Bringing the Railway to Daming

Chapter 47: Paper Money in Lao Zhu's Eyes [Please Read]

Speaking of which, although Zhu Yuanzhang came from a humble background and lacked economic knowledge, he was not completely unaware of the disadvantages of indiscriminately issuing paper money.

Because one of the greatest sufferings endured by the people at the end of the Yuan Dynasty was that the Yuan court issued paper money indiscriminately, causing the money owned by the people to become waste paper!
Therefore, at the beginning of the establishment of the Ming Dynasty, Zhu Yuanzhang learned from the bad policies of the previous Yuan Dynasty and did not issue paper money at the beginning. Instead, he minted copper coins - Hongwu Tongbao.

However, after just a few years, Zhu Yuanzhang discovered that compared with the money needed by the Ming Dynasty, the Hongwu Tongbao was far from enough, even if some Song Dynasty copper coins were included, it was still not enough.

The main reason is the scarcity of copper.

The secondary reason is that coin casting is limited by technology and craftsmanship, and the number of copper coins that can be minted each year is limited.

Later, the money shortage even reached the point where in some places people were unable to use the ancient method of barter to trade, and even the imperial court's tax revenue was affected to a certain extent.

Seeing this, Zhu Yuanzhang had to issue the Ming Baochao in the eighth year of Hongwu.

Because he had suffered from the indiscriminate issuance of paper money by the previous Yuan Dynasty, Zhu Yuanzhang issued an edict at the beginning of issuing treasure notes, stating that the value of treasure notes was equal to that of copper coins.

One string of Ming treasure notes is equal to one string of copper coins, which is equal to one tael of silver.

Four strings of Ming treasure notes are equal to one tael of gold.

Baochao can be used instead of copper coins for any transaction, including paying taxes to the court!
It can be said that the Ming Dynasty treasure notes had been issued for several years, and although some officials, merchants, and civilians still resisted the treasure notes, there was no sign of them depreciating.

Last year, considering that the first batch of treasure notes issued had worn out due to long-term use and the writing was blurred to the point of being difficult to recognize, the court even promulgated the "Banknote Reversal Law", allowing the people to exchange old banknotes for new ones from the officials.

Zhu Yuanzhang believed that compared with the previous Yuan Dynasty's use of paper money to plunder the people's money, he issued the Ming Baochao and promulgated various policies because he really wanted to make the Baochao as practical as copper coins, or even replace copper coins to solve the money shortage.

But Liu Kuan said that later the Ming Dynasty treasure notes also depreciated to worthless like the previous Yuan Dynasty paper notes. How could he believe this?

How can I accept this?

He must ask Liu Kuan for an explanation!

In the past few days, Liu Kuan had gained some understanding of the current Ming Dynasty banknote system through chatting with servants in the mansion, colleagues in the court, and even shopping in the market.

He knew that the Ming Dynasty's treasure notes were still very strong.

It did not depreciate, nor did it reach the point where the government refused to allow people to pay taxes with treasure notes.

However, this does not change the fact that there are huge loopholes in the Ming Dynasty Banknote Law!

Therefore, after a moment of thought, Liu Kuan said, "Your Majesty, in fact, almost all countries in later generations have replaced gold, silver, and copper as currency with paper money."

Zhu Yuanzhang was surprised. "Oh? Doesn't this mean that issuing Ming Dynasty treasure notes to replace copper coins is a viable monetary system?"

Liu Kuan shook his head. "Replacing gold, silver, and copper with paper money as currency is indeed an inevitable step for currency law to go through as the times develop."

"But even in later times, there were still some countries that issued excessive paper money, causing great suffering to the people, to the point that paper money was abolished and the country's economy collapsed."

"The truly powerful and great nations all learned their paper currency methods by learning from the many failed experiences of previous generations."

"In this regard, the Ming Dynasty's banknote system, having drawn upon the experience of the Song and Yuan dynasties, was actually quite complete. The only major flaw remained undiscovered and could be filled."

Just one big loophole?
Zhu Yuanzhang became interested and asked anxiously, "What loophole?"

Liu Kuan said: "When the Ming Dynasty's treasure notes were issued, there was no guarantee, and no estimates of the gross national product and currency demand were made."

"This means that the issuance of treasure notes is entirely up to Your Majesty's will—Your Majesty can issue as much as you want."

"Perhaps Your Majesty still remembers the disaster of excessive issuance of paper money during the previous Yuan Dynasty, and has exercised some restraint in issuing Ming Dynasty treasure notes."

"But how can Your Majesty guarantee that in ten years, when the court finds itself in financial difficulty, you won't issue more paper money to alleviate the financial difficulties?"

Hearing this, Zhu Yuanzhang couldn't help but interrupt Liu Kuan and said, "Boy, I'm not afraid to tell you that the reason we want to issue paper money is because printing paper money is much more convenient and cheaper than minting copper coins."

"In that case, during the court's financial difficulties, why not issue a little more paper money to alleviate the situation? Just don't issue it as profusely as the previous Yuan Dynasty did."

Hearing this, Liu Kuan almost couldn't help laughing.

You may say that Lao Zhu has simple economic concepts, but he is also smart and knows that paper money is used for over-issuance.

But you say he is smart, he actually said such a thing, as if he was completely unaware of the harm of unrestricted printing of paper money.

After secretly shaking his head, Liu Kuan asked, "Your Majesty, how can you guarantee that the extra paper and pens you issued were only a small amount, and not excessive?"

"Also, Your Majesty can restrain himself from issuing excessive paper money, but how can we guarantee that the successive emperors of the Ming Dynasty will be as wise as Your Majesty and not issue excessive paper money?"

"In fact, as far as I know, historically, the Ming Dynasty's treasure notes began to depreciate uncontrollably after ten years, and one of the main reasons for this was the over-issuance of paper money."

"So the court began requiring that part of the sex tax be paid in copper coins. Later, when the treasure notes depreciated significantly, the court completely refused to accept paper money when collecting taxes, eventually rendering the treasure notes completely obsolete!"

"After Your Majesty, the Ming Dynasty had three wise and virtuous emperors: Yongle, Hongxi, and Xuande. They all tried to curb the devaluation of the treasure notes, but not only were they ineffective, but the situation actually worsened." "Ultimately, it's all because the Ming treasure notes didn't have a guarantee, and it's impossible to estimate the national production value."

Hearing this, Zhu Yuanzhang frowned deeply.

Although he still didn't want to believe what Liu Kuan said, he knew that Liu Kuan would not deceive him on this.

So I asked, "Why do we need to set up a guarantee for issuing banknotes? And why do we need to estimate the national product?"

Liu Kuan asked in return, "Your Majesty, do you know that in ancient times, when there were no copper coins, what did people use as currency?"

"When there were no copper coins, didn't people barter?" Zhu Yuanzhang was puzzled.

Liu Kuan shook his head. "Barter is certainly a form of transaction, but there are also things similar to copper coins, such as shells."

"Shells?" Zhu Yuanzhang was surprised. "They're plentiful on the seashore. How could they be used as currency by the ancients?"

Liu Kuan said: "In ancient times, few people lived by the sea. Shells flowed inland and naturally became rare. They were used as currency before gold, silver and copper were discovered."

"Gold, silver, copper, cloth, shells, and paper money can all be used as currency. This shows that currency is just a tool for transaction and a symbol of credibility."

"Except for banknotes, the above-mentioned items are all valuable enough or have a certain value, so they are trusted by people."

"Paper money itself is of very low value. If it is to become a currency that the people can trust, it must have credibility."

"That's where the security deposit comes from—in later generations, when countries issued paper money, they would use gold as a security deposit, and sometimes they would use both gold and silver."

“Generally speaking, when issuing a penny worth of paper money, it is best to have a penny worth of security.”

"Although in reality, the imperial court generally uses currency, there must be limits."

"According to later studies of ancient banknotes, mainly referring to the experience of the Song Dynasty, it is best not to exceed three times the deposit."

"As for estimating the national product, it's actually another layer of security for paper money—mainly to prevent too little or too much money from being used by the public."

"For the Ming Dynasty at that time, estimating the national product was too difficult to do, and it didn't have the same significance as it would later."

"To guarantee the value of the Ming Treasure Notes, all we need to do is establish a deposit system and allow the people to exchange copper coins for paper notes with government officials. That's all that's needed."

As for allowing direct transactions with gold and silver as currency, or even exchanging treasure notes for gold and silver with government officials, Liu Kuan did not mention it.

This was not allowed in later generations, and the fact that the Ming Dynasty did not allow it was an inevitable policy for the implementation of paper currency.

After listening to this, Zhu Yuanzhang pondered for a while and looked at Zhu Biao, "Biao'er, what do you think?"

Zhu Biao said, "Father, since my brother-in-law has pointed out the only and core loophole in our Ming Dynasty's banknote system, we should follow the experience of later generations and establish a deposit system."

Zhu Yuanzhang nodded and said, "Since that's the case, Liu Kuan, please write a memorial regarding the deposit and submit it to me."

"By the way, haven't you finished writing your memorial on the reform of the six ministries? When can you submit it?"

Liu Kuan was embarrassed.

He has been busy with the affairs of the Science and Technology Department recently and has forgotten about the memorial to the six ministries on reform. Fortunately, he was about to finish it.

Then he said, "In a few days, I will present both memorials together."

Empress Ma said at this time: "Zhongba, Kuan'er is busy with the affairs of the Science and Technology Department, and he also wants to write you some instructions for making telescopes and silver mirrors."

"Though these six reforms and the deposit are important, they're not urgent. Give him more time so he can think things through more thoroughly."

After listening to this, Liu Kuan thought to himself: The mother-in-law really loves her son-in-law.

Unlike Lao Zhu, who only knows how to exploit him.

Zhu Yuanzhang smiled after hearing what Empress Ma said, "Well, I'll give you a few more days to finish writing the memorial."

After this conversation, the lunch dishes were already served.

The palace dishes supervised by Empress Ma still tasted good, but Liu Kuan had lost his appetite.

He finished his meal in a hurry, said goodbye to the Zhu family, left the Forbidden City, and went straight to the Science and Technology Department...

　Please collect and read!

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　　Good night~
　　
　
(End of this chapter)