Jiaozi, the First Government Paper Currency
composition: probableauthorship: traditional
Merchant deposit receipts in Sichuan become a government-issued paper currency, the first anywhere, because iron coin was too heavy to move value at the scale trade required.
- paper currency arising from a physical limit on metal coin
- private merchant receipts absorbed into state issue
- notes issued in limited series against reserves
- the earliest state paper money, and the earliest inflation of one
Sichuan used iron rather than bronze coinage, and the weight made large transactions impractical, so merchants issued paper receipts redeemable for deposits. The practice was regularised, then taken over by the state, with printed notes issued in limited series against reserves. The step from a redeemable receipt to a state currency is the significant one, and the later history of the experiment, including its inflation, is as instructive as its invention.
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