I traveled with them to the Northern Song Dynasty

Chapter 355 Cai Jing: Consort Ye possesses great talent for governing the country and ensuring its stability.
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afterwards.

Lying in Zhao Yu's arms, Ye Shiyun yawned and said, "Your Majesty, I would like to appoint Cun'er as the chief manager of the Great Song Dynasty's money exchange and Shou'er as the chief manager of the royal money exchange. What do you think, Your Majesty?"

Upon hearing this, Zhao Yu suddenly understood! He finally realized why Ye Shiyun had urged him to completely open up the financial market and to establish a royal bank.

Zhao Yu didn't understand financial operations, but he knew it was a double-edged sword.

The establishment of fleets and the reclamation of colonies during the Age of Exploration (such as plantations in the New World and mines in Australia) required huge initial investments. After the establishment of the Open Bank, private capital could be pooled into large-scale funds through deposits and loans—merchants could borrow from the Bank to purchase merchant ships, colonists could mortgage future harvests to obtain agricultural tools and seeds, and the Royal Bank could concentrate Zhao Yu's funds to support his sons in expanding the territory of the Song Dynasty and the Zhao family in those unknown regions, solving the problems of the historical "European nobles + wealthy merchants sponsoring" model and the previous problem of scattered funds and insufficient scale when Zhao Yu invested alone.

Stock trading further mitigates risk and reward. If a merchant firm plans to follow a prince to open a new sea route, it can issue stocks to raise capital from hundreds of households. Even if the route encounters danger, the loss for each household is only one percent of the original amount. Conversely, if the ship returns laden with gold, silver, and various other profits, investors can receive dividends according to their shares.

This "accumulated wealth" financing method enabled more small and medium-sized merchants to participate in overseas trade, driving a geometric increase in the number of Song Dynasty merchant ships and the scale of trade.

The risks of the Age of Exploration were ever-present. Merchant ships could be sunk by storms, colonies could suffer natural disasters leading to crop failure, and conflicts with indigenous people could destroy trading posts. The emergence of insurance was precisely to exchange "small premiums" for "large-scale risk compensation"—ship owners paid premiums of one-tenth of the value of their merchant ships, and if the ships were lost, the insurance companies would pay 80% of the losses; plantation owners insured their harvests, and in the event of natural disasters, they could receive compensation for seed and labor costs.

This encourages investors and practitioners to venture into high-risk but high-return overseas businesses, preventing a single disaster from crippling the entire industry and stabilizing the sustainability of expansion.

The Industrial Revolution required the mining of coal and iron ore, and the manufacturing of equipment such as textile machines and blast furnaces. These industries also relied on long-term capital investment.

Money shops could provide mine owners with installment loans, allowing them to use the coal and iron ore they mined to offset principal and interest; the stock market enabled emerging factories to quickly raise funds to expand their scale, attracting more farmers to leave the land and enter factories, thus accelerating urbanization and industrialization. At the same time, the money shops' currency exchange and inter-regional remittance services broke down regional currency barriers, allowing gold and silver jewelry brought back from overseas to be quickly converted into capital for domestic industry, forming a cycle of "overseas expansion - capital repatriation - domestic upgrading".

However, everything has two sides.

The core of money shops, stocks, and insurance is "credit" and "expectation," but human greed can easily distort them into tools of speculation. If rumors circulate in a colony that a large gold or silver mine has been discovered, it may trigger a frenzy of stock speculation—the stock of a merchant originally worth a hundred strings of cash may be inflated to a thousand strings by speculators, even though there is no corresponding output. If money shops, in pursuit of interest, lend to speculators who have no ability to repay (such as lending to merchants who dream of mining based solely on "verbal promises"), once the rumors are debunked, the stock price will plummet, borrowers will default, and the money shops will collapse due to a run on them, which will then affect other money shops (depositors, fearing the safety of their deposits, will withdraw their cash in droves), triggering a chain of financial panic.

Although the Song Dynasty Money Shop had been operating for fifteen or sixteen years and had gained some financial experience, this did not change the fact that the financial regulatory system was not yet mature at that time.

If the Song Dynasty's money shops were to issue paper money indiscriminately to increase fiscal revenue, or if Emperor Zhao Yu ordered the royal money shops to issue more coins to accelerate overseas development, or if private money shops were to issue more coins (far exceeding their actual gold and silver reserves), it would lead to currency devaluation, soaring prices, and a sharp drop in the purchasing power of the copper coins that ordinary people had painstakingly accumulated, which would only exacerbate the people's suffering.

Furthermore, financial instruments naturally favor capital holders. Wealthy merchants can obtain high returns by opening money shops and purchasing stocks (for example, a large merchant might operate both a money shop and a shipping fleet, earning both loan interest and trade dividends), while ordinary artisans and farmers have neither the capital to open money shops nor the ability to bear the risks of stocks, and can only rely on wages or income from farming. Over time, wealth will concentrate in the hands of a few financial and trade oligarchs—who can use their capital to control overseas trade routes, domestic factories, and even influence policy by bribing officials (such as pushing the court to enact regulations that "favor money shops"), creating the potential for "capital interference in politics."

If the profits from the colonies are not distributed equitably, the conflicts will intensify.

Suppose that the profits from sugar production in the New World plantations are divided among the shareholders of the trading companies and money lenders, while the immigrants who go to the frontier struggle to make ends meet due to exorbitant taxes (such as interest on loans from money lenders and colonial administration fees), which could trigger an immigrant riot.

Domestically, high-ranking officials, wealthy merchants, and powerful figures engage in fraudulent activities in pursuit of stock market gains, rendering their businesses hollow and further destabilizing society.

Moreover, the instability of colonies would directly impact domestic financial markets.

If a fleet suffers huge losses due to natural disasters such as storms while en route to Huazhu or the Prince's Continent, not only will the insurance company have to pay out huge sums of money (which may even lead to its bankruptcy), but investors holding shares in the fleet will also lose everything, and in turn default on loans to money shops. The risks of a single colony are transmitted to the domestic market through the chain of insurance, stocks, and loans, forming a chain reaction of "overseas crisis - financial collapse - domestic turmoil".

Even worse, if some private money shops, envious of overseas income, want to "strike it rich" overseas, they might overdraw their credit by "living beyond their means" (such as lending to expeditions without considering their repayment ability). Once the public loses trust in these money shops, depositors will run on them, potentially shaking the very foundation of the Song Dynasty's finances. This would be far more destructive than a simple military defeat.

In short, the essence of financial instruments is "leverage for resource allocation"—if used well, it can give wings to the industrial revolution and overseas expansion of the Song Dynasty, transforming technological advantages into sustained national power growth; if used poorly, it will backfire due to the collapse of credit and social division.

If the Song Dynasty could achieve a balance between "liberalization and regulation," this double-edged sword could become a powerful tool for the empire's rise; conversely, if it only sought the benefits while ignoring the risks, it might repeat the historical mistake of "the bursting of financial bubbles." After all, financial innovation in any era needs to be guided by a mature system.

In other words, the key issue is not whether to open up these financial businesses, but whether to establish a matching regulatory system.

Ye Shiyun actually wanted her two sons to take responsibility for such an important matter.

Zhao Yu's first thought was that this was far too frivolous.

It should be noted that Zhao Cun was not yet eighteen years old; Zhao Shou was not yet seventeen.

Entrusting such an important task to two young men, Zhao Cun and Zhao Shou, was indeed a bit risky.

Moreover, the Great Song Bank and the Royal Bank will definitely be the two most important banks in the Great Song Dynasty. If Zhao Yu were to hand them over to Ye Shiyun's son, and given that Ye Shiyun herself is the most important driving force behind the Great Song economy, if Ye Shiyun were to act impulsively, the Great Song economy might experience a tsunami.

Furthermore, it is illogical to entrust such a crucial financial matter concerning the fate of the Song Dynasty to his two sons who are not yet fully adults, and it is likely to draw criticism from both inside and outside the court.

'In the game of power, balance and checks and balances are the only long-term solution.'

A sense of unease arose in Zhao Yu's heart. If such economic power were concentrated too much, it might attract criticism from both inside and outside the court, and even shake the foundation of the country.

However, Zhao Yu reconsidered.

Zhao Cun and Zhao Shou both inherited Ye Shiyun's genius. They showed amazing talent in numbers from a young age. In addition, Ye Shiyun personally taught them economics and finance from childhood. To be honest, in terms of ability, they are indeed likely to be the most knowledgeable people in economics and finance in the world besides Ye Shiyun.

Crucially, Zhao Cun and Zhao Shou are Ye Shiyun's sons, making them essentially the sect's holy sons. If anything happens that they can't handle, Ye Shiyun will help them. Most importantly, Zhao Cun and Zhao Shou are also Zhao Yu's sons; there's no reason for Zhao Yu not to side with his own sons.

Therefore, Zhao Yu was somewhat tempted.

Seeing that Zhao Yu did not immediately agree, Ye Shiyun knew that Zhao Yu probably thought Zhao Cun and Zhao Shou were too young and was a little worried about letting them do such a big thing. Ye Shiyun put her arm around Zhao Yu's waist and said, "Your Majesty need not worry. I will personally design how to regulate the reserve ratio of banks, establish financial regulatory agencies, formulate the Bankruptcy Law, and how to balance the gap between the rich and the poor through taxation. I will definitely not leave any future troubles for our Great Song Dynasty."

Upon hearing these economic and financial terms that even he himself was not very familiar with, Zhao Yu knew that even an economic expert like Cai Jing of this era might not be able to formulate these regulatory measures, which were advanced financial management techniques from later generations. After all, these were the wisdom accumulated by economic and financial talents all over the world over hundreds of years. Therefore, this financial regulatory mechanism really had to be established by Ye Shiyun.

Having figured this out, Zhao Yu instructed Ye Shiyun: "This matter is of great importance. You must not be lazy or negligent and cause trouble for the two brothers. Otherwise, I will not be able to explain it to my subjects."

Upon hearing this, Ye Shiyun gave Zhao Yu a quick kiss on the cheek and said, "When have I ever neglected important matters?"

Zhao Yu thought about it and agreed. Although Ye Shiyun was somewhat lazy and averse to work, she had never neglected her duties.

In Zhao Yu's opinion, Ye Shiyun's intelligence was simply too high. She could probably do her job well with only half or even less effort, leaving her with plenty of time to eat, drink, and have fun.

Thus, Zhao Yu made up his mind to use Ye Shiyun and her son to establish the financial system of the Song Dynasty, and also to let them manage his wealth.

……

The next day.

Zhao Yu handed over the "Proposal for the Establishment of the Great Song Financial System" given to him by Ye Shiyun to Cai Jing and other ministers.

Cai Jing was deeply shocked after reading it!
The brilliance of Ye Shiyun's "designed" financial system lies not in its complexity of techniques, but in its profound principles, which are ahead of their time by over a thousand years.

This system, based on "credit anchoring," is quite different from the contemporary money shops that rely solely on goodwill for circulation. Instead, it establishes a new financial system that can fully resolve all the troubles and bottlenecks currently facing the Song Dynasty.

Moreover, in the past, the rampant issuance of paper money in Yizhou caused prices to soar because there was no anchor. Now that the ironclad rules have been established, the circulation of currency is like a channel drawing in fresh water, with neither the risk of drying up nor the risk of flooding.

Its ingenuity lies in the fact that it not only liberalized the money shops, solving the problems and bottlenecks encountered by the Song Dynasty, but also devised a risk mitigation mechanism.

If a business goes bankrupt, it often leads to the collapse of money shops and depositors, like a domino effect.

Ye Shiyun's "bankruptcy liquidation order" prioritizes depositors' savings over commercial bonds, and the money shop's assets are split and paid out quarterly. This will transform the sudden collapse into a trickle, like a flood diverting into tributaries, preventing displaced people from blocking roads and shops from closing down.

Ye Shiyun came up with many, many, many more ingenious ideas like this.

This system is not a repair of the old law, but a reconstruction of the "way of wealth".

When people discuss economics today, they often focus on the profits and losses of a single city or merchant. However, this system considers how the wealth of the world can "generate interest, circulate, and be preserved." Like a chess player placing a piece, it may seem like only one move is being made, but in reality, the whole game is being planned. Every rule contains clever connections between different moves, and every layer of design contains the wisdom to prevent problems before they arise.

To put it simply, its advancement lies in breaking free from the conventional approach of "discussing wealth in isolation." It uses a self-consistent logic to weave currency, credit, and risk into an invisible net, allowing worldly wealth to circulate freely within it, while maintaining boundaries. This vision and framework impressed Cai Jing, who couldn't help but marvel at its ingenuity.

Cai Jing said with mixed feelings:

"Governing a country is difficult, especially in managing finances, which is like controlling a hundred horses; the slightest misstep can lead to chaos. For example, border garrisons require three million shi of grain and five hundred thousand bolts of silk annually. If the grain transport is delayed by half a month, the soldiers risk going hungry. Another example is the floods in Jiangnan, where building dikes requires the conscription of one hundred thousand laborers and tens of millions of catties of bricks and stones. If the conscription is excessive, it can lead to popular resentment or even a peasant uprising. Furthermore, there is the salt and iron monopoly. It is necessary to prevent smuggling and profiteering while also protecting the livelihoods of merchants. High prices cause public complaints, while low prices deplete the national treasury. Maintaining a balance is difficult even for the most astute strategist."

In the past, during the Qingli era, the Western Xia invaded the border. The court urgently dispatched grain and fodder, but because the granaries of various prefectures and counties were scattered and the transport commissioners delayed, the border troops were short of food for three months, and thousands of soldiers deserted. During the Xining era, the reform aimed to implement the Green Sprouts Act to help farmers, but because local officials imposed heavy burdens and levies, it became a tool for exploitation, and the people complained bitterly.

These predicaments all stem from the lack of fixed rules for wealth and the absence of a method for its use—money and silk are like scattered sand, difficult to accumulate and even more difficult to use. Even wise rulers and capable ministers often find themselves in a situation where they "have the will to do things but no money to support them."

However, governing a country is also easy, because once the flow of wealth is orderly, many predicaments will disappear like ice meeting the spring sun.

The system devised by Consort Ye was precisely the key to establishing the financial lifeline of the Song Dynasty.

With the rule of "credit anchoring," money can be used to offset real money, ensuring smooth circulation in commercial ports. This allows the national treasury to grow like a canal opening up the river, with annual revenue increasing naturally. With the method of "risk mitigation," although businesses and money shops may occasionally make or lose money, it will not affect the whole system. With people's livelihood stable, the people's hearts will naturally be with the government.

At that time, border troops could advance their provisions with money, and the grain transport would be scheduled on a ten-day basis, eliminating any worries about delays; dikes in Jiangnan could be built with loans from money shops, which would be repaid in installments over the years with taxes, allowing laborers to be hired and relieving the government of a heavy burden; and the prices of salt and iron would be determined based on the production and sales reported by the inspection department, which would both prevent smuggling and benefit the people.

All of this is because finances are managed in a structured and regulated manner, and what was once as difficult as climbing to heaven has become a matter of course.

The so-called governance of a country is simply ensuring that the wealth of the world is used where it should be used and where it should be used. When there is enough money, things are easy; that is the meaning.

At this point, Cai Jing sincerely said, "Consort Ye possesses great talent for governing the country and ensuring its stability..."

……

(End of this chapter)