UNFORESEEN CONSEQUENCES

IN WHICH ONE THING LEADS TO ANOTHER

Riksbank governor Per Åsbrink defied norms by raising the interest rate without first telling the government what he planned to do. Insiders knew what to expect next. Åsbrink would be dismissed. He wasn’t.

Instead, Prime Minister Tage Erlander fired the chairman of Åsbrink’s board of directors, who had approved both the measure and its surprise announcement. Åsbrink promised not to ignore the Treasury again, but he didn’t apologize. He remained in his position until 1973

It turns out there is a Swedish account of the interest rate incident, by economic historian, Benny Carlson, co-author of the article on Dag Hammarskjöld, upon which a recent episode of this serial depended (The Central Banker and the Diplomat.) The Interest Rate Revolution, of 1993, hasn’t been translated and I don’t read Swedish. Thanks to translated sources, however, I know enough of the story to get by.

Åsbrink’s one percent coup had embarrassed the Social Democrats, the party that had governed Sweden without interruption for twenty-five years. Not only that, it had ended the low-interest rate policy, raising the cost of the government ambitious spending plans.

Finance Minister Gunnar Sträng was furious. As the second most powerful man in the government, he may have hoped to replace Erlander someday. If the prime minister wouldn’t punish the errant central banker, Sträng would do it himself.

Perhaps only one man grasped what might be the consequences. The interest coup would end ten years later, with a second successful coup. It would be more consequential than the first.