Muhammad bin Tughluq forced currency

[Rangnath]

I hope I identified this correctly.  Yes, the coin is in terrible shape. But I wanted to use it as an example of incredibly stupid economic policy. As I understand it, Muhammad bin Tughluq, who then controlled the greater part of the Gangetic plains, wanted to generate currency without backing it with silver. His resulting tankas at 9 grams and approximately 22 mm in diameter were introduced as having the same value as his silver coins. Among other consequences were the withdrawal of his copper coins from Central Asia which represented a secession of trade and the increase of counterfeiting.

Corrections and additions on this are appreciated. 
There must have been other notable examples of this kind of economic policy.  Can you think of any?
richie

[Oesho]

I don’t think it was such a stupid experiment, but there was no reference regarding the use of fiduciary currency. Muhammad must have been aware of the use of paper-money in China. It had appeared to Muhammad bin Tughluq that it must be possible to issue fiduciary copper or brass tokens which would replace silver currency. In a way he was his time to much ahead. We are now quite acquainted with the use of fiduciary money whether in paper or metal.
With this carefully organised reform, Muhammad bin Tughluq overlooked that his officers at the mint used precisely the same tools as the ordinary workman and worked on metal universally available. There was no special machinery to mark the difference of the fabric of the Royal Mint and the handy-work of the moderately skilled artisan. Unlike the precautions taken to prevent the imitations of the Chinese paper notes, there was positively no check upon the authenticity of the copper token and no limit to the power of production by the masses at large. Under such circumstances it is only strange that the new currency should have last that long (approx. two years). Muhammed bin Tughluq accepted the copper tokens at the treasury and their exchange for full money equivalents, as their was no practical scrutiny against illicit fabrications. The sums actually exchanged may be estimated by the mounds upon mounds of copper and brass coins which were heaped up as mere rubbish in the Fort of Tughluqabad (Dehli), where they were still to be seen a century later, in the reign of Mubarak Shah II. It is clear that good money was paid for all those tokens, Muhammad bin Tughluq’s temporary loan, extracted from his own subjects, must have been repaid at a more than Oriental rate of interest.

[Rangnath]

I thought that Muhammad bin Tughluq was trying to get something for nothing (using the philosopher's stone to turn copper into silver), not implementing an innovative monetary policy.  My apologies to the Tughluqs for using the slanderous, imprecise word "stupid".  Thank you for your erudite explanation. 
What precaution did the Chinese take with respect to their paper money?
richie

[Figleaf]

More great pictures from Oesho:

0863 View at the citadel of Tughluqabad built by Ghiyas al-Din Tughluq
0872 View from Tughluqabad with the tomb of the Tughluqs.

Peter

[Oesho]

Severe to the extreme in punishments, and, doubtless ready to enforce the penalties said to have been specified in the original proclamation, no threat of vengeance is recorded on the forced currency, as had been the case with the Chinese notes. The legends on the forced tokens consist of an appeal to the religious devotion of one section of his subjects, or of an official intimation of legal equivalents to guide the mercantile classes.
Regarding the Chinese notes I quote from Marco Polo?s account of the paper currency of Kublai Khan: ?In his city of Kanbalu is the mint of the grand Khan, who may truly be said to possess the secret of the alchemists, as he has the art of producing money by the following process: - He causes the bark to  stripped from those mulberry trees, the leaves of which are used for feeding silkworms, and takes from it that thin inner rind which lies between the coarser bark and the wood of the tree. This being steeped, and afterwards pounded in a mortar, until reduced to a pulp, is made into paper, resembling (in substance) that which is manufactured from cotton, but quite black. When ready for use, he has it cut into pieces of money of different sizes, nearly square, but somewhat longer than they are wide. Of these, the smallest pass for a denier tournois; the next for a Venetian silver groat; others for two, five, and ten groats; others for one, two, three, and as far as ten besants of gold. The coinage of this paper money is authenticated with as much form and ceremony as if it were actually of pure gold or silver; for to each note a number of officers, special appointed, not only subscribe their names, but affix their signets also; and when this has been regularly done by the whole of them, the principal officer, deputed by his Majesty, having dipped into vermilion the royal seal, committed to his custody, stamps with it the piece of pap, so that the form of the seal, tinged with vermilion, remains impressed upon it, by which it receives full authenticity as current money, and the act of counterfeiting it is punished as a capital offence. When thus coined in large quantities, this paper currency is circulated in every part of the grand Khan?s dominions; nor dare any person, at the peril of his life, refuse to accept it in payment. All his subjects receive it without hesitation, because, wherever their business may call them, they can dispose of it again in the purchase of merchandise they may have occasion for; such as pearls, jewels, gold or silver. With it, in short, every article can be procured ?. When any persons happen to be possessed of paper money which from long use has become damaged, they carry it to the mint, where, upon the payment of only 3% , they may receive fresh notes in exchange. Should any be desirous of procuring gold or silver for the purpose of manufacture, such as drinking-cups, girdles, or other articles wrought of these metals, they in like manner apply at the mint, and for their paper obtain the bullion they require. All his Majesty?s armies are paid with this currency, which is to them of the same value as if it were gold or silver.?

[Figleaf]

There must have been other notable examples of this kind of economic policy.  Can you think of any?

I can think of two examples, one in Sweden, one in Ireland, both ending badly.

In 1718, the Swedish minister of finance, Baron von Görtz issued a series of small copper coins (KM 352, 354-360 and 369) with the value of 1 daler, a large silver coin. Görtz was trying to finance a seemingly unenending series of wars instigated by the Swedish king Charles XII. The issues devalued almost daily and before Görtz could worm his way out of trouble, Charles was killed in Norway. The population took out their anger on Görtz, who was beheaded in 1719.

In 1689-1690, James II unsuccessfully tried to regain his throne by landing in Ireland with French troops. The campaign ended with his utter defeat on the Boyne. To finance his efforts, he had old guns (hence: gun money), pots and pans and other copper and brass objects melted and made into copper sixpences, shillings, halfcrowns and (in 1690) crowns (KM93-95, 100 and 101). Most historians agree that he saw the copper coins as a loan that would be repaid in monthly installments after his return on the throne. As this wouldn't happen, the coins were in principle worthless, even dangerous to possess. However, William III declared them valid for farthings, halfpennies and pennies. This still ruined Charles' supporters. The Stuarts lost their support in Ireland (later attempts were made in Scotland). These coins were a factor in the strife between catholics and protestants that is still not completely settled.

Both coins were found by our member Bubba, the Swedish coin (KM 360) in the Netherlands, the Irish coin (KM 93) in Norfolk.

Peter

[Rangnath]

This is rich fabulous wonderfiul stuff! 
I know in part, I am a visual learner. This lesson on fiduciary coinage was a decadent chocolate cake for the eyes.
I find myself perched on a hill overlooking the ruins of the Tughluqs thinking of Marco Polo. 
Thanks so much Oesho. 
And thank you Peter!  The examples were beautiful. 
richie

[Ansari]

Nice piece of information

Thankyou