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Economist Zhu Jiaming: From Jiaozi to digital currency civilization inheritance

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This paper presents the history of Jiaozi from a broader perspective and compares the digital currency issuance figures of Jiaozi 1000 years ago with those of today from several perspectives.

Source: The Economic Observer

Original title: "From Jiaozi to Digital Currency Civilization Inheritance"

作者：朱嘉明教授- 著名经济学家、被誉为「改革四君子」之一

January 12, economists, digital assets institute professor academic and technical committee chairman Zhu Jiaming financial museum and the museum of Chinese coin in sichuan jointly launched "the first jiaozi, academic BBS and launch ceremony" section "jiaozi", published titled "from the hand to the digital currency civilization heritage" speech, in a broader perspective in this paper, the hand in history, and from the Angle of some 1000 years ago jiaozi, and compare the present digital currency hair. This article was published in Economic Observer, No. 1009.

Comparison of economic transformation processes

Song Dynasty Transformation: From Traditional Agricultural Society to Commercial Society. The Song Dynasty is divided into the Northern Song and the Southern Song. The Northern Song lasted from 960 to 1127, and the Southern Song lasted from 1270 to 1279, covering 319 years. In terms of the length of the dynasties and emails, the Song Dynasty is second only to the Zhou Dynasty and the Han Dynasty.

The "economic transformation" of Song Dynasty is a big issue in Chinese history. The Japanese historian Hunan Naito (1866-1934) made pioneering contributions in this regard. He put forward the hypothesis of "Tang and Song Dynasties Reform Theory" at the beginning of the 20th century, and later perfected and enriched the "Modern Song Dynasty Theory". Naito's "Tang and Song Dynasties Reform Theory" and "Modern Song Dynasty Theory" had a profound influence on European and American sinologists and Chinese scholars of Song history, and thus formed the concept and theory of "economic revolution", "commercial revolution", "maturity theory" of feudal society, and even "pre-capitalism" in Song Dynasty.

I personally support the "Tang and Song revolution theory". In the Song Dynasty, the transition from traditional farming to commercial society was fully started. Specifically, after the middle period of the 11th century, "China's economy no longer has the conservative ideas of that kind of relatively closed state of natural economy. Especially in the south of China, economic relationship to a dramatic shift in business development, broke the self-sufficient economy, promote the regional economic specialization and the family of the change of the mode of production, service for the market, both also depend on the market to achieve its own development, the function of the currency as a medium of exchange goods and services continued to expand." (Cambridge History of China's Song Dynasty, China Social Sciences Press, 2020, p. 353) The "Commercial Revolution" of the Song Dynasty promoted an unprecedented period of commercial prosperity. "Tokyo Menghualu" and "Riverside Scene at Qingming Festival" record the details of the commercial society of the Northern Song Dynasty with the language of literature and art. As a matter of fact, compared with the Northern Song Dynasty, the commercialization degree of the Southern Song Dynasty was more developed. The prosperity of Lin 'an as shown in "Dream Liang Lu" and "Capital Ji Sheng" was even higher than that of Tokyo.

There were many factors supporting the "commercial revolution" in the Song Dynasty. First of all, the family system, the slave system and the manor system completely collapsed; Secondly, large population growth, regional autonomy, urbanization, internal migration, property rights revolution, contract, monetization, consumerism; In addition, there were technological innovations, the handicraft revolution, the coal and iron revolution and the expansion of international trade.

The custom of doing business in Song Dynasty spread to all social strata. In the fiscal and taxation structure of Song Dynasty, the contribution from industry and commerce even made the proportion of agricultural tax gradually decrease, and the non-agricultural tax was as high as 80% in Chunxi-Shaoxi period of Southern Song Dynasty. China became the model of a prosperous commercial society of that era. The Song Dynasty broke off the tradition of "valuing the origin and rejecting the end" and formed the "mercantilism" with Chinese characteristics. Compared with the mercantilism of the early Renaissance movement in Europe in the early 15th century, there are both differences and some similarities.

Since the "Five Dynasties and Ten Kingdoms" period, the regional pattern of China's economy has completed the "economic center of gravity" shift from the north to the south. In the Song Dynasty, Sichuan was one of the most economically developed regions in China. During the reign of Chongning in the Northern Song Dynasty, the hukou accounted for about one tenth of the country. The population density of Chengdu Fu Road and Zizhou Road in the west of Sichuan Province is the highest in China. Sichuan not only developed agriculture and various handicraft industries, but also trade in tea, horses and salt, making it an important economic center in China. During the reign of Shenzong in the Northern Song Dynasty, the annual commercial tax collected in Sichuan accounted for about 20% of the national total. These constitute the direct reason why jiaozi was born in sichuan.

Therefore, the generation of jiaozi in the reign of Song Renzong is simply summed up as money shortage or because of the heavy iron and copper coins and the high transportation cost, which is not enough to explain and touch the root cause. The Northern Song Dynasty began the transformation from a traditional farming society to a commercial society. The development of commodity economy and the formation of credit system accelerated the monetization process of the whole society.

Contemporary transformation. There is also a transition from the real economy to the digital economy. The transformation of the contemporary digital economy originated from the computer revolution in the second half of the 20th century, followed by the Internet revolution, which not only accelerated the arrival of the "post-industrial society", but also began the evolution to the "information society". Shortly after the global financial crisis in 2008, the digital currency represented by Bitcoin was invented and developed, forming the coexistence of the traditional real economy and the digital economy, and the digital economy began to transform the traditional real economy.

Comparison of the historical course of money

Song dynasty banknotes: private, official and public. Jiaozi has experienced at least three stages from "private", "official" and "public" :

The first stage, the "personal child" stage. Appeared in the early northern song dynasty, chengdu, sichuan province for the inconvenience to carry money businessman operating cash custody business, depositors cash delivered to shop, shop fill in the deposit amount in use to disappear on the paper roll paper, again returned to the depositor, and charge a fee, this shop is "jiaozi shop", this kind of temporary fill out a deposit amount to disappear paper vouchers of hand. What is "early year" here? According to the research of Mr. Jin Gang, "private friendship" began in the first year of Taizong and Taoism of Song Dynasty (995 AD), and the Sichuan merchants began to conduct trade with paper money.

In the second stage, "private jiaozi" to "official jiaozi" to cross the stage. During the reign of Jingde in the Northern Song Dynasty (1004-1007), Zhang Yong, governor of Yizhou, reorganized the jiaozi shop households, which were exclusively run by 16 wealthy merchants. At this point, the issuance of "Jiaozi" has been officially recognized by the government, but it does not mean that it has entered the stage of "official jiaozi".

The third stage is the "Guanjiaozi" stage. Song Renzong Tiansheng first year (1023), the government set up Yizhou Jiaozi Affairs, the first issue of "Guan Jiaozi". Later generations generally tend to regard the issuing date of Guanjiaozi in 1023 as the birth date of Jiaozi.

However, the full history of mating must be traced back to the "private" stage of its origin. If according to Mr. Jin Gang's research from 995, that is to say, after the founding of the Song Dynasty, a generation had created "jiaozi", until 1109, "jiaozi" was replaced by "qian Yin", about 119 years. As for the circulation time of "money diversion", the span of the Northern Song and Southern Song, from 1109 to 1234, during which time, there was "Huizi", circulation almost throughout the Southern Song. In addition, from 1131 to 1264 in the Southern Song Dynasty, "Guan Zi" was in circulation. It is difficult to draw a conclusion that there is no "private" element, especially that the management institutions of these notes are generally "privatized", after a thorough research on "money circulation", "hui zi" and "guan zi".

Contemporary "digital currency" has "private", "official" and "public". Since the birth of Bitcoin in 2008, the evolution of digital currency in more than ten years has formed three forms of "private", "official" and "public". All kinds of private digital currencies are "private", while the legal digital currencies issued by the central bank are "official". There are also digital currencies issued by some institutions and social enterprises with obvious "public" characteristics.

Comparison of monetary value bases

Credit Basis of Paper Money in Song Dynasty. The paper money of the Song Dynasty, from jiaozi to huizi, had the character of continuity and did not break because of the political change. In Song Dynasty, different paper money existed for a long time. Paper money probably played a dominant role in the monetary system of the Song Dynasty, and its role was higher than that of copper money and other metal money. In other words, throughout the monetary system of the Song Dynasty, the main body is not copper money and metal money, but the paper money endorsed by the state. In the late Southern Song Dynasty, the paper money itself was quite "diversified", including Huizi, Qian Yin, Huaijiao and Huhui, as well as Guanwai Yinhui and Guanwai Tiehui, etc.

The monetary history of the Song Dynasty is essentially the evolution of paper money in the Song Dynasty. The paper money in the Song Dynasty experienced a change from "credit money" to "credit money". In the Jiaozi Period of the Northern Song Dynasty, the government still attached great importance to the preparation and support of its metal currency, or the reserve of metal currency was between 28% and 29%. However, since the late Northern Song Dynasty and continued to the Southern Song Dynasty, there is no shortage of scholars and officials who have realized that the credit of paper money no longer requires reserve funds, and the paper money has the status of legal compensation, so it can be separated from the circulation of reserve funds, that is, the so-called "law is circulation, people think it is convenient".

Under the credit currency system of the Song Dynasty, the government made up for the long-term shortage of metal currency supply and supported the real economy by continuously expanding the national credit currency, which formed the interaction of conscious monetization and commercial revolution. During most of the Northern and Southern Song Dynasties, the government basically achieved a balance between avoiding deflation and controlling inflation. In the middle and late Southern Song Dynasty, the government carried out the "technique of weight and lifting", linking precious metals, copper coins, ultimatums and valuable objects with the value of banknotes to promote the recovery of overissued banknotes and alleviate the pressure of large-scale depreciation of banknotes. It's quite modern finance.

Generally speaking, in the aspect of monetary economy in the Song Dynasty, the government had a strong sense of giving up the metal reserve that supported paper money and placing the value of paper paper entirely on the basis of national credit. It believed that when paper money obtained the status of legal compensation, it could realize the circulation without reserve money and open the first credit monetary system in human history.

Neither the Northern Song nor the Southern Song was trapped in the disintegration of the economic system and the so-called "malignant" inflation. The Northern Song was defeated by the Jin in the second year of Jingkang, while the Southern Song was defeated by the Mongols and Yuan. However, the war between the Southern Song Dynasty and the Mongolian-Yuan Dynasty lasted for about 40 years, triggering the economic crisis, financial crisis and currency crisis, and superimposed with the social crisis, political crisis and military crisis, and finally collapsed. To attribute the collapse of the Southern Song Dynasty to hyperinflation is actually "seeking fish from the wood", which is not consistent with the real history.

It is also necessary to reevaluate the historical status of Wang Anshi's reform. The financial crisis in the middle of the 11th century broke out in the Northern Song Dynasty because of the perennial foreign wars, which was the direct historical background of Wang Anshi's reform. The Green Seedling Law, the Law of Enrollment for Civil Service, and the Law of Trade Exchange implemented by Wang Anshi's Reform were all aimed at increasing the fiscal revenue of the national monetary form. For example, the Green Seedlings Act exempts farmers from usurious exploitation by establishing a government-led rural loan system. The method of enlistment was to establish a system whereby the state and county government paid for the enlistment by themselves through the allocation of contributions by households in the form of currency. The market exchange law, through the government's market fund, stabilizes the market price, and the traders use their property as collateral to obtain government loans. The core features of these reforms are: recourse to monetary and financial means, especially state-led loan interest, to finance the state finances, to meet the state's over-monetization needs and impulses, to maximize tax revenue and improve the state's fiscal situation.

Both Wang Anshi himself and his supporters, including representatives of Shenzong in Song Dynasty, agree that credit paper money has liquidity, expansion and appreciation, and has experienced and promoted the monetization process since the "Jiaozi Revolution". However, Wang Anshi's reform still ended in failure. This is because the development level of agricultural and industrial economy in Wang Anshi's era was too low to support the advanced process of monetization. Finally, the real economy and the monetary economy broke up, the benefits of monetary policy were not sustainable, and the marginal utility was soon lost. In the end, the financial crisis was not eased, but aggravated. Nevertheless, it has to be admitted that Wang Anshi's Reform was an experiment of "Keynesianism" in the Song Dynasty, which was hundreds of years in advance. The government hoped to stimulate the effective demand of farmers and businessmen through monetary and financial means and increase the supply of social wealth.

The credit basis of contemporary digital currency. Since the emergence of digital currencies, especially the various stablecoins of digital currencies, their value bases have been diversified, including at least the stablecoins based on fiat currency, assets and algorithms. Among them, the value basis of fiat currency digital currency is sovereign countries and governments.

Ultimately, however, it is the technological system, including blockchain, that underpins the value base of digital currencies. The history of Bitcoin over the past 12 years is evidenced by the massive appreciation of Bitcoin since the end of 2020. People realize that the value of Bitcoin has a number of advantages over the value of traditional fiat currencies and gold. What is certain is that the trend of bitcoin overvaluing gold will continue, and digital currencies will deal the final nail in the coffin to the residual value of precious metals. Because of Bitcoin, gold will eventually repeat the historical function of copper and silver as a monetary value, and gold will completely leave the monetary economy and become a metal in its usual sense.

Therefore, the emergence of digital currency reproduces the historical situation of Jiaozi: on the one hand, just like the existence of copper and iron coins in the Song Dynasty, the traditional and government-based credit currency continues to exist; On the other hand, just as the credit paper money from Jiaozi to Huizi dominated economic activities in the Song Dynasty, the digital currency based on algorithms and technologies is entering the stage of comprehensive rise, showing the prospect of finally gaining the dominant position in economic activities.

The technical basis of money in different times

The technical premise of handover. Throughout the Song Dynasty, from the Northern Song to the Southern Song, the monetary system was supported by paper money, not copper coins, not even iron coins. Because jiaozi need to circulate repeatedly, the minimum circulation time to about three years, so the paper quality, printing, ink requirements will be quite strict. Therefore, jiaozi and other banknotes of the Song Dynasty were of technical content, inseparable from the progress of paper manufacturing technology and printing.

China invented paper by Cai Lun in the Han Dynasty. In song dynasty, under the premise of fully succeed papermaking technology in sui tang and five dynasties, both in the production of paper, raw materials, technology, or the production of paper products quality, quantity, type, distribution, and the role in People's Daily life and so on are significantly more than the former generation, and formed a complete industrial chain, to achieve "full maturity level." The remarkable advantage of paper in the Song Dynasty is tough texture, durable, not easy to be affected by moisture deterioration. It is worth emphasizing that Sichuan has been a papermaking center since the Tang Dynasty and has been in the leading position in the country. In the Song Dynasty, Chengdu had excellent papermaking technology, and the "Chu paper" made of Chu Shu's ductile fiber was of the best quality and was difficult to forge, making it the best paper for printing Jiao Zi. Jiaozi's "paper" was initially commissioned by the government to be manufactured by the people. In 1068, the first year of Xining, Shenzong of the Song Dynasty, the government officially set up the paper making institute to manufacture the Chu paper for printing jiaozi. When the Southern Song Dynasty was issued, the government still stipulated that Sichuan Chu paper should be used as printing paper as far as possible.

Before Bi Sheng invented moveable type printing, Chinese printing technology was mainly reflected in imprinting, rubbing and block printing. Jiaozi, which was born before Bi Sheng invented movable type printing, apparently used block printing. Engraving printing was invented in the Tang Dynasty and was widely used in the Song Dynasty, becoming the mainstream of society. It is certain that the engraving of jiaozi printing, from raw materials, hand engraving technology to printing technology will be the highest level at that time. In terms of Jiaozi printing, we must break through the technical difficulties of metal carving plate and color printing. Therefore, during the reign of Song Zhenzong, the private Jiaozi issued by a wealthy businessman in Chengdu were well printed. After Jiaozi was issued by the government, the printing of Jiaozi was more rigorous. The central government of the Song Dynasty directly participated in the casting of the copper printing of Jiaozi in Yizhou. Jiaozi printed using multiple blocks of copper, plate color printing. Jiaozi in the late Northern Song Dynasty was printed with six copper plates in black, blue and red, which was a milestone in the world printing history.

In addition, the division of labor and management of paper money manufacturing process in the Song Dynasty should be advanced and strict. Teacher Wang Wei provided the Japanese literature on the strict division of labor in the coinage workshop of the government during the Shenzong period of the Song Dynasty, which involved the supervision of the officials, the directors of the coinage, the craftsmen, the pasting of the books, the printers, the carvers and the laborers, with an estimated number of 186 people.

In short, the number of printing from Jiaozi to Huizi in the Song Dynasty was huge, and there was a high demand for the supply of paper, copperplate production technology and printing technology. Therefore, the appearance of jiaozi in the Song Dynasty is not only the crystallization of the high economic prosperity of Sichuan in the Tang and Song Dynasties, but also a proof of the highly developed papermaking and printing technology in China.

The technical basis of "digital currency". The technical basis of "digital currency" includes two basic aspects: first, indirect technologies, such as ITC technology, big data and cloud computing technology; Secondly, direct technologies, such as blockchain technology and algorithm technology as digital currency, and now the popular DEFI technology.

If Jiaozi and Huizi are understood as 1.0 of China's credit currency, the currency of Yuan Dynasty was 2.0, and that of Ming Dynasty was 3.0. After that, China experienced the historical stage of currency economy and currency silver conversion. However, in the 1930s, the implementation of "abolishing the two and changing the yuan" and "legal currency reform" finally brought China's monetary economy back to the track of legal compensation credit which had been suspended for hundreds of years since the Ming Dynasty under the new historical conditions.

If we take the big history as the vision, it is not difficult to realize that the emergence of Jiaozi is not the result of the natural evolution of metal money, nor is it a simple change in the form of money. Now, due to the birth of Bitcoin, the acceleration of multiple digital currency system is changing the absolute monopoly pattern of the traditional fiat currency system, and promoting the further decline and end of the value of gold, which has affected human beings for thousands of years. Comparing Bitcoin with gold, Bitcoin is superior to gold in a series of aspects, such as scarcity, trading, storage and safety. So, on March 3, 2017, with a single bitcoin at $1,290 and an ounce of gold at $1,228, a single bitcoin was just over an ounce of gold; By February 2021, the price of Bitcoin exceeded $50,000, and the price of one ounce of gold fluctuated around $1,800. A single Bitcoin could buy about 27.78 ounces of gold. The "scissors gap" trend of the rise in the price of Bitcoin and the relative decline in the price of gold for several years seemed to have entered a stage that could not be reversed.

The invention of Jiaozi a thousand years ago was a sudden change in the history of human money. It was a great revolution and opened the earliest experiment of human credit monetary system. One thousand years later, the rise of digital currency is a great revolution in the history of human money, which will accelerate the arrival of the era of digital economy.

(This article is the text of the author's speech at the "First Jiaozi Academic Forum and the Launching Ceremony of" Jiaozi Festival ". It has been revised and supplemented by the author and some annotations have been deleted.)