This is a picture of Kublai Khan who lived about 700 years ago. He was the first to issue large quantities of paper money. The Italian explorer Marco Polo visited him in China, and was deeply impressed by Chinese economic management. He wrote how Kublai Khan "had the secret of alchemy in perfection" and how he "causes each year to be made such a vast amount of money that it must equal in quantity all the treasure of the world".
But Marco Polo had gone back to Italy when the system collapsed. It was left to Alexander Del Mar - an American historian - to describe the breakdown of the system. Just like ours the system had been working magnificently:-
"This was the most brilliant period in the history of China. Kublai Khan entered upon a series of internal improvements and civil reforms which raised the country he had conquered to the highest rank of civilization, power and progress. Life and property were amply protected; justice was equally dispensed; and the effect of a gradual increase in the currency was to stimulate industry and prevent the monopolization of capital."
But then a little later :
"Population and trade had greatly increased, but the emissions of paper notes outran both, and the inevitable consequence was depreciation. All the beneficial effects of a currency which is allowed to expand with a growth of population and trade were now turned into those evil effects that flow from a currency emitted in excess of such growth. Excessive and too rapid augmentation of the currency resulted in the entire subversion of the old order of society. The best families in the empire were ruined"
Since Kublai Khan first showed the way the same trick has been used repeatedly. The historical record shows that the failure of these types of system always follows the expansion which happens when everything seems to be going so well. |