The Ambition of the North: From the Baltic to the Orient, November 1670
In the bustling port of Karl's Harbor, the masts of the East Indiamen made the low Nordic sky seem even lower, symbols of an ambition that extended far beyond Sweden's coasts. Far from being simple merchant ships, these giants of the seas were the vectors of a bold strategy, designed to transform Sweden's natural riches into an uninterrupted flow of wealth and prestige, destined for the opulent markets of Asia. The idea was simple: why confront the East with goods of minimal value there, when Europe was full of silver?
First Stage: Europe, the Precious Metals Market
The quays of Karl's Harbor echoed with the cries of the dockworkers as the first cargoes were loaded into the ships' holds. The air vibrated with the smell of tar and freshly cut wood, mingled with the metallic sound of forged iron bars and copper ingots being hoisted aboard. Sweden, with its mines at Falun, was an undisputed power in metals. Tons of high-quality iron, in the form of robust bars, smooth cannons, and sharpened tools, formed the backbone of the export. Alongside them, pure copper, gleaming under the pale Scandinavian sun, promised to satisfy Europe's insatiable demand for armament, construction, and nascent industries.
But the cargo was not exclusively metallic. Wood, pitch, and pine tar, vital elements for the maintenance and construction of fleets, were carefully stacked, ready to meet the needs of shipyards on the continent. Bundles of luxurious furs, soft to the touch and shimmering in the light, were also waiting to find buyers among the European nobility and wealthy merchants.
However, the fleet's master stroke lay in a revolutionary innovation: sailcloth textile produced at a negligible cost, with a quality superior to that of expensive classic fabric, was a marvel. The ships would have to avoid Amsterdam. The strategy was to sail to strategic ports where demand and prices were highest, where silver was most abundant. Lisbon, the Portuguese capital, was an important destination. Portugal, with its monopoly on vulcanized rubber and the resulting flow of silver repatriated from Asia, represented a potential source of fresh currency. Selling Swedish iron to the Portuguese would be a direct way of capturing a portion of that Asian silver even before the Swedish East Indiamen reached the Orient.
But first would come the English ports: Portsmouth, a rapidly expanding commercial and financial center, eager for metals and wood. France, with its bustling ports of Brest and Nantes, true naval shipyards, would be an ideal client for Swedish wood, iron, and tar, offering in return the liquidity needed to finance future Asian imports. The objective was simple: to convert Sweden's natural wealth and ingenuity into a maximum of silver metal. The bankers, financial architects of this enterprise, managed these transactions with a masterful hand, using letters of exchange and an extensive network of correspondents to repatriate the accumulated silver or transfer it directly to the departure centers of the East Indiamen. Each transaction was one step closer to the Orient, each piece of silver a promise of fortune.
Second Stage: The Voyage to Asia with Accumulated Silver
Once the ships' holds were filled not with wood and iron, but with the fruit of their European sales, the East Indiamen would prepare for the great voyage to India. Silver, the major and undisputed part of this new cargo, would be the only passport to the treasures of Asia. Tons of silver metal—gleaming ingots, renowned Spanish coins, or other recognized silver currencies, ranging from 80 to 120 tons of fine silver depending on negotiations, accompanied by vulcanized rubber if possible—would fill the dense holds of the fifteen giants of the seas and their escort of 10 frigates. It was the only commodity that Asia, in its grandeur, would accept in massive quantities in exchange for its spices, silks, and porcelain.
A limited quantity of very high-value or prestigious European products, such as finely crafted clocks, precision scientific instruments, or perhaps some specific luxury fabrics, could accompany this ocean of silver. But these items would be mere frills, curiosities intended for a few Asian elites; silver, and predominantly silver, would constitute the bulk of the export cargo.
The ships were already loaded with sufficient provisions for the long journey ahead, from barrels of fresh water to food supplies. The crews, experienced long-distance sailors, were reinforced, even if it meant hiring foreigners or intensively training Swedes. The survival of every man on board was paramount, as the success of the enterprise depended on their endurance and know-how. The space not occupied by the silver was optimized for the sailors' needs, ensuring a journey as safe and efficient as possible.
The wind filled the sails, and the East Indiamen of Karl's Harbor, heavily laden with their precious cargo of Swedish products, were preparing to leave the Baltics, heading for the distant horizons of Asia.
Estimated return: around spring 1672, a year and a half after their departure in this cold month of November 1670.
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Karl's Harbor, 1671: A Port, a City in Turmoil, and Boldness
Karl's Harbor, a strategic port in the making, was a city where the air vibrated with ambition. Sweden was going to concentrate a part of its naval power there, now with access to a dry dock. The goal was to make it a major center for Baltic trade. This was the place chosen by Joao. Okay, "chosen" isn't exactly the right word; "there's no better place in Sweden" would be more accurate.
That year, Joao decided to get into banking. The money shortage that was plaguing Europe, the exorbitant cost of long-distance trade, the dependence on foreign bankers—all of this irritated him. He dreamed of a solution, a way for the Sith Company, and by extension Sweden, to free itself from these constraints. His quest, as paradoxical as it may seem, didn't begin in the plush offices of money changers, but amidst smoke and sulfur, in the search for a new gunpowder.
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The Genesis of Innovation: From Gunpowder to Paper
Joao's persistent obsession with a new powder made him seem crazy, like he had found something, but not what he should have found long ago. The children often laughed about it, as he now took them with him whenever he was searching for powder, all while Beatriz had just given birth to their youngest, Karl.
Joao had decided to separate his Portuguese titles from his Swedish ones. Simao would become the Marquis of Carrascas, and Joao the Count of... ahem, maybe they needed to find another title besides "de Carrasca" too? Ha, Joao didn't care much about that.
The "obsession," as it was now called in the family, had even led Joao to collect rainwater "struck by Thor," something few understood, to mix it with tallow and sulfur. It yielded no results. While collecting it, he would shout at the storm, "I am a noble !! So take me seriously!!!!"
Simao and Joao, bewildered by the "obsession," didn't know whether to laugh or cry. They chose to look at each other before turning their gaze back to the "madman" shouting at who-knows-who "Thor" was! The former Cardinal Chigi taught them who Thor was when Joao visited O'pescador at Chigi's new monastery, which Dom Miguel had "sponsored," notably by purchasing many books.
But the "obsession" made Joao capricious. After repeated failures, he continued to search for this "new powder that no one had yet invented." He had observed how wood, abundant in Sweden—pines and firs almost without limit, but still with borders—decomposed under the action of water and time, forming a sort of fibrous paste. He took advantage of the new watermill installation on the Lyckebyån.
Joao came up with a bold hypothesis: what if this wood paste could replace saltpeter, that expensive and hard-to-obtain component? The first experiments were a resounding failure. Joao mixed the wood paste with charcoal and sulfur. The result? Once dried and powdered, it had none of the desired explosive properties. When lit, the mixture only smoldered slowly, with an acrid smoke and a lot of residue, a far cry from the detonation needed to propel a cannonball. Saltpeter was, and remained, the indispensable oxidizing agent. Joao left this research to others, and instead became interested in all the by-products that could give him a return on investment (ROI).
It was in the midst of these by-products that a serendipitous observation occurred. During the drying of certain mixtures of wood paste—or even of the wood paste alone that had been exposed to the sulfur vapors released by the experimental combustion of other mixtures—thin, astonishingly uniform sheets were formed. They were lighter than the original wood, and smoother than any coarse parchment.
It was then that one of Joao's assistants, an old papermaker used to rags, picked up one of these sheets. "My lord," he said, his eyes wide, "It looks like paper! But so fine, so... clean!"
Joao examined the sheet. It did not have the texture of typical rag paper, which was often coarse and full of impurities. This one, although off-white, almost cream, was surprisingly regular. The sulfur, used for the powder, had a bleaching effect on the wood fibers. This was a return on investment! At least potentially a new era for paper.
The paper thus obtained, while retaining a slight yellowish tint compared to the classic white of clothing and other rag papers, was of a higher quality and regularity than most traditional rag papers. Wood, that inexhaustible resource of Sweden, could be turned into paper...
"And is that interesting?" asked little Joao.
"Given all that I read, yes, it's extraordinary. I still need to do a cost and results study, but it's interesting..."
"Oh, and when are we going to go on the boat?"
"Soon enough." Joao thought about the probable war with Holland in a few years before correcting himself. "Yes, not long from now. Where do you want to go this time? Not Lisbon again. I already told you that's not possible for papa right now."
"To Riga!"
"Okay, agreed, we'll go there. Anyway, we have new ships to try out that should be arriving from France and England soon. They are big, very thick ships. Do you want to go to Riga in January?"
"Oh no, papa!! Not in January!"
"Hahaha! I'm just joking."
Later
And if paper could be produced in mass, at low cost, and with better quality and regularity, then the paper money that the Sveriges Riksbank was struggling to get fully accepted would take on a whole new dimension.
Once the process was refined, the pine and fir wood was ground into fine fibers, then macerated and boiled to form a paste, just like with rags and clothes. This paste was then introduced into fumigation chambers where sulfur was burned. Joao and his employees had discovered that the sulfur concentration and exposure time could be optimized to achieve maximum bleaching without destroying the fibers. It was an innovation that defined the quality of the paper, a new alchemy that transformed the Swedish forests into a reservoir of wealth even vaster than the wood used for the navy or charcoal.
Once bleached, the paste was spread on screens, pressed, dried, and sized, giving birth to sheets of paper of an unmatched quality, as far as Joao knew. The production cost of this paper was so much lower than that of rag paper, and the quantities he could produce were so much greater, that it represented a huge novelty. Joao decided to wait for the crew to launch a Karl's Harbor paper company, which should happen around the middle of this year, at the same time the Swedish fleet was coming to visit the first dry dock with their guild of naval masters.
As for the gunpowder, Joao gave up after four attempts, until he thought of his three children and the "obsession" resurfaced: latex: no, granite rock: no, a mixture of "Thor's water" and tallow: no, wood paste: no. And this thing: consolation, no... never. I used the by-products and it's potentially very profitable.
Wood pulp as a binder for the three classic ingredients (saltpeter, charcoal, and sulfur). This allowed for a more homogeneous mixture and better-quality granulation, just as tallow and nitric acid could have made nitroglycerin. But the rain contained it in too small a quantity, and Joao had no way of knowing this at the time. This would have made the powder more reliable and more powerful than earlier versions.
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The Nordström Bank: A New Model for Sweden
Joao was finally ready to launch the Sith Company's bank. The Nordström Bank would complete its negotiations with the Sweden Bank. The Sweden Bank's notes could circulate within the Nordström Bank, but only on the local market, trying to popularize the notes through deposits and loans within the limits the Sweden Bank would set. The initial capital would be 20 tons of fine silver, which, despite the costs, would allow for a better approach to all Swedish markets through its branches.
This bank would initially be autarkic in its internal monetary operation. No international letters of exchange, no foreign correspondents for the exchange of its notes. The Nordström Bank's notes would be exchangeable only in its own branches, which he planned to open quickly in the main Swedish cities and regions: Stockholm, Gothenburg, the mining centers of Bergslagen, and the merchant ports. The goal was to create a parallel monetary system, a bubble of Swedish liquidity, independent of the chaotic international money flows.
The core of the economic model was based on loans to depositors and local players. The Sith Company primarily targeted ambitious merchants, small landowners looking to expand their farms, and bold entrepreneurs who lacked capital in this liquidity-starved Swedish economy. He offered them loans at classic interest rates, but ones that were not very accessible for "small sums," often around 5% to 10% per year. These rates were attractive enough to stimulate investment, while more or less guaranteeing a neutral operation for the Sith Company, at least for its subsidiary bank. The interest was to be paid annually. The implicit, but very real, clause of these loans was the confiscation of assets (land, ships, stocks, equipment) in case of default. Joao and his crew, despite all their nobility, were realistic about the economic war that Holland would wage in a few years when the Baltic Trade Company and the Sith Company became "serious" competitors.
These loans to depositors and local players had several objectives for the Sith Company. Firstly, the interest collected on these loans largely covered the bank's operating costs—agency staff, vault security, building maintenance, and especially, the cost of producing his revolutionary paper.
The bank was designed to be an autonomous entity, generating its own revenue for its subsistence and expansion. Secondly, by financing local merchants, artisans, and small owners, the Sith Company promoted the "credibility of paper money by linking it to a certain amount of exchangeable fine silver," with access to a broader population than most international banks, and thus, growing control over commercial transactions in Sweden. Although these notes, if the Sweden Bank agreed to try this system this way, would probably not be accepted abroad, the merchants he financed would use the money (which he lent them or which they deposited with him) for their exchanges. By becoming the main provider of liquidity and credit for these decisive small players, the Nordström Bank would, de facto, become a bank of resistance to any Dutch incursion into the Swedish economy, while also having the ability to indirectly influence the flow of goods and capital in the Baltic Sea.
A crucial aspect of the Nordström Bank's charter, and a calculated measure of prudence, was a self-imposed limit on the issuance of notes. The charter would stipulate that the bank would never issue more notes than the Sveriges Riksbank itself would have been authorized to issue with a base of 20 tons of silver, or would simply act as a partner to the Swedish economy via the Sweden Bank. It was a measure of prudence, aimed at not flooding the market with paper money and maintaining confidence by respecting a kind of "issuance ceiling." The Nordström Bank's system would be a bit like an international banking system, but one that remained within Swedish territory.
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The European Context: The Great Silver Drain and Global Flows
To understand the audacity and relevance of this small enterprise, we must delve into the global economic reality. Most people do not pay attention to it; they have their hungry bellies and their copulation to ensure. But this was a period of "bullion famine." Despite the massive influx of silver from the Americas, about 200 tons per year, mainly via Spain, Europe paradoxically found itself short of precious metals.
The main reason was trade with Asia. Europe had an insatiable thirst for Eastern products: Chinese silks, Indian cottons, Moluccan spices, tea. But Asia, and particularly China and India, had little interest in European manufactured goods. The only thing they accepted as payment, in massive quantities, was silver metal. Thus, silver flowed from America to Spain, then from Spain and other European nations to Asia, with no direct physical return. This was a colossal and continuous "silver drain," which only Portugal had more or less managed to reverse through the export of vulcanized rubber. This revolutionary material was in high demand in India and China, who were willing to pay for it exclusively in silver.
European bankers saw their reserves dwindle, their liquidity dry up, and interest rates climb. For the rest of Europe, including Sweden, this created a structural and almost permanent silver shortage. Silver was constantly being siphoned out of their economies with no direct return. Banks were under constant pressure, struggling to maintain their reserves.
Loans were rare and expensive, investment was stalled, and economies were subject to deflationary pressures. It is in this context of extreme physical silver scarcity that the 20 tons of fine silver come into play. This capital was like an oasis in a desert of liquidity.
These notes, although not internationally convertible unless the Sweden Bank and its managers imposed it, offered an alternative for local transactions, relieving the pressure on rare silver. Merchants and small owners, desperate for capital and the difficulty of obtaining loans elsewhere, might find the means to invest through an intermediary system undisturbed by international trade.