The Gold War: the dissolution of the Scandinavian Currency Union during the First World War

This article explains how the outbreak of the First World War resulted in the de facto dissolution of the Scandinavian Currency Union. Up until the First World War, the union among the central banks of Denmark, Norway and Sweden is considered to be a success. However, the outbreak of war brought cooperation to its knees. The article rejects two conventional perspectives on the break-up of the union. Firstly, that Denmark's and Norway's greater monetary expansion was pivotal to the break-up, whilst Sweden pursued a more prudent monetary policy. In contrast, the article argues that the disintegration of the union is better understood by the implementation of a unilateral Swedish gold blockade policy, influenced by Swedish economic theorists. Secondly, that Sweden in April 1917 finally solved her problem of continued gold inflows by threatening to withdraw from the union. Quite conversely, it is argued that Swedish the Riksbank had to give up her hard line, because Norwegian Norges Bank throughout 1917 forced through gold shipments to pay for Norway's trade deficit, which resulted in a virtual Gold War between the two countries. The scramble for resources saw cordiality being replaced by distrust, whilst national needs overrode any hope of cooperation.