Chapter 99 Silver: Once World Currency

In 1621, a Portuguese merchant wrote: "Silver wanders all over the world until it reaches China. It remains there as if in its natural centre." The main business of Europeans in the world trade in the 16th and 17th centuries was to resell silver, gold and commodities, because they had nothing to sell in the prosperous Asian market, mainly because the products produced in their own countries were not competitive. 【1】 Since the Ming Dynasty, China has always used silver as the main currency in circulation, and China itself was not a big silver producer in the world at that time, so why did the Ming Dynasty choose silver as currency?And where does China's silver come from?

Silver became the main currency of the Ming Dynasty not because of a voluntary choice, but because the situation was stronger than others.Before the Ming Dynasty, the Song, Jin, and Yuan all tried to replace precious metals with paper money as the main currency, but the results were surprisingly similar.Due to the iron law of human greed, once currency is separated from the nature of commodities, it loses its natural rigid constraints, and the wealth plundering of large-scale issuance of paper money to make up for fiscal deficits eventually ends in hyperinflation, tax depletion, financial collapse, and the collapse of the empire.In the early years of the Ming Dynasty, the paper money experiment of the previous dynasty was also tried, and Mingbao banknotes were issued. By 1522, the paper money was devalued to the original 2‰, inflation was rampant, and public dissatisfaction was boiling.The Ming government was finally forced to abandon the paper currency system and restore the metal currency system instead.From the Song Dynasty to the Ming Dynasty, after nearly 500 years of paper currency system experiments, the final conclusion drawn by history is: it is not reliable.

The choice of metal currency before the Ming Dynasty was nothing more than gold, silver, and copper. Gold was too expensive, while copper was too cheap, so silver, as the only candidate, became an out-and-out "people's currency." The question is, where can China, which lacks silver mines, get a large amount of silver to use as currency?The answer is world trade. If the world trading system is likened to a huge waterwheel system, the currency is the torrent that drives the gears of the waterwheel.The larger the money supply, the faster the waterwheel turns, and the larger the scale of world trade.From the 16th century to the 19th century, the currency that powered the world trading system was silver.

In 1581, Zhang Juzheng, the chief assistant of the Ming Dynasty, began to implement the "One Whip Law" throughout the country. Starting from the labor law and land tax, and starting from the desire to guarantee the government's taxation, he gradually shifted the focus of corvee service from the household to the farm, and changed the final taxation The settlement currency was set to silver, thus creating a huge public demand for silver. Coincidentally, in 1545 and 1548, the Spaniards successively discovered huge silver mines in Peru and Mexico, together with Japan’s silver export, the huge silver supply of these three countries constituted a powerful force driving the gears of world trade.

At that time, China's most powerful industries were tea, porcelain and silk, and there were few decent competitors in the world market.China's porcelain exports to Europe account for 50% of the value of all porcelain exports, so that China's name in the world is the English word "China" for "porcelain".Silk is also a heavyweight product exported by China. "The amount of silk exported from China exceeds people's imagination. A thousand hundredweight is exported to the Portuguese Indies and the Philippines every year. They are filled with 15 large ships, and the silk exported to Japan is countless. Count..."【2】

Due to the scarcity of silver in China, a situation in which silver was expensive and gold was cheap appeared in the Ming Dynasty in China. At the beginning of the 17th century, the gold-silver price ratio in Guangzhou was 1:5.5 to 1:7, while in Spain it was 1:12.5 to 1:14.The price of silver in China is twice that of Spain.The Spanish merchants who had just discovered a huge silver mine in the Americas were overjoyed after discovering this huge room for currency arbitrage. Groups of European merchants boarded ships bound for China with the huge amount of silver they plundered from the Americas.It is this silver-gold arbitrage impulse that spurs the huge world trade wheel to start turning at full speed.

Although Europe began the pace of the Industrial Revolution in the 17th century, and machine production greatly reduced production costs, their main product, textiles, was not competitive in China.On the one hand, the long-distance shipping has greatly increased the transportation cost, and on the other hand, due to the long-term and continuous investment in inland waterway shipping, especially the Grand Canal, China's successive dynasties have effectively reduced the transportation cost of local commodities in China, thus greatly increasing the value of local commodities. Competitiveness.

More importantly, China's textile industry reached a considerable production scale in the late Ming and early Qing Dynasties. According to estimates by Western missionaries, at the end of the 17th century, there were as many as 200,000 weavers in Shanghai and its surrounding areas, providing yarn for spinning. The number of workers is as high as 600,000.The industrial scale effect and low transportation cost made European products almost lost the opportunity to compete in China, and this phenomenon lasted until the middle and late 19th century. Under this situation, the main commodity transported by European merchant ships was American silver. After arriving in China, they exchanged silver for Chinese porcelain, silk and tea, and exchanged "expensive silver" for "cheap gold". Ship to India to purchase Indian goods, and finally return to Europe full of Eastern goods and gold, earning a lot of money.

During the nearly 400 years from the 16th century to the 19th century, Europeans were mainly engaged in the work of plundering American silver and international spoils.It is no exaggeration to say that the plundering of American silver became the first pot of gold in Europe.At that time, the center of world trade was obviously in China. China exported commodities and imported currency, thus establishing a silver-based monetary system.The way to prove that China was the world trade center at that time was very simple. Once the silver arrived in China, it never left and became the main part of China's money supply until the British began to sell opium to China.

It is estimated that from the discovery of the American silver mine in 1545 to 1800, a total of 133,000 tons of silver was produced in the Americas, of which 75% (about 100,000 tons) was shipped to Europe, and Europe finally sent 32,000 tons of silver to China through Asian trade. .If the silver shipped directly from the Americas to China and the silver exports from Japan to China are included, China obtained 48,000 tons of silver through world trade [3].Interestingly, the influx of 68,000 tons of American silver into Europe (excluding the 32,000 tons shipped to China) brought long-term inflation, while the 48,000 tons of silver entering China did not cause obvious inflation in the Ming and Qing Dynasties. There was only one reason. China's commodity economy was far more developed than that of Europe at that time. The increase in currency stimulated a substantial increase in commodity supply, and the pressure of inflation was effectively offset.

Since silver came to China and ascended to the throne of the king of currency, the chronic hyperinflation that appeared repeatedly in the Song, Liao, Jin, Yuan and early Ming Dynasties in Chinese history for nearly 500 years has never recurred. After 1935, Chiang Kai-shek abolished the silver standard system, legal currency reform and the issuance of gold-dollar banknotes, which once again triggered hyperinflation and eventually lost power. Looking back at history, if there is any currency that can be called the world currency in these 400 years, and then promote the rotation of the gears of world trade, silver will be the only candidate.