The part of Wang Mang's currency that didn't fail

[bgriff99]

On another thread we have gotten off on a sideline, in regard to why the novel currencies of Wang Mang failed.   A young man with great ambition, he managed to seize the throne of China.  He conceived and imposed extraordinary new forms of money.   Some based on exotica like tortoise shells never were made.   His vastly overvalued tokens are the main story.  He imposed capital punishment on anyone refusing to use it, long story short.   In the end he finally gave up, and issued ordinary cash, with only a novel inscription, and the intent to displace Wu-chu's.   That was the Huo-chuan.

The coins were good, and issued in quantity.   Historical records say they survived into the subsequent reign only because the new emperor liked them.   That was enough.   

In 2007 I was able to work over a lump pulled from the Java Sea which contained 200 cash coins.   Some were worn smooth.   The majority were privately made trade cash.   It was possible to date the cache to after 1659.   Out of 191 identifiable, the only official coins it contained were two Ming, four Sung, and one extremely worn Huo-chuan.    I do not have that piece on hand to show.   It belongs to Scott Semans.

It circulated for 1650 or so years, not based on fiduciary value or any kind of law.   Only on its intrinsic copper, which even worn nearly to illegibility, exceeded most of the other pieces.     Now I wonder, if somehow some US dollars should be kept 1650 years if they could be pulled out and spent, and with no less value than they have today.

[EWC]

To be honest Bruce, I had thrown in the towel as hopeless on this, but Peter seems to urge me to have another go.

On this tortoise shells matter – and much else - I recommend a little book that can be found here:

https://www.academia.edu/356703/Wang_Mang

The original print run of 500 sold out donkey's years back, quite a lot through Scott Semans I recall

I quote the pertinent passage here

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

In valuing Shu-shi silver at 1,580 cash for 8 taels (the "liu") it is clear that Mang is not creating a denomination of silver coinage at all - no-one would be foolish enough to want a denomination of exactly this size. He was clearly fixing the price of silver within the state regulated economy. Obviously given the choice, traders were going to prefer silver bullion in payment to Mang's fiduciary copper issues and silver bullion use was therefore likely to compete against and drive down the value of the official currency. By fixing the price of silver in the system Mang could make trading it above this price a criminal offence, so as to force his own coinage. The same should be said of the gold, and of the cowries and tortoise shells too. These latter items had been valued highly in earlier times, but they find no logical place in the modern fiduciary system Mang was forging. Most likely the use of tortoise and cowry shells had been informally revived in the chaotic markets that operated at the time of these great reforms. The new coins were not trusted, gold had been requisitioned, use of the old cash was illegal, so archaic forms of wealth staged a come back on the streets. Mang had to act against these too. Strong corroboration of this suggestion comes from a passage in the " Food and Money " that tells us that all these gold, silver, tortoise shells, and cowries were in fact being requisitioned by the state - to remove any competition for the fiat currency:


"Artisans and merchants who had been able to collect gold, silver, copper, lead, tin, to whom tortoises had presented themselves, or who had gathered cowries, all themselves testified (the quantities) to the Office for Money of the Superintendent of the Market, and he took them in accordance with the emanations of the seasons."

On this reading, the prices and classifications just represent the amount in fiat coin, paid out to those turning such items in to state officials. This is by far the most satisfactory explanation of what happened. Pan Ku garbled the story.  In order to try to force the spade coins to circulate, regulations were passed to have checks made on people at customs posts, fords, rest houses, city gates and palace gates, to detain those who travelled without them. 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Note also that at the end there is a review of some of the opinions on Wang Mang put into print by scholars at prestigious institutions over the years.  Homer Dubs (Yale and Oxford) takes the biscuit – outrageous- as I see it. 

[Figleaf]

These two posts clear things up considerably. For me at least. Bruce says: look, here's a (beautifully preserved) huo-chuan. Full value. EWC says: look, here's an enlightening quote. It says the coins were fiduciary. It also explains the many commodities defined as money: people used them because they didn't trust Wang's fiduciary coins, so he overvalued the competition, making his fiduciary coins the only rational choice. I have questions of detail on that, but the explanation makes economic sense, so I like it.

Back to Peng. He mentions five coin reforms. Are we talking about the same coins in the two posts? It seems not.

His vastly overvalued tokens are the main story.  (...)  In the end he finally gave up, and issued ordinary cash

So there is at least one issue of fiduciary coins and at least one issue of full value (or close enough) coins. Let's see if my understanding is right and why the fiduciary coins were succeeded by the huo-chuan. Can you comment, gentlemen?

Peter

[Quant.Geek]

Gentlemen,

I am enjoying these posts similar to Peter and a good scholarly debate is always a welcome (as long as it doesn't get personal).  May I humbly add that you can find the Chinese and English versions of the Hanshu (Selections from The History of the Han Dynasty) with the Memoir of Wang Mang here.

Regards,

Ram

[EWC]

Good to find people getting into the detail of this.  Personally I think to call the event a currency failure is to fail to grasp the scale of what was going on.  Contemporary records seem credible, and suggest 25 million people died during the civil wars triggered by Wang Mang's reforms – that is about 50% of the population and - if so – it was I suppose the bloodiest civil war in the history of the planet .  There are general similarities with the civil war fought at the fall of the Roman Republic just a few years earlier.  Mang was a progressive reformist paralleling Julius Caesar and Augustus in the West, the whiggish Confucian reforms in China broadly parallel those of the Gracchi in Rome.

Of course the progressives won in Rome and lost in China and with hindsight its easy to see that Wang Mang was too optimistic and the matter turned into a disaster on a gigantic scale.  But that should not take away the fact that the state Mang tried to build is very like the ones erected since 1945, and thus, whether you like them or not – they were a supreme intellectual achievement.

Ram very helpful points up that the Han Shu is available on the web.  That is the ultimate resource, if you are willing to read through a few hundred pages – however – my summary gets the coin reforms down to 4 pages, and includes illustrations so I repeat my suggestion that people start there (pages 16 to 20)

https://www.academia.edu/356703/Wang_Mang 

According to my reading of the Han texts the 5th and last coinage reform, of 14 AD, saw 3 denominations in circulation, the Huo Chuan (value 1) and the Huo Pu spade (value 25) and the Ta Chien (1st cast in 7 AD) stayed in circulation, but with its value cut from 50 to 5 cash.  This differs from Bruce, so I would be interested to get citations concerning his different account.  Nor do I recall the death penalty being imposed for refusing Mang's cash, so I would like a reference for that also.

As I said before, my main interest in studying Wang Mang, was to expose the outrageous mis-representations that were, and perhaps still are, taught in universities concerning this complex matter.  Details of that are at the end of the account I link to – and, as every, carefully considered and well informed criticism is most welcome

[bgriff99]

EWC and Peter, what you present here makes my case for me.   Sudden imposition of token money tends to fail even when backed up by full legal remittance in specie.   Because people don't trust that such laws will be permanent.   No emperor is permanent.   Each one's successor is going to have new ideas of his own.

Fiat money is that not backed up by specie.   Or that which pretends to be remittable, but the treasury which pays it out refuses to take it back at face value, if at all, for payments.   Wang Mang was trying to eliminate the existing unit cash, and pay out tokens.   If those tokens were brought back, you could not get unit cash for them.   That may have been well intentioned in the sense that unit cash were heavily counterfeited and a big nuisance.    One element of failed new token currencies is contact with an exterior hard money system at the perimeters.   Or the continued market presence of the prior intrinsic coinage.   Both situations undermine token and fiat money.   

Token and fiat money work when a government's promises are proven to be durable through regime change and war alike.   Thus the political stability of the United States, including elections just like normal in 1864, reassured people using the US dollar that the unbacked greenbacks of wartime necessity were not fools' money.  The government promised to withdraw them in favor of gold notes promptly, and kept that promise.

[bgriff99]

Regarding the death penalty, that is my mistake.   That was the penalty for counterfeiting the new coinage.   Nothing new there.   The penalty for holding wu-chu's after they had been ordered recalled was confiscation of property and banishment.    There were heavy penalties, (enslavement, depending on social rank) for just knowing about a counterfeiter and not reporting it.   Apparently a lot of nobles and wealthy merchants were underwriting the forging.

The 'Ta Chuan' value fifty coins were devalued to 15 cash, in the reference I'm looking at, during Wang Mang's lifetime.   Afterward they remained in circulation but were gradually reduced in value to one cash.   My only specimen is 27mm wide, but just 3.6g.   In later years and depending on exactly what was current, it ought to have passed as a two cash.    This is a full-sized one.   Others and a plethora of counterfeits were smaller.   But the pattern of devaluation of cash down to their intrinsic value, after token laws have expired, holds.

[bgriff99]

In valuing Shu-shi silver at 1,580 cash for 8 taels (the "liu") it is clear that Mang is not creating a denomination of silver coinage at all - no-one would be foolish enough to want a denomination of exactly this size. He was clearly fixing the price of silver within the state regulated economy. Obviously given the choice, traders were going to prefer silver bullion in payment to Mang's fiduciary copper issues and silver bullion use was therefore likely to compete against and drive down the value of the official currency. By fixing the price of silver in the system Mang could make trading it above this price a criminal offence, so as to force his own coinage.

Of those silver coins, there were two denominations, same weight but different fineness.   At 8 taels they were more like an official sycee.   Your explanation of their function is excellent.   But they were withdrawn after 6 years, with 8 years to go in Wang Mang's reign.    Presumably the "cash" they were remittable in was the Ta Chuan wu shih coins at their face value, but not wu-chu's.    But I don't see anyone verifying that they were remittable at all.   Intrinsically that much silver should have cost far more in copper than 1580 cashpieces weighing just one mace, regardless of what they were.   Thus perhaps the report of frantic and overwhelming counterfeiting of Ta Chuan value 50's, and in turn the exit of those silver pieces, from being under- not overvalued.   If so, it does indicate that Wang Mang wasn't entirely in it for the stealing of value of the currency already in circulation.

I am sorry about these hasty and fragmented replies.   My comment attempts keep timing out or being "page not found"-ed.

[bgriff99]

So there is at least one issue of fiduciary coins and at least one issue of full value (or close enough) coins. Let's see if my understanding is right and why the fiduciary coins were succeeded by the huo-chuan. Can you comment, gentlemen?

Peter

Halfway into his reign Wang Mang abolished his own too-complicated new system.    The final system was as EWC says.   Three items, all of the same kind of bronze.   The unit cash huo-chuan;  the already circulating value-50 pieces, revalued at 15 (or 5?) huo chuans, and the small spades valued at 25.   Their weight ratios (actual pieces) were roughly 1 : 2 : 3.5.    The fiduciary premium on the two higher valued pieces expired along with Wang Mang.   Afterward the huo-chuans continued as ordinary cash.   The value-50's worked their way down to one, or maybe two cash.   The little 16 gram spades are still common.   A lot of them must have escaped being sold for scrap and been forgotten in the backs of desk drawers along with old bun pennies.

Contrary to one source I saw, that only the sentimental favor of the next ruler spared the huo-chuans from peremptory melting, there was a money shortage, and no new issues were or could be made at first.    So most likely the spade pieces continued to circulate for some time too.   

[EWC]

Sudden imposition of token money tends to fail even when backed up by full legal remittance in specie.   Because people don't trust that such laws will be permanent.   No emperor is permanent.   Each one's successor is going to have new ideas of his own..........Token and fiat money work when a government's promises are proven to be durable through regime change and war alike.

Am delighted to find us clearing up early misunderstandings and making such excellent progress – yes – I completely agree.

Wang Mang tried to force changes in a few years which only worked in the UK when they were allowed to evolve over centuries.  Actually – that tends to be the sort of criticism I would make of the Euro also – seen from a UK perspective.  I am not opposed to the Euro per se – but imposition from above is running ahead of the democratic mandate from below.  Not of course on the scale seen with Wang Mang!

The additional point I would make is this.  You are entirely correct to point out that earlier fiat money systems eventually failed – and many of them failed very rapidly indeed.  And this was due to abuse of the system by issuing regimes leading to inflation.  But the reverse of that matter is that the intrinsic systems have also tended to fail, for the exact opposite reason, because they tend to deflate the economy with undesirable social consequences. 

I sent a mail to another group a month or so back – criticising a philosophy Prof who wrote about the intrinsic metal system championed by John Locke.  It gets into the nitty gritty of the propaganda surrounding economic systems.  My fear is that professionalisation, specialisation and elite funding via modern academia is undermining the modern understanding of the history of economics, and my frail hope is that independent numismatist might be an antidote to what is going on.

Its a bit complicated (economics always is I think) - I am happy to explain further

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I wrote:

The null response to my last here seems to corroborate my claim that in recent times attention has been too focussed up arcane and fantastical philosophical aspects of metrology at the expense of its real history in social contexts.  Thus I will push on to illustrate what seem to me troubling consequences of that turn.

In 2013 the journal 'Annals of Science'  published a paper by Daniel Carey concerning Locke on Money, much concerned with Locke's philosophy of language. 

https://www.academia.edu/4868422

I like the paper in general, but point up a misleading point at the heart of it.  I do not view this as a criticism of the author, his referees, or the editor of the journal in question.  I view it as a criticism of  the direction of 21st century professional academic output in the social sciences in general.  I would be delighted to get details of any authors or relevant journals against whom this claim would seem unfair.

Carey suggests that around 1696  :  'Locke was defending silver according to its current legal weight against efforts to introduce an alteration'

Whilst true in a strict sense – this statement is very misleading.  According to the last (1967) traditional grand narrative on weight metrology, English silver coin had carried a seigniorage charge for around 900 years prior to 1666.  In 1666 seigniorage was legally abolished.  But by 1696 still only a small proportion of the circulating coinage had actually been restruck under the new system.  Most of the coinage had been struck under the earlier traditional system, that is to say, overvalued against bullion.  Thus Locke was involved in a massive alteration, the belated application, in practice, of the legal alteration of 1666 to the greater part of the national currency

The heavy cost of the recoining exercise fell on the tax payer, short term beneficiaries being the king seeking cheap bullion to finance a French war, and wealthy merchant houses, exporting coin whilst building trading empires in the East.  Longer term problems however may have been much greater.   Markets and thus market prices seem to have been undermined domestically as the greater bulk of the coinage disappeared over the eighteenth century, exported or hoarded, and the general population was pushed towards trucking and buying on credit in shops at monopoly prices.  Arguably Britain's global reach in the 18th century was in good part financed by widespread domestic quasi-serfdom, as England became "a nation of shopkeepers".  The roots of this transformation seem to me to lie directly in Locke's 'philosophy of language'.

Some economists are aware of this seigniorage matter today.  The Nobel Laureate Thomas Sargent wrote on it recently, but perhaps others may share my fear that his suggestion, that Locke was perhaps "an idiot", really gets to the bottom of this matter?  Back in the 19th century a sophisticated independent amateur readership still existed, and Del Mar could popularise the view that Locke was a party to "a monetary crime".  Addressing the more mannered independent amateur readership of the 18th century, Adam Smith called this abolition of seigniorage a "vulgar prejudice" of "the mercantile system".   Was he really differing from Del Mar?

My fear is this.  Professional academic monetary history in modern times has become heavily funded by potentially interested parties.  The rest of the social sciences (including "heterodox economists")  should have offered focused criticism, but have not.  They too have become intellectually hobbled, but by a philosophical turn.  A minority did loudly oppose that turn – Marwick, Stove, Sokal etc - but it is a minority which seems to be, quite literally, dying out.

[Figleaf]

I love topic drift, but it is hell for moderating, so blame me if I cut this discussion in the wrong place. Let's continue on your first three paras in this thread. I'll quote the rest in a separate thread and react there.

Summing up the above (minus the philosophy part), economic theory says fiduciary money can be maintained only on trust. Trust is derived from financial stability, which depends on control of the money supply. Issuing fiduciary money in uncertain times is not a recipe for success, as trust will be low. You cannot legislate trust, so Wang Mang's monetary laws did not help. His fiduciary system was eventually replaced by "full value" coins, which proved acceptable even after Wang Mang's demise.

Peter

[bgriff99]

Issuing fiduciary money in uncertain times is not a recipe for success, as trust will be low.

Peter

Arrgh, you are trying to make me seem gratuitously contrary.    "Fiduciary" is not the right term here.   Sung paper money was trusted because it was all obligations in coin, of which there was a plenitude.   And it was too heavy to carry around.   The fiduciary had nothing to do with creating token or fiat value.   Only with trusting peoples' word and bond to be honored, to pay back a promise.    That is what is done in good times.    The state was one of the promise makers, and it failed under stress (also some fecklessness).

Creating token or fiat value can be done in uncertain times when there is no other option.   Wang Mang failed precisely because he usurped an established money system for no reason, when times were good.   Money is conservative.   He violated its most basic principle.   It is a means for storing and making productivity transferable.   It must be the same device unchanged indefinitely.   Or only changed if there is no other choice.   At that point what happens is dictated by both faith in the issuer, and making the most minimal change that will answer.   If the cause is hopeless, or a fraud, then the monetary edifice will fall for certain.

The conservatism of money is more evident where I am that in Europe.   Our money looks the same as it did when the exchange gold standard still was in force.   In the 1970's when a new dollar coin was introduced to replace paper bills, NOBODY would accept them.   It was like they were radioactive.   To take them was to admit the dollar had become a quarter.   Which it had.   The more recent gold colored dollar coins do not circulate either.   I was never offered a single piece of either, in change, ever.   Only the reverse designs of the one, five and 25 cent coins have changed, and a new portrait of Jefferson, all which did not take an act of Congress, which is terrified to do anything to the money.   The nickel is now well over twice its face value, the same dimensions and composition as when introduced in 1866.   America will not abide a stainless steel coin.    I look with bemusement on the parade of "new issues" worldwide show here.

But back to introducing token and fiat money, were not the Great War and the Depression "uncertain times"?    Yet the pound and dollar did fine.   Our cause was not lost, the edifice evolved.    And it was forced, by war, to do what was needed anyway, but would NEVER have been attempted nor would have succeeded in peace and prosperity.   EWC praises Wang Mang for making changes when it was NOT an emergency, which for most things is the proper way.   But not for money.

[EWC]

EWC praises Wang Mang for making changes when it was NOT an emergency,

My reading skills are OK, even for small letters..........

This thread is becoming hopeless complicated - imo all of it ought to stay under the old coins v tokens title. But I leave that to others.  I agree with most of the things bgriff99 has said in recent posts - so have just pulled out the bit I disagree with.

Firstly - I praised Wang Mang for the sophistication of ideas, and criticised their hasty implementation - so the comment is wrong.

More importantly - it is by no means clear that there was not a looming emergency.

I would have said that civil war was probably brewing in Rome from right back when Tiberius Gracchus was murdered.  Julius Caesar thought emergency powers were required, Brutus and his chums thought otherwise.  Killing Caesar turned out to be a bad plan for stopping civil war – that much we are sure of.

In 1601 George Moore correctly predicted civil war if English royal monopolies were not repealed.  He was ignored.  War came about 40 years later

Voltaire correctly warned of the coming French revolution.  In much the same way, he was ignored, and the terror came.

Wang Mang thought emergency measures were necessary, and all we know for sure is that calamity was not avoided.

But your assumption that there was no emergency looming is just your opinion, and Wang Mang was surely better informed than you on early first century Chinese politics?

[bgriff99]

I agree I am assuming too much.   Your own book on Wang Mang suggested the time at which he became emperor was prosperous, for the wealthy at least.
The Huns were an ongoing threat, and that clearly was a problem.    You point out that monetary change is usually done during emergency, and Wang Many did not wait for that.   I'll let it go that he forsaw trouble and was proactive.

If the currency change had begun with the huo-chuan (which in my opinion shows anti-counterfeit design features) and a standardized silver system, it would have been fine.   He could have called the gold and paid for it in real money.   The problem on the face of things is that he ripped off the value of the money without compensation.   Two rules of changing the money, internally, are nobody loses value, and the old form is removed so no one can try to keep using it.

In his era the long Chinese experience of cash vs silver had not yet been accumulated.   So he gets a pass on not knowing what ought to have been done at the outset.   He largely learned by experience what would and would not work.    There WAS a prior attempt at a complicated system of token and fiat money, and big silver coins that were far overvalued.   That all collapsed quickly.    And in centuries afterward, even with more monetary experience, the same problems of counterfeiting could not be stopped.