My Pen Pal Zhu Yuanzhang

Chapter 26 Circulation of Currency

The most important responsibility of the imperial court is to ensure the full circulation of currency?
Isn’t the imperial court used by the emperor to govern the country and bring peace to the world?

Zhu Yuanzhang felt that Li Han was wrong. The imperial court was the core of the country, a place that dealt with numerous affairs every day. The six ministries each had their own responsibilities. Which one was not important?

Moreover, the imperial court had no money. How could it pay salaries, provide disaster relief, and build water conservancy projects to ensure farming?
“I’m sure you must be confused, Mr. Zhu. The imperial court is the most important institution in the country. Its functions cover all aspects of a country. Why is its most important function to ensure the full circulation of currency?

Let me tell you a simple story and you will understand.

For example, if you, Mr. Zhu, go to a small town with beautiful mountains and rivers for a visit, you come to an inn, stay in the hotel, pay a deposit of one string of treasure notes, and then go sightseeing.

At this time, the innkeeper took the string of precious notes and paid the village butcher for the meat, and the butcher gave the string of precious notes to the old farmer who sold vegetables as money for the vegetables.

At the same time, the old vegetable farmer, who liked to gamble, owed money to the gambler, so he returned the one string of treasure notes to the gambler.

After the gambler got the money, he quickly paid the innkeeper back for the room.

Then Old Zhu returned to the inn and felt that this town was just a name, not as beautiful as your hometown Fengyang, and there was nothing to do. He didn't want to live there anymore, so he asked the owner to return the deposit of one string of treasure notes.

You see, this string of treasure notes was simply circulated once, and everyone paid off their debts. The innkeeper got meat, the butcher got vegetables, the old farmer made money, and the gambler stayed in the inn. The currency did not increase, but the output of meat and vegetables actually increased. In the end, the money returned to your hands, Old Zhu.

Old Zhu, do you understand the reason behind this?"

Circulation!
Zhu Yuanzhang spoke out unconsciously and quickly. According to his understanding, the currency must be used.

But Lao Li's example may be a bit of an underestimation of Lao Zhu. Although Lao Zhu is thrifty, he cannot get back that one string of treasure paper!

Maybe Old Zhu will even give a reward to the innkeeper.

“Look, this simple little story clearly explains what circulation is, doesn’t it?
Circulation actually has two meanings.

The first level is that everyone recognizes that currency is wealth and is willing to use currency. Its essence is that they recognize the credit of the court!

The second level is that money can flow fully among everyone.

The flow of wealth can ensure the full exchange of resources and meet the needs of all people. Wealth exchanges resources and resources generate wealth. The two complement each other and are indispensable. "

Yes, yes, that’s right!

Zhu Yuanzhang nodded vigorously. After reading this letter, his head became more and more itchy!

But his question was still not answered. The currency was in circulation, but where did the money for the court come from?

Mr. Li wouldn't say that it would be better to just let the court print banknotes directly, right?

"Seeing this, you may be confused. The currency is in circulation, but where does the money come from? If the court has no money, how can it guarantee the running expenses of the country?
Have you ever thought that since the currency is issued by the imperial court, wouldn’t it be better to let the imperial court print more currency?
This move is a big mistake. The imperial court can issue more currency, but it is only effective under certain circumstances. If the currency is issued excessively, the only result will be soaring prices, and money will become less and less valuable. In the end, the imperial court will lose its credit and the currency will become waste paper!"

Zhu Yuanzhang got goose bumps all over his body. It seemed that Old Li knew exactly what he was thinking.

It seems that treasure notes must not be printed casually!

"So, where does the court get its income?

It's very simple. You increase the amount of one string of paper money by 10,000 times, or even 100,000 times. Add 10,000 inns and 10,000 butchers. Then do the math and see if the people have gotten what they want. If the currency can circulate normally among the people, then the world will be peaceful.

As for what the court gained, a butcher might not have to pay taxes, but what about 10,000 merchants selling a million kilograms of pork meat? Would the court still collect taxes? "I see!

The answer is so simple: collect taxes!
Zhu Yuanzhang suddenly realized that his useful knowledge had increased.

“Of course, this simple little story is just an ideal situation. In reality, the situation is much more complicated than this.

For example, a vegetable farmer has a strong gambling addiction and is unwilling to pay back the money. Instead, he takes the money to the gambling house and ends up losing money and owing money again. The currency cannot circulate effectively and the debt increases again.

However, the gambling house owner had no moral principles and used his experts to cheat in the gambling house, making all the townspeople lose money to him. A large amount of money in the town was concentrated in the hands of the gambling house owner, and the money was once again not circulated effectively.

The gambling house owner used the money he earned from cheating to continue lending money to others to gamble.

This cycle repeats itself, with all the money concentrated in the hands of the gambling house owners, blocking the circulation of money in the town, making the poor even poorer, with no extra money for reproduction, and even no guarantee of survival.

What’s even more terrifying is that the gambling house owner doesn’t pay taxes!

Now, Lao Zhu, you understand the importance of the court ensuring the circulation of currency, right? "

Zhu Yuanzhang understood it clearly!
Because he had such a cruel and bloody experience!
When I was a child, there were years of natural disasters and some of my friends’ families had poor harvests and no food, so they had to borrow from the landlords. The landlords would usually lend the money at high interest rates, with nine out of ten returns.

With the interest compounding, the family certainly could not afford to pay back the loan, so they had no choice but to mortgage the land to the landlord. This cycle continued over and over again, and in the end, the land became the landlord's, and the family went from being self-employed farmers to tenants.

How many farmers have had their families broken up and their wives and children separated because of this!
I didn’t understand this principle before, but now I understand!

Old Li, here, I, Old Zhu, would like to call you my mentor!

“Therefore, the imperial court had to do its utmost to prevent the concentration of currency in a single group. In the Ming Dynasty, this group was the landlord gentry class!

One of the effective ways to prevent monetary concentration is taxation!
The essence of taxation is the redistribution of social wealth by the court.

"And Mr. Zhu, your tax source is probably very simple, right?"

Zhu Yuanzhang was stunned. Li Han's words were like a bolt from the blue, hitting him right in the heart!
Since the founding of the Ming Dynasty, the aristocratic class has not had to pay taxes. Ninety percent of the Ming Dynasty's tax revenue comes from agricultural taxes!
This also means that a large amount of money is concentrated in the hands of landlords and gentry because they do not have to pay taxes, while the farmers have less and less money because they bear a large amount of taxes!

At the beginning of the founding of the country, in order to win the hearts of the gentry in the south of the Yangtze River, he exempted them from taxes.

At the same time, in order to make all the scholars in the world submit to the Ming Dynasty, it was also stipulated that all those who passed the imperial examination would be exempted from taxes and corvee labor!

Then, all the burdens will naturally be borne by the farmers!

Although this policy felt inappropriate when it was first formulated, it was also a convenient approach at the time. Now, fifteen years have passed, and no major problems have arisen, so it has not been changed.

After Li Han’s reminder, he realized how serious the problem was!
"Therefore, how to levy taxes is a big question, but it is not the focus of this communication. Let's talk about it next time."

Zhu Yuanzhang was so angry that he laughed. Old Li, why are you always like this? Can you tell me the next time at the critical moment?

However, the following content immediately perked him up.

"Now that you understand what trade and currency are, let's talk about overseas trade and sea power.

Why, overseas trade is more efficient and can accumulate wealth faster and more long-term than plundering! "

(End of this chapter)