Digital currency (3) and the Ming dynasty

A Chinese reader told me the parallel drawn by Wen Zhao between Chinese digital currency and banknotes’ issuance under the Ming dynasty. The Taiwanese chronicler considers this innovation similar to the printing of paper money with all its consequences. Let us return to these Ming banknotes.

Zhu Yuanzhang fought the Mongolian Yuan dynasty and founded the Ming dynasty in 1368. Hong Wu – his emperor’s name – tried to create a self-sufficient society.

Metal crisis

Soon, bronze, gold, and silver used for the exchanges began to run out. The Chinese Empire had already resorted to the issue of banknotes in previous dynasties. To ensure trade, the government in 1375 decided to create a paper currency, called Da Ming Baochao (大明宝钞). The population was obliged to change the metal in their possession to get banknotes.

Lousy time for arrangements between friends

The emperor came from a poor peasant family and harbored a hatred for corrupt officials. The process was aimed, among other things, at this caste and the drying up of their resources. Of course, with this episode, one thinks of the tons of red banknotes piling up in civil servants’ houses’ recesses in our time. China’s economic opening has generated colossal corruption that affects many society levels up to the highest levels. The Chinese press, even if selective, has widely covered these cases. The introduction of digital money also targets so-called dirty money.

Inflation is not far away

Very quickly, galloping inflation followed, and in 1400, two years after the disappearance of Hong Wu, banknotes were worth only 3% of their value. A huge black market had taken place where old metal coins from previous dynasties were exchanged.
A new bubble is coming?

What are the motivations?

The arrival of this digital currency raises many questions. What is the real objective? As is often the case, depending on where one stands on the political or ideological chessboard, or according to one’s interests, the answer varies. I read all sorts of hypotheses. Control of society and capital, protection, modernization, sanitation, difficult times. And why wouldn’t it be a cocktail of all these motivations?

More articles on digital currency here

Sources, video by Wen Zhao:

30 August 2020

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