Whether it is from the private Jiaozi or the later government-run Jiaozi, the time of paper money in ancient China is hundreds of years earlier than that of Europe. In all fairness, early is not the same as good. The history of human civilization can be said to be a "history of trial and error", and many things that have achieved great success are not achieved overnight, but have gone through a lot of failures before finally succeeding. On the one hand, people's understanding of things themselves is gradually deepened and improved; On the other hand, in order for a new thing to succeed, in addition to the condition that it is good in itself, it must also conform to a series of very accidental additional factors such as social and economic development, policies and regulations, people's preferences, cultural customs, etc. Historically, there are often people who put forward advanced views, invent advanced technology, and create advanced works, but they were not successful at that time, and they lived their lives in poverty, and even caused death, because their creations did not conform to the general environment of the times. "Orange is orange born in Huainan, and orange is born in Huaibei", which is really a helpless but irresistible fate.
Having said all this, I do not have any intention of denying the historical significance of the Song Dynasty Jiaozi, but I hope to fully compare the similarities and differences between the Song Dynasty Jiaozi and early European banknotes (bills) in addition to the specious achievement point of early time, so as to more accurately highlight the characteristics and value of the Song Dynasty Jiaozi. After all, Jiaozi, not early European paper money, is the precious legacy left to us by our ancestors, and it is incumbent upon future generations to study all aspects of these legacies in more detail and come to more appropriate conclusions.
If we enter the word "banknote" into our computer and ask a translation software to translate it into English, we will get several different answers, such as **money (literally translated as paper money), bank note (literally translated as bank note). The former reveals the material properties of Western banknotes, while the latter implies the path of development. Bank notes, as the name suggests, refer to bills issued by banks. Since the British use this word as the name of paper money, it means that there must be a very close connection between paper money and banks.
A few hundred years ago, Western Europe did not have the sophisticated banking system it has today, or even a bank-like institution. The word banker, now translated as "banker," used historically to refer to merchants who engaged in currency exchange. It is said that these merchants always sat on benches waiting for business, and when someone came to do business, the benches were transformed into makeshift desks and counters, as bank and its pronunciation in other languages refer to. Historically, Europe has been divided and riddled with political regimes, and the currencies circulating on the continent are dizzyingly diverse. Whoever has the right to mint money will receive seigniorage and economic power in the field of currency circulation, so kings and lords have always tried to mint their own currency. Although these coins are basically gold and silver coins, they vary in size, weight, gold and silver content, and purity, and even the same coinage issued at different times also has metal content and purity. Such a chaotic currency circulation situation makes transactions extremely complicated, and large-value, cross-border** is likely to be stuck in the threshold of currency inconsistency.
In 2007, I went to Berlin, Germany, and then Belgium and other places as part of an exchange program organized by the school with several high school classmates. At that time, the euro was already circulating in many European countries, and we were fortunate not to have currency exchange problems during our trip. However, the euro was only officially introduced in 2002, and the painful experience of having to exchange currency several times when traveling to Europe in the past is still fresh in people's minds. The team leader once half-jokingly told us that the exchange rate of the German mark is very high, and the exchange rate of the Italian lira is very low, and a little mark can be exchanged for a large stack of lira. Euro coins are very distinctive, with a uniform pattern on the obverse and a design on the reverse that is designed and selected by each country. As a result, people can identify the country from which a coin was struck, and on the other hand, they are not sure of the authenticity of a coin at first glance when they see an unfamiliar design. The biggest currency problem I encountered during that exchange was the different designs on the back of the euro coins. While I was still in Berlin, a coin that was said to have just been issued and had a "distinctive" design fell into my pocket. After finishing our trip in Germany, we took a bus to Brussels, Belgium. It was early summer, and the temperature was much higher than the actual temperature under the strong sunlight during the day, and what was worse was that the air conditioner in the bus actually "struck", and the "source of life" in everyone's hands was quickly depleted in the scorching heat. Having just entered the first service area in Belgium, several high school students rushed to the store's freezer to buy large bottles of chilled mineral water. I pulled out the "different" coin when I made the payment. The cashier, apparently never seen the pattern on the back of it, took the coin in his hand, looked left and right for a long time, and finally made sure that there was no problem, and then completed the transaction. The waiting process was extremely embarrassing for me, not only afraid that the other party would think it was a counterfeit currency and cause unnecessary disputes, but also worried that if the other party did not accept the coin, I would have to take out the only remaining 100 euro banknotes, and the other party was afraid that the other party would not accept it, and I would have no water to drink during the next trip. I've heard that some Europeans would rather not do business than find a lot of change. Fortunately, the results were successful.
Historically, Europeans have faced far more complex situations than I have encountered. People often have to go through complex currency exchanges before trading, and it is normal not to know the currency in the other person's hand, and it is not a shame at all. A group of merchants specializing in currency exchange gradually emerged, providing services for both sides of the transaction to identify, weigh and convert currencies. Italians in particular were well versed in this field, most notably the Medici family, who would become famous and patronage of artists, and who were influential in the financial and even political and religious spheres. In addition to running a large family economy and controlling Florentine politics, the family also produced three popes, two French queens, and prominent artists such as Botticelli, Leonardo da Vinci, Michelangelo, and Raphael who also received funding from the Medici family.
Slowly, people felt that it was too condescending to let only these merchants run the exchange business, and the money changers were actively seeking to start other businesses in order to make more profits. Especially for some large merchants, although the value of European gold and silver coins was much higher than that of Chinese copper coins, the amount of currency needed to complete a large, long-distance transaction was still high. Carrying so many gold and silver coins out of the house is heavy, inconvenient to count, and not very safe. As a result, people began to deposit their coinage in the hands of these money changers, entrusting them with the exchange and preservation of their own currency. The British, on the other hand, chose to store their lives in goldsmiths' shops. The British were accustomed to entrusting their currency to the Tower of London (once the Royal Mint). However, King Charles I of England tried to seize people's deposits in the "Tower of London" because of lack of money, causing fierce ** before giving up. After this incident, people no longer believed in the credit of the British king and the "Tower of London", and turned to hand over cash to private people such as goldsmiths, and deposits and withdrawals became a private market activity in the full sense of the word. Merchants who run a currency deposit business charge a certain amount of custody fees and issue paper receipts, which depositors can hold and request withdrawals. In addition, unlike the Sixteen Wealthy Households, the British goldsmiths agreed to transfer gold and silver to a third party at the written request of their customers shortly after they entered the money deposit and withdrawal business, and the money transfer business was born.
The acceptance of notes issued by money changers and goldsmiths depends on whether they and depositors have a good reputation in the local area. However, these notes have not entered the circulation sector too much, and users rarely use them directly in transactions, so these notes cannot yet be classified as currency.
Another difference from the 16 wealthy households is that European note issuers have long been in the lending business on the basis of their deposits and bills, which can not only greatly increase their income, but also be one of the key factors in the evolution of money changers into modern commercial banks. Although European bankers also operated other industries, the financial industry such as currency exchange and banking has always been the main business they started and relied on to maintain their position, and the financial empire and business empire of the world are built on that humble bench or that goldsmith's hammer. Over the course of their long lives, European note issuers found that most of their deposits had been dormant in their coffers for a long time, and that only a few of them really needed to have gold and silver coins ready for cash. Not only do they carry out lending business, but they also actively absorb deposits to further increase the number of loans. As a result, the deposit business has changed: customers who used to have to pay a custody fee when they deposit money in exchange for bills can now earn interest on their deposits.
With the expansion and transformation of business, bankers have issued more and more types of bills, such as checks and discounted bills. Due to the convenience of circulation and access, people have gradually become accustomed to mixing the "bank bills" issued by bankers with gold and silver coins in the field of circulation, and bank bills have completed the leap in nature from bills to money.
In 1694, the Bank of England, which had the character of a national bank, was founded, and members of the royal family, including the king, and businessmen subscribed for ** worth 1.2 million pounds, thus becoming the original shareholders. After the establishment of the Bank of England, it provided the British army with military expenses for the war against France through loans, and in exchange received the right to issue the same number of bank notes as the loans. The essence of these bank notes is officially issued banknotes. In addition to the connection with the national treasury, these bank bills also had a very crucial shift in the history of world money, which can be said to have opened a new era of credit money. As we said above, in the past, bank bills were mostly certificates of deposit, that is, bank bills were deposited by customers first. Even if the bank does not need to make 100% reserves for loans, it does overissue a certain amount of bank bills, but after all, it is still based on existing deposits. The Bank of England issued bank bills, on the other hand, without any deposits of gold or silver coins, on the basis of state borrowings, which was almost indistinguishable from issuing paper money out of thin air. After all, the state has to borrow when it has no money. After the establishment of this issuance mechanism based on national debt, the credit currency attribute of paper money has been greatly enhanced, and it has further moved closer to contemporary credit money. As for the Bank of England's daring to issue paper money on the basis of national debt, it is because it is itself a product of the country's fiscal needs, and second, because the state can repay its debts with lasting and reliable revenues such as taxes, which are not necessarily less effective than gold and silver coins. Theoretically, as long as the country does not go bankrupt and the royal family is not overthrown, this bank note can be quite well protected.
Contrary to popular imagination, after the Bank of England issued bank notes endorsed by the Crown, the bank notes issued by other private banks were not immediately outlawed. The banknotes of each bank are circulating in the market at the same time, and who has a wider circulation range and who is more popular depends on who provides better credit. It's just that in the following years, the "pro-son" of the Bank of England has been taken care of more by the government in terms of policy and business, and gradually has the functions of the first treasury, clearing center, lender of last resort, etc., and basically monopolizes the right to issue money, thus evolving into a "bank of banks" - banks.
Obviously, the sixteen wealthy households in Sichuan in the Northern Song Dynasty were far from being able to form a commercial bank, let alone a ** bank; The financial business they carry out based on Jiaozi is also not as rich as that of the Europeans. The relatively single business scope has caused Sichuan Fumin's profit methods and amounts to be more limited, which has increased the risk of their operation of Jiaozi. The credit relationship behind private relations is also less complex than that of European bank bills that have developed to a certain extent. The nature of private bonds is completely consistent with that of early European bank bills, that is, the substitution of metal money, which cannot be regarded as money in the full sense; Both can effectively help traders move money and participate in transactions as circulation tools to a certain extent.
As for the state power into the paper money issuance mechanism, the East and the West, represented by the Song Dynasty and England, embarked on a completely different path of paper money development. Unlike the Bank of England, which relied on national debt to issue banknotes, the Song people combined the government-run Jiaozi with many areas of the state's finances to form a unique banknote issuance mechanism, which not only consolidated the issuance foundation, but also gradually pushed the banknotes to the forefront of the national finance.
This article is excerpted from Jiaozi: China's Contribution to World Financial History