Instead, the value of the notes was set, for instance, by royal decree, that is the king or queen simply decreed what value the notes should have. Such money is sometimes called ”fiat money”. This is money that has no link whatsoever to metals or other material objects. Faith in such money must thus be created in some other way. We can view money as a "good" with special properties. It can be used to pay for things and it has a special information value, it is a measuring stick that makes it possible to compare prices. It also acts as a means of preserving value, it can be stored and saved to be used for future consumption. It is in this context that price stability comes into the picture. If inflation rockets, the money we have saved loses purchasing power. It was therefore quite natural  BIS Review 135/2009  1  that the central banks – when they were eventually given the monopoly for issuing notes – were also given the task of safeguarding price stability. In Sweden, the state, in the form of the Riksbank, first acquired the sole right to issue notes in 1903. One of the reasons the Riksbank was given this sole right was the desire to create a uniform and stable payment system. Previously, the banks had been able to fund their operations by issuing their own notes. However, when a bank went bankrupt its notes became worthless.
Apart from the fact that it was difficult to value the instruments themselves, the complex links between the banks and their special companies made it difficult to see the actual exposures of the banks. Eventually, no one knew where the risks  BIS Review 135/2009  3  were. The increasing amount of loans not only made investors highly indebted in relation to their equity, many banks also did not really have enough capital in relation to the risks they took. When economic activity began to decline in the USA and prices fell on the US housing market, many institutions suffered major losses. Uncertainty about who might be exposed to impaired assets led to trade petering out on a number of financial markets. Many banks now found it difficult to find funding on these markets. In September 2008, the major US investment bank Lehman Brothers filed for bankruptcy protection. This had extensive repercussions throughout the world. The global financial crisis escalated and the Swedish banks were also seriously drawn into the crisis. All over the world, banks and other financial institutions began to cut back their exposures and reduce their level of indebtedness. The decline in lending reinforced the downturn in global economic activity. This in turn accelerated the decline – many assets fell dramatically in value and the banks' loan losses increased. A vicious circle arose in the global economy in which the financial turmoil aggravated the weakening of the real economy and vice versa.