Comment: Peter Schiff rails against wild printing of paper-money.

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Peter Schiff rails against wild printing of paper-money.

History of Chinese Invention - The Invention of Paper-Money

History of Chinese Invention - The Invention of Paper Money Chinese paper bank notes, 800 AD. Common circulation, 1050 and 1450 AD, overlapping the Song, Yuan (Mongol), and Ming dynasties.

The history of paper money is interesting not only from the idea and technology of printing, but also from the perspective of trading with a commodity that in itself has no intrinsic value. Clearly the issues of paper currency must inspire confidence for trading something of worth for items of no specific worth, and with the potential to be abused by the issuer as a way to increase the supply and control of items of value, thus creating inflation.

For much of its history, China used gold, silver and silk for large sums, and bronze for everyday transactions. The notion of using paper as money is almost as old as paper itself. The first paper banknotes appeared in China about 806 AD. An early use of paper was for letters of credit transferred over large distances, a practice which the government quickly took over from private concerns. The Chinese, with their great gift for pragmatism, labelled this practice "flying money". The printed notes were normally military scrip or other emergency measures issued in dire circumstances, but for the most part these notes disappeared quickly. The first real use of a paper money system was in Szechwan province, an isolated area subject to frequent copper shortages (which is a component of bronze). It had reverted to an iron currency of coins, and paper was a welcome option. Iron banks sprang up to facilitate the trade, and the government was quick to take over the profitable enterprise. Amazingly, the Chinese only used paper money on any meaningful scale for about 300 years of a 400 year period between 1050 and 1450, overlapping the Song, Yuan (Mongol), and Ming dynasties.

The Song dynasty was the first to issue true paper money in 1023, and it did so at first cautiously, issuing small amounts, used in a limited area, and good for a specific time period. The notes would be redeemed after three year's service, to be replaced by new notes for a 3% service charge, an efficient way for the government to make money.

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul