 1668-2008". riksbank.se. Retrieved April 1, 2019.
  7. Rob Wile (April 8, 2013). "Here's Why The World's First Central Banker Got The Death Penalty". Business Insider. Retrieved April 1, 2019.