Chongzhen revived the Ming Dynasty

The shift from the silver standard to the gold standard was a major change in the field of currency issuance.

This was something Zhu Youjian had been pushing for, so when he saw this possibility, he immediately became even more attentive to revising the Currency Law.

After pondering this matter, Zhu Youjian addressed his ministers:

"No matter what kind of paper currency it is, it needs to be backed by collateral in order to gain the public's trust."

"Among metal exchanges, gold has the highest value and is the most stable."

"I believe that the issuance of vouchers can be anchored to gold."

"It is stipulated that each yuan of voucher represents a certain amount of gold."

The courtiers didn't have this concept before; they just printed paper money however they wanted.

However, after the issuance of subsidiary currency, they understood:
Subsidiary currency could be exchanged for silver coins, so its value was stable.

The same applies to the issuance of vouchers; for stability, they need to be redeemable for goods.

The previously set resources were now being supplemented by gold and silver by the emperor, ultimately anchoring the supply to gold.

Han Kuang, who was in charge of the Planning and Development Committee and responsible for allocating corvée labor resources, strongly supported the issuance of vouchers.

However, he was highly skeptical of the emperor's claim that the vouchers were linked to gold:
"Your Majesty, while the gold supply is stable, the quantity is far too small."

"The imperial court has a considerable number of vouchers to issue, but not enough gold to be used as collateral."

Zhu Youjian chuckled and said:

"If we don't have enough gold, we'll add other supplies."

"If someone insists on exchanging, first see if they have any needs, and exchange for basic supplies such as food, cloth, coal, and steel."

"Those who don't need these supplies can exchange them for silver coins."

"Only after all the silver coins have been exchanged can gold be exchanged."

"The general order is: supplies, silver, gold."

"Gold is reserved for last, as the final anchor, the last piece of collateral."

This exchange method effectively acknowledged the status of silver coins. It was similar to a bimetallic standard or a parallel standard.

Gold and silver circulate according to their own value without interfering with each other, and the state does not regulate the exchange rate between the two currencies.

This concept is relatively easy to understand because the Ming Dynasty used both silver and copper coins and did not have a fixed exchange rate.

It wasn't until the establishment of the metal exchange that a guiding price for exchange was provided.

However, Zhu Youjian's setup was different; he incorporated supplies into this composite system.

Furthermore, it stipulated a minimum amount for gold exchange, making it closer to the gold bullion standard in terms of gold exchange.

This means that gold is rarely seen in daily circulation, and only appears in the form of vouchers.

Such a complex currency system left the courtiers scratching their heads, just as they had felt when the emperor first ascended the throne and they were completely baffled by the currency.

They thought that after a few years of adjustment, they would have become familiar with the emperor's methods, and the emperor would therefore delegate more and more power.

Unexpectedly, upon hearing these words today, they realized that the emperor had many more ingenious ideas, and they were far behind.
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Unable to understand, Zhu Youjian had no choice but to explain to these people what a monetary standard was.

Only after understanding the copper standard, silver standard, gold standard, and composite standard did they begin to grasp the emperor's words somewhat.

Zhang Pu, the youngest and most quick-witted among them, said with a hint of realization:

"I see!"

“In the past, when Zhang Jiangling implemented the Single Whip Law, he converted goods and corvée labor into silver, thus changing the copper standard to the silver standard.”

"No wonder there have been such big changes; silver is used everywhere."

Zhu Youjian nodded in approval and said:
"Our dynasty has never minted many copper coins; in the early period, we used paper money."

"However, because the paper money was issued indiscriminately without any collateral, its value continued to decline. For the sake of convenience in transactions, people turned to the more stable silver."

"When the seas were opened during the Longqing reign, Westerners brought the silver they mined, and the silver price of silver soared. Zhang Juzheng took advantage of this and adopted the silver standard."

"However, his silver standard was not thorough. Not only did he continue to issue paper money and copper coins, but he also did not mint coins for silver."

Speaking of Zhang Juzheng's actions, Zhu Youjian commented:
"Silver is more stable than paper money, and it is more convenient to receive silver than to receive goods. Using the silver standard is a step forward."

"However, if the court does not mint silver coins, it will lose the right to mint coins, which will lead to problems such as fire loss and fineness. Moreover, the price of silver fluctuates greatly and is greatly affected by external factors."

"Therefore, after I ascended the throne, I immediately minted silver coins and centralized the right to mint coins back into the court."

"But this only addresses the symptoms, not the root cause. The Ming Dynasty does not have enough silver and has always relied on foreign countries, which puts it at a great disadvantage in currency exchange."

"Besides, silver isn't very useful, so exchanging it for silk or porcelain would be a huge loss."

"If there is currency that can replace the function of silver, the Ming Dynasty will not need to use goods to exchange for useless silver."

This view has always existed in the Ming Dynasty. Many people believe that silver is not very useful, and that the Ming Dynasty is losing money by exchanging wearable silk and usable porcelain for silver.

Unfortunately, due to the collapse of paper money, people only accepted silver. Without using silver, there was no more convenient medium of exchange.

Now that Zhu Youjian wanted to replace silver with gold, Han Kuang inquired:
"If we're talking about useless things, gold and silver are the same; they're not very useful either."

"What difference could there be between using silver and using gold?"

"The difference is huge," Zhu Youjian explained.
"The Ming Dynasty doesn't produce much silver, but it does have some gold mines."

“Especially now that we are developing overseas, gold mines have been discovered in North America and other places, and there are also some in the Mohe area.”

"In this way, the Ming Dynasty can produce a large amount of gold domestically, and the silk and porcelain that need to be exchanged for silver can be exchanged for gold."

"This gold was mined by the Ming Dynasty itself. People can use the gold they pan for to buy goods and have more ways to make a living."

"I have decided to allow all Ming citizens who have emigrated overseas and settled in other places to go gold panning and receive half of the profits."

This was his measure to encourage immigration and move more people out of the country.

Han Kuang knew how much pressure the Ming Dynasty faced in terms of immigration, and upon hearing this, he immediately fell silent.

Since the Ming Dynasty produces its own gold, it should naturally use more gold.

Chen Jiru, who is quite sensitive to finance, also gave a reason to support pegging the gold price:

During the Wanli era, one tael of gold could be exchanged for seven or eight taels of silver.

"During the Tianqi era, when Wei was in power, all the officials who flattered him presented him with gold cups, and the price in Jiangnan once rose to thirteen gold cups."

"After Your Majesty ascends the throne, there will be ten changes of rulers."

"After the metal exchange was opened, the exchange rate rose from one tael of gold to thirteen taels of silver in Japan to thirteen taels recently."

"Gold is more valuable and more stable than silver."

"I believe that the ultimate anchor of the voucher should be gold."

This phenomenon has attracted much attention in Beijing.

Some well-informed officials even participated in buying and selling gold.

Anyone who frequents metal exchanges agrees that silver is more stable than copper, and gold is more stable than silver.

Therefore, the collateral for the paper money issued by the imperial court should be gold, not silver.

Zhu Youjian praised him, saying:

"That's exactly why there's more silver than gold in the world, and the amount of silver being mined is increasing while the price of gold isn't keeping up."

"The value of gold will continue to rise in the future, and it will be far more stable than that of silver."

"In the West, due to excessive silver production, the gold-silver ratio has risen to 1:15."

"I intend to set the currency value according to this exchange rate to avoid being taken advantage of when trading with Westerners."

This news gave the assembled officials a jolt. Some were already thinking of converting their silver into gold as soon as possible—

Although the price of gold is already high enough, according to the emperor, it needs to reach a ratio of one gold to fifteen.

As for copper coins, they are even less valuable. Currently, there is a silver shortage, and the exchange rate for copper coins has been steadily rising. Many households that previously kept copper coins have switched to saving silver.

Nowadays, it seems that storing silver is not safe either, so people are turning to storing gold.

However, Zhu Youjian wanted to adopt the gold standard, so naturally he hoped to collect more gold. He said:

"The Ming Dynasty's gold reserves are insufficient to meet the needs of transactions."

"Therefore, the imperial court's vouchers were not only secured by gold, but also by silver and goods, and the corresponding currency was issued according to the futures prices of bulk commodities."

"However, these things are not as stable as gold. If the imperial court wants to issue vouchers, it still needs to collect as much gold as possible."

“The Currency Act should include specific provisions for gold control, stipulating that gold mined from gold mines must be exchanged for vouchers.”

"Unless there is a legitimate need, each household shall not store more than ten kilograms of gold."

"The surplus funds will be purchased by the Gold Reserve Council and used to issue vouchers."

This regulation will clearly harm the interests of wealthy families.

The impact on ordinary people is minimal, as they are unlikely to possess ten kilograms of gold.

Most of the ministers in the imperial court were from wealthy families, and even those who were not wealthy had close ties with wealthy families.

Han Kuang objected tactfully:
"Your Majesty, for the vouchers to be recognized, they need to be traded in gold by the people."

"His Majesty forbids people from hoarding gold, so how can they accept vouchers?"

Zhu Youjian said solemnly:

"Why are you not allowed to hide gold anymore?"

"This is to prevent the stockpiling of gold, which would affect the money supply."

"If the money supply is insufficient, bartering or even levying taxes in kind will be necessary."

"As the Grand Secretary, don't you know the dangers?"

Han Kuang was speechless; he was not a tough person to begin with.

He lamented that he couldn't store more gold, and that storing silver carried the risk of devaluation.

He lacked confidence even if it were vouchers, unsure if he could redeem them for gold.

Once the vouchers are devalued into paper money, they become worthless.

Chen Jiru then said:
“It’s acceptable for ordinary individuals to keep their gold to no more than 10 kilograms, but temples may keep their items to no more than 10 kilograms, so we should make an exception.”

"But gold shops and the like need gold to make jewelry."

"I believe that the restrictions should be relaxed slightly to allow some people to own more gold."

Zhu Youjian frowned and said:
“A license is required to collect gold items weighing more than 10 kilograms, and a luxury tax must be paid.”

"As for financial institutions such as banks and money shops, as well as gold shops for industrial use, they can apply to the Gold Reserve Council for a gold business license."

"And they must be subject to the supervision of the Financial Reserve Committee and be subject to the allocation of funds by the Financial Reserve Committee in the event of a bank run."

The gold of these companies will be used as collateral for the vouchers.

In this way, if the vouchers encounter a run on the bank, the Gold Reserve Council can forcibly collect gold.

Furthermore, to prevent such a thing from happening, Zhu Youjian added:
"Gold exchange by the Gold Reserves Council starts at ten kilograms."

"Only when the weight reaches ten kilograms and there is a guarantee from a financial institution will it be allowed to be exchanged."

"Moreover, there are limits on the amount that can be exchanged, which are set according to the deposit reserve requirements of each financial institution. In principle, the amount that can be exchanged per month shall not exceed one ton."

"This is a limited gold bullion standard, designed to maintain the stability of gold prices as much as possible."

This was the system the US dollar operated under before the collapse of the Bretton Woods system. If even this couldn't be sustained, then the only option was to switch to fiat currency.

However, due to the failure of the paper money, the Ming Dynasty's monetary credibility was essentially nonexistent. Therefore, Zhu Youjian also relied on conscripted corvée labor and other resources, supplemented by material capital.

This way, even if the gold standard collapses in the future, there will be supplies to support it.

He was so focused on these things that he forgot about the acceptance level among his ministers.

Han Kuang advised him:

"Your Majesty, if the vouchers cannot be freely exchanged for gold, the people may not trust them."

"With so many restrictions, people will use the vouchers at low prices."

Zhu Youjian had considered this point and said confidently:
"It doesn't matter!"

"The imperial court allows taxes to be paid in vouchers, which represent gold."

"Furthermore, silver is currently the most widely accepted commodity. The imperial court controls gold, but it can loosen its control over silver."

"As long as you have the voucher, you can exchange it for silver coins."

In practice, gold and silver were used interchangeably, with silver partially replacing gold.

根据朱由检所知，黄金和白银1:15的比价，维持到了西历19世纪。1792年美元实行的金银双本位，就规定一美元折合371.25格令纯银或24.75格令纯金，金银比价是1:15。

He believed that as long as the exchange between vouchers and silver dollars could be maintained, people who preferred silver would be happy to accept vouchers.

He addressed his ministers:

"The gold-silver ratio in the West is 1:15. Based on this ratio, one tael (37.5 grams) of silver is equivalent to 2.5 grams of gold."

"Therefore, a one-yuan voucher represents 2.5 grams of gold, which is equivalent to a one-yuan silver coin."

"When the price falls below this ratio, the imperial court will use silver coins and vouchers to buy up gold indefinitely, and then use the proceeds to issue more vouchers."

“When the exchange rate is higher than this, it means that silver has depreciated. The Gold Reserve will then redetermine the exchange rate of the vouchers for silver coins based on the exchange rate of the metal exchange.”

"In short, we cannot let the people suffer losses; vouchers are more valuable than silver coins."

This idea is ideal, but difficult to realize.

Han Kuang pondered the emperor's words and asked:
"If silver depreciates and people rush to exchange their silver for coins, what will happen when there aren't enough coins?"

Zhu Youjian said confidently:

"No, the more silver depreciates, the less likely people are to buy it."

"Bad money drives out good money; this is a law in the financial field."

"After silver depreciated, it became inferior to gold, and people were eager to spend their silver coins. Just like those who hoard copper coins now are eager to spend them."

"At that time, there will be plenty of silver coins on the market, and the value of vouchers will be more stable."

Han Kuang frowned, not quite understanding. But he was too embarrassed to press further, so he asked again:
"What if the people don't accept the 1:15 exchange rate and sell off their gold in large quantities, leaving the imperial court with insufficient silver to buy it all?"

Zhu Youjian laughed heartily:

"That's even simpler, just give them vouchers."

"If you absolutely must have silver coins, then exchange them for gold overseas."

"Those in the West would be very happy to exchange silver for gold."

"However, this should not be done unless absolutely necessary; gold should be kept within the country as much as possible."

"You must remember that the value of silver will only decrease, gold is better than silver, and the ultimate anchor of vouchers is gold."

"The value of a one-yuan voucher is fixed at 2.5 grams of gold, but not necessarily in silver." (End of Chapter)