The article was more or less an explicit encouragement to readers to withdraw their money from the bank and go to the Riksbank to redeem it for gold: “Anyone who brings SEK 1,000 in banknotes to the Riksbank has the legal right to receive 50 SEK 20 [gold coins] and these currently have a value of SEK 1,450 – 45% profit on the most risk-free of investments”12 The final results were indeed an onslaught of people who wanted to redeem their banknotes at the Riksbank, who were therefore forced to raise the discount rate in order to defend the gold reserve. In connection with this, the Riksbank requested release from the obligation to redeem banknotes for gold, which was subsequently also granted. ...but it was also followed by deflation and recession However, shortly afterwards the trend was reversed. There were various reasons, including the weakening of international economic activity. But the most important reason for the severe turnaround in general prices was connected with the view of the monetary system that prevailed at the time. The political view was that Sweden should return to the gold standard as soon as possible, and to the parity that had applied before the war. To make this possible, the krona needed to be strengthened, which required bringing down prices and 11  See, for example, Fregert (2013) and Hasselberg (2021). 12 Statsvetenskaplig tidskrift, [Political science journal] May 1922, p. 151. 6 [14]  wages. It was therefore recognised that a period of actual deflation would be required.
Thus, we would need rules not only like the Stability Pact, for a maximum deficit in a downturn, but equally some forceful rule for fiscal rectitude in good times. Those rules are difficult to state as clearly as the 3 per cent limit, but one way ahead could be to define annual targets for actual net lending based on the predicted output gap. But why didn’t we see these problems from the beginning? Perhaps because we were fortunate to have something that can work as a temporary replacement for rules: clear objectives, strong leadership and the market as a quickly reacting judge. This existed not so long ago in Europe. The objective was to join the euro zone and achieve the convergence criteria. The leadership was provided  BIS Review 66/2004  1  by Germany both in terms of its economic size and its example of fiscal discipline. Now the objective of joining the euro has been achieved, and, in addition, Germany has lost its leading role and the markets react less to fiscal laxity. Instead of leadership towards clear objectives we have recently seen the opposite - the political exploitation of the gap between the national and European level. The requirements of the Pact are blamed on heartless “accountants in Brussels”, and when a majority puts narrow national political interests first the agreed rules become moot - “peer pressure” becomes “peer protection”. Incorrect facts are more or less deliberately sent to the Commission ahead of sensitive elections.