The history of money – why do we need cryptocurrencies part IX

In our cycle we reach the end of the Middle Ages. However, before we go further, it is worth getting acquainted with the achievements of China in the field of money.

The climax of the power of medieval China occurred during the reign of the Tang dynasty in the 7th and 8th centuries. The Middle Kingdom ruled then – beyond its indigenous territories – also Tibet and today’s Afghanistan. In the capital, the city of Chiang Kai, lived 2 million. people, which means that in the ranking of the most populous cities of the Middle Ages it was in the first place. What’s more, in the seventh century, the entire population of the country amounted to 50 million. Later it doubled, which means that every fourth Earthman was then a Chinese.

Trade and beginnings of banknotes

Tang’s family knew that wealth was born from trade. He maintained economic relations with Byzantium, India, Indonesia and Siam. The basis of the economy was grain. Especially rice, which even in medieval England was considered a luxury good (it was eaten by lords rather than farmhandlings).

China also invented paper, and hence paper money (first in the form of bills of exchange), which appeared here at the turn of the eighth and ninth centuries. In 812, its emission was taken over by the central authority.

Strict bank notes began to be put into circulation in the 10th century by 16 private banks. Already in 1023 their emissions were taken over by the central bank. Initially, every banknote was kept in gold. In addition, money was exchanged every three years (it was about their physical consumption). Excessive production of banknotes in the twelfth century, however, led to – it will not be a surprise for the readers of this cycle – inflation.

The Mongols

In the twelfth century, Mongolians entered the stage of history on their shaggy ponies, who in the early 13th century were overrun by the Chinese state. What is interesting, however, did not destroy the country and its culture, but they introduced a friendly dynasty to the throne and introduced a reform on the money market. The Yuan Dynasty introduced the so-called silk bills, which had a silk cover (we know that today it’s a little like to put a dollar on flannel shirts, but then it was a very luxurious item).

The description of the money production was described by Marco Polo – a Venetian who came to China in the second half of the thirteenth century. In the book “Describing the World” he wrote:

“And all this money is sealed with the seal of the Great Khan. And all these paper money are made with such seriousness and solemnity as if it were pure gold or silver, because on each of them a few officials assigned to it sign their name and stamp their stamp, and when all will be done, the highest minter, established by the emperor, he submerges his seal in cinnabar and seals it with money, so that the shape of the seal is reflected on him with cinnabar red; such a coin has full value. Every forgery is punished with death. This coin releases the Chan in such a large quantity that it could buy all the treasures of the world for it. ”

Reform continued

Another reform in the field of money was introduced by the famous Ming dynasty. She introduced a new banknote that was in circulation for 200 years. He only had one denomination, but he lost its importance to silver again due to inflation.

China again started experiments with paper money in the 17th century and again led to inflation, which is mentioned as one of the reasons for the fall of the Ming line. After these events, the ore was returned as a form of currency, while the Chinese came into contact with banknotes only in the 19th century.

To be continued…

image: imf.org

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