A piece of paper, stamped with an official seal, saying it could be redeemed for 360,000 strings of copper cash. The government that issued it pulled this off six hundred years before Europe did.
In the first year of the Tiansheng reign of Emperor Renzong of Song, the government set up the Yizhou Jiaozi Office in Chengdu. Its capital was 360,000 strings of cash. In its first issue, it put out 1.26 million strings’ worth of notes, with a reserve ratio of 28 percent. Notes were issued in series, each lasting two or three years; when they came due, you exchanged the old notes for new ones. They took counterfeiting seriously, too: designs, codes, signatures, seals—the lot.
The rules looked pretty convincing.
And then they started breaking them. One rule at a time.
Wars cost money. Officials cost money. Soldiers cost money, too. Printing notes was a lot faster than collecting taxes. The History of Song, in its Treatise on Food and Money, sums it up in eight characters: “Without setting aside capital, they increased issuance without limit.” No reserves, but they kept printing. Printed paper could only be paper.
The Yuan issued Zhongtong notes; the Ming issued Da Ming Baochao. Every dynasty started out with rules written in the strictest terms, and every dynasty began printing more by the middle of its reign. During the Yongle era, the Da Ming Baochao became impossible to circulate. The government simply stopped accepting its own notes, and silver returned to the scales in everyday trade. Three dynasties faced the same problem and handed in a blank paper three times. Same old story.
A lot of people say ancient China never developed banks because it valued agriculture over commerce, or because capitalism never sprouted. They’ve got it backwards.
The Tang had feiqian, or “flying cash.” The New Book of Tang says merchants deposited money with regional offices or wealthy households, took a certificate, and then “presented the matching certificate at their destination to collect the money.” That’s remittance across distance. The Song had Jiaozi shops where you could deposit money, get a note, and withdraw it whenever you wanted. The Qing had piaohao—draft banks. Rishengchang, in Pingyao, opened in the third year of the Daoguang reign and ran for more than a century. Its signboard read: “Remittances reach the world.”
Deposits, loans, remittances, and settlement across distance. They had all four, centuries before Europe.
As I see it, the one thing they lacked was actually very simple. Not complicated at all.
The people who print the notes and the people who spend them have to be two different parties.
The government printed the notes at the Jiaozi Office, and the government spent them on military costs. There was no wall between the two, no institution that could tell it no, and no legally enforceable contract saying how much could be issued that year. When the treasury ran short, printing money was the only way out. The people doing the printing approved it themselves.
The Bank of England was founded in 1694. What it got right was this: private shareholders pooled their money and lent it to the king; the king repaid them with tax revenue; and the right to issue banknotes was placed in the hands of a corporation accountable to its shareholders. Limited liability came later, then the lender of last resort. Only then was the system complete.
No matter how big a money shop gets, that doesn’t make it a bank. A bank is what you get when the law separates the people who keep the books from the people who spend the money. That’s all there is to it.
The system built in 2008 solved the other half of the same problem. It took the power to keep the ledger away from a single institution and gave copies to tens of thousands of nodes across the network. If anyone tries to secretly print more, the books won’t add up. They simply won’t. That half worked.
The other half wasn’t done, and couldn’t be. It really couldn’t. When things go wrong, who opens the vault?
No one.
When a piaohao faced a run, its manager could still appeal to the government, and the government could still open the vault and release silver. When a protocol faces a run, the code keeps running and settlement keeps happening. There’s no vault to open. The algorithmic stablecoins that failed in 2022 were really just like the Jiaozi of old: both rested on credit that had never been tested. As long as it held, everyone thought this was more convenient than backing the notes with silver. But when it finally gave way, the queue outside the counter was full—and the people in it were the earliest customers of all.
Open your wallet now and take a look at the stablecoins you’re holding. How often does the issuer publish its reserves? Who audits them? Who pays the auditor? Those few lines are the equivalent of the sign outside the Jiaozi Office that listed its capital.
There are different accounts of when Rishengchang closed its doors. Some say it was liquidated in 1914; others say it shut down in 1923—a nine-year gap, with no definitive answer. A display at the Central Bank museum in Taiwan says the draft bank operated for 123 years.
Even now, I still look at the number on that signboard. It tells me more than any white paper ever could.
$BTC $USDC $USDT
#稳定币 #金融史 #currency
In the first year of the Tiansheng reign of Emperor Renzong of Song, the government set up the Yizhou Jiaozi Office in Chengdu. Its capital was 360,000 strings of cash. In its first issue, it put out 1.26 million strings’ worth of notes, with a reserve ratio of 28 percent. Notes were issued in series, each lasting two or three years; when they came due, you exchanged the old notes for new ones. They took counterfeiting seriously, too: designs, codes, signatures, seals—the lot.
The rules looked pretty convincing.
And then they started breaking them. One rule at a time.
Wars cost money. Officials cost money. Soldiers cost money, too. Printing notes was a lot faster than collecting taxes. The History of Song, in its Treatise on Food and Money, sums it up in eight characters: “Without setting aside capital, they increased issuance without limit.” No reserves, but they kept printing. Printed paper could only be paper.
The Yuan issued Zhongtong notes; the Ming issued Da Ming Baochao. Every dynasty started out with rules written in the strictest terms, and every dynasty began printing more by the middle of its reign. During the Yongle era, the Da Ming Baochao became impossible to circulate. The government simply stopped accepting its own notes, and silver returned to the scales in everyday trade. Three dynasties faced the same problem and handed in a blank paper three times. Same old story.
A lot of people say ancient China never developed banks because it valued agriculture over commerce, or because capitalism never sprouted. They’ve got it backwards.
The Tang had feiqian, or “flying cash.” The New Book of Tang says merchants deposited money with regional offices or wealthy households, took a certificate, and then “presented the matching certificate at their destination to collect the money.” That’s remittance across distance. The Song had Jiaozi shops where you could deposit money, get a note, and withdraw it whenever you wanted. The Qing had piaohao—draft banks. Rishengchang, in Pingyao, opened in the third year of the Daoguang reign and ran for more than a century. Its signboard read: “Remittances reach the world.”
Deposits, loans, remittances, and settlement across distance. They had all four, centuries before Europe.
As I see it, the one thing they lacked was actually very simple. Not complicated at all.
The people who print the notes and the people who spend them have to be two different parties.
The government printed the notes at the Jiaozi Office, and the government spent them on military costs. There was no wall between the two, no institution that could tell it no, and no legally enforceable contract saying how much could be issued that year. When the treasury ran short, printing money was the only way out. The people doing the printing approved it themselves.
The Bank of England was founded in 1694. What it got right was this: private shareholders pooled their money and lent it to the king; the king repaid them with tax revenue; and the right to issue banknotes was placed in the hands of a corporation accountable to its shareholders. Limited liability came later, then the lender of last resort. Only then was the system complete.
No matter how big a money shop gets, that doesn’t make it a bank. A bank is what you get when the law separates the people who keep the books from the people who spend the money. That’s all there is to it.
The system built in 2008 solved the other half of the same problem. It took the power to keep the ledger away from a single institution and gave copies to tens of thousands of nodes across the network. If anyone tries to secretly print more, the books won’t add up. They simply won’t. That half worked.
The other half wasn’t done, and couldn’t be. It really couldn’t. When things go wrong, who opens the vault?
No one.
When a piaohao faced a run, its manager could still appeal to the government, and the government could still open the vault and release silver. When a protocol faces a run, the code keeps running and settlement keeps happening. There’s no vault to open. The algorithmic stablecoins that failed in 2022 were really just like the Jiaozi of old: both rested on credit that had never been tested. As long as it held, everyone thought this was more convenient than backing the notes with silver. But when it finally gave way, the queue outside the counter was full—and the people in it were the earliest customers of all.
Open your wallet now and take a look at the stablecoins you’re holding. How often does the issuer publish its reserves? Who audits them? Who pays the auditor? Those few lines are the equivalent of the sign outside the Jiaozi Office that listed its capital.
There are different accounts of when Rishengchang closed its doors. Some say it was liquidated in 1914; others say it shut down in 1923—a nine-year gap, with no definitive answer. A display at the Central Bank museum in Taiwan says the draft bank operated for 123 years.
Even now, I still look at the number on that signboard. It tells me more than any white paper ever could.
$BTC $USDC $USDT
#稳定币 #金融史 #currency