Ancient Chinese Paper Currency
The very first paper money emerged in the Tang Dynasty (618-907), but it was not used throughout the entire nation until the Song Dynasty (960-1279). The Song Dynasty was the first government to print government backed paper money known as the Jiaozi, or Huizi.
Tang Dynasty Paper Currency
This is a recreation of a Tang Dynasty "flying cash".
In the Tang Dynasty paper currency was nothing more than letters of credit, much like modern checks. They were simply notes from the bank where you deposited your hard money.
You could then travel to any city with a bank, take that note with you, and get the same amount in hard cash from the bank in that city you arrived in. With this flying cash, the Chinese could also aquire goods without immediate payment. They could write up a "flying cash" to a shop owner, then come back later when they had hard cash and pay back their debt.
Though these bills weren't official government monies, they were significant. These bank write ups allowed people to forgo hard cash for an easier piece of paper. Since people no longer had to carry hard cash with them everywhere they went, travel was much simpler. Since the traveler had no money on them, looters would not target them, and the traveler's fear of being looted would be suppressed. That ease of travel made trade more desirable, and trade excursions increased. This is the basis of our modern checking system.
Another significance is that these lines of credit, which is what they are essentially, greatly expanded economical power. Since a consumer no longer had to have the cash money upfront to pay for an item, citizens besides the high class could afford to purchase expensive items, like silk and porcelains. With their "flying cash" debt noted they could pay back the vendor in hard cash later in full. This is the basis for our modern credit system.
You could then travel to any city with a bank, take that note with you, and get the same amount in hard cash from the bank in that city you arrived in. With this flying cash, the Chinese could also aquire goods without immediate payment. They could write up a "flying cash" to a shop owner, then come back later when they had hard cash and pay back their debt.
Though these bills weren't official government monies, they were significant. These bank write ups allowed people to forgo hard cash for an easier piece of paper. Since people no longer had to carry hard cash with them everywhere they went, travel was much simpler. Since the traveler had no money on them, looters would not target them, and the traveler's fear of being looted would be suppressed. That ease of travel made trade more desirable, and trade excursions increased. This is the basis of our modern checking system.
Another significance is that these lines of credit, which is what they are essentially, greatly expanded economical power. Since a consumer no longer had to have the cash money upfront to pay for an item, citizens besides the high class could afford to purchase expensive items, like silk and porcelains. With their "flying cash" debt noted they could pay back the vendor in hard cash later in full. This is the basis for our modern credit system.
Song Dynasty Paper Currency
An authentic Song Dynasty printed Jiaozi bill.
In the Song Dynasty the government printed paper bills. They were government backed and insured by a government store of copper coins, and were as good as any hard cash source available.
Each bill issued had printed pictures of houses, trees, and people.
These bills could be traded in for hard cash at any time in any of the issuing banks. They were readily accepted for payment of debt and other financial obligations.
In 1023 these banknotes were withdrawn and only official notes printed by the government were allowed.
This new adopted governmental policy was successful at first for two reasons: First, for each issue of paper notes to be put into circulation, the government provided a cash backing.
Second, paper notes and standard coins were interchangeable, so a citizen could buy salt or liquor with his paper notes from one of the many government-owned stores.
These Song government monies were much more significant than the previous Tang "flying cash" bills. They were government backed, meaning they were as valid as any coin money, which wasn't true during the Tang Dynasty. Now people could use these easy to carry paper bills anywhere they wanted, and the vendor would have to take it. These bills made carrying money and banking simpler, since one bill could be the value of several copper coins. Since it was simpler to do, more people banked and spent money. The increased spending of money meant a sharp rise in demand for goods, which made more trade necessary. The Song Dynasty greatly emphasized internal trade as well as foreign trade. Since paper bills increased trade, they continued to print them. For that trade reason the Song government flooded the banks with bills, making them readily available to all people, but this caused severe inflation. Also contributing to inflation were counterfeit bills, which were easier to make back then than it is today. The individual just needed a set of print blocks and paper; but counterfeiting was low due to the punishment of death.
Each bill issued had printed pictures of houses, trees, and people.
These bills could be traded in for hard cash at any time in any of the issuing banks. They were readily accepted for payment of debt and other financial obligations.
In 1023 these banknotes were withdrawn and only official notes printed by the government were allowed.
This new adopted governmental policy was successful at first for two reasons: First, for each issue of paper notes to be put into circulation, the government provided a cash backing.
Second, paper notes and standard coins were interchangeable, so a citizen could buy salt or liquor with his paper notes from one of the many government-owned stores.
These Song government monies were much more significant than the previous Tang "flying cash" bills. They were government backed, meaning they were as valid as any coin money, which wasn't true during the Tang Dynasty. Now people could use these easy to carry paper bills anywhere they wanted, and the vendor would have to take it. These bills made carrying money and banking simpler, since one bill could be the value of several copper coins. Since it was simpler to do, more people banked and spent money. The increased spending of money meant a sharp rise in demand for goods, which made more trade necessary. The Song Dynasty greatly emphasized internal trade as well as foreign trade. Since paper bills increased trade, they continued to print them. For that trade reason the Song government flooded the banks with bills, making them readily available to all people, but this caused severe inflation. Also contributing to inflation were counterfeit bills, which were easier to make back then than it is today. The individual just needed a set of print blocks and paper; but counterfeiting was low due to the punishment of death.