Late Yuan Dynasty: I am the true emperor

Chapter 392 Public Transport Economics (I)

Governing a big country is like cooking a small fish. Suppressing powerful landlords and dividing the land is a long-term policy. We must be prepared for a protracted war. It is by no means something that can be won in one or two battles.

For example, the Shen family was divided from one household into 12 households, and each household still retained 5000 mu of land. But there is no need to be too anxious. At most, in one or two generations, they will take the initiative to divide the land into less than 300 mu per household.

Now Lu Jin has stationed a front army in eastern Zhejiang, and there are also a large number of internal guards who have penetrated into the villages and towns for surveillance. Those powerful gentry will never confront him head-on, and what Lu Jin wants is the current stability. It would be best if there is no chaos in the spring. Let's do the spring plowing well first and plant the grain in the fields for me first.

If the situation gets too serious now, delaying spring ploughing and causing famine, the losses will be more than just the resistance of a few landlords.

But don't imagine that they will cooperate honestly. They dare not resist head-on, but they will definitely do something behind the scenes, such as sending money by false pretenses, or falsely registering their own land in the name of public places such as Taoist temples, while actually continuing to collect rent in secret. There are many ways to hide the land.

But Lu Jin was not an emperor who grew up in the deep palace of ancient times and was unaware of the sufferings of the people. Even if he had not seen it with his own eyes, he had heard about it to some extent. After all, the knowledge of later generations was far beyond that of people of this era.

Therefore, there is no need to rush to deal with these powerful landlords. Let them finish the spring ploughing and plant the grain first, and then collect taxes in summer and autumn. By then, the spring imperial examination will be over, and there will be enough manpower. After the Supervisory Office is replenished, the new officials can be assigned to various places to investigate cases. There will be plenty of opportunities to deal with them, and even those Taoist temples and Buddhist temples that collude with the powerful gentry will be dealt with at the same time.
Therefore, Lu Jin did not care whether those powerful landlords were willing to cooperate actively. Just when Shen Rong took the letter of introduction written by Yu Yunzhou and ran to Jiankang to seek an official position, Lu Jin was giving a lecture to everyone in the Marshal's Mansion.

The Marshal's Mansion in Jiankang has not been too busy recently. Lu Jin has already drawn up a development plan for this year. The whole year is divided into four quarters. In the spring, all the people are registered and encouraged to engage in farming and sericulture, so as to ensure spring ploughing.

Supply and marketing cooperatives at all levels were fully rolled out, salt and iron began to be distributed, and new banknotes were printed in large quantities in preparation for currency reform.

The five armies were reorganized and each unit was deployed to its proper place after the reorganization. Two new ironworks were set up. Zhao Junyong was eliminated at the same time. The spring imperial examinations were held and the reserve of officials was done.

The Intelligence Bureau should expand outward. It is best to fully deploy intelligence stations in Central Plains, Huguang, Fujian, Shandong, Hebei, Liaodong, and Goryeo to collect intelligence from all aspects and lay a solid foundation for this year's strategic operations.

In the summer, taxes were collected and new officials were sent to inspect local areas to crack down on powerful and corrupt officials.

In the military field, after the troops were deployed in place, they began training and combat. The two newly built ironworks began production, fully producing weapons and armor to replace armor and weapons for this year's main attacking forces as soon as possible.

In addition, we have to wait until the summer to see the situation and decide whether to give Fang Guozhen some money and ask him to go to Dadu to buy horses on his behalf so that we can form more cavalry units this year.

The military academy of the Marshal's Mansion should also start organizing intelligence from all aspects in the summer and formulate a detailed military plan based on its own preparations.

In autumn, grain is harvested and military operations begin, which lasts until the beginning of next spring. This six months of idle farming time is just right for fighting!
Now all plans are proceeding in an orderly manner. The army is being reorganized and mobilized, all localities are also registering households and preparing for spring plowing, the ironworks is in the preparation stage for construction, and the imperial examination has not yet arrived, so Lu Jin has the leisure to give them lectures during this period.

He had previously told everyone that he wanted to compile a new volume of economics for the Gongshu Secret Classic, and now he finally had the time to do it.

That day in the main hall of the Marshal's Mansion, Lu Jin asked craftsmen to make a blackboard and chalk and set them up in the main hall. Officials who were not too busy came over to listen to him talk about economics.

Lu Jin certainly did not write the book himself. He was only responsible for lecturing, and a group of people below listened and took notes. They then compiled them into a manuscript, which was then finalized after Lu Jin reviewed it.

When they heard that Lu Jin was going to give lectures to officials, many people came immediately. In addition to Wang Guangyang, Tao An, and Chen Yu, the three who had originally agreed to help him write books, others included Yang Xian, Shi Nai'an, Qin Conglong, Liu Zhang who was responsible for printing new banknotes, and even Zhan Ding who had just arrived a few days ago.

There were also some other minor officials, and even officers from the Imperial Guard of the garrison commander's mansion came to listen. Lu Jin did not refuse them and let them stand in front of the door and listen. After all, whoever could learn the most would get it.

Lu Jin started with the definition of money, what is a general equivalent, what is means of production, what is inflation, deflation, he first threw out these concepts one by one, and then continued.

"In fact, China has been deflationary for a long time, most of its history, especially in the era when copper coins were used as currency. That is to say, the amount of currency was not enough to meet all transactions in society, and bartering always existed among the people.

"Even among the people, the imperial court has always collected taxes in kind. If there is enough money, why don't they just collect money for other taxes besides food?
"When did this deflationary situation begin to change? I think it was probably in the early Song Dynasty. In the early Song Dynasty, a large number of copper coins were minted every year, and commodity trade was developed. Later, things like Jiaozi paper money appeared. At first, it was only used spontaneously by private merchants, and later it was taken over by the court.

"For the imperial court, which never had enough money, the newly-issued paper money was like a poison that could quench its thirst. They could not help but over-issue it. However, they had never seen paper money before and did not understand the economic principles behind it. The result of over-issuing paper money was that there was more and more money in the market, but the truly valuable goods did not increase. This would cause the paper money to depreciate and the price of goods to rise, thus leading to inflation for the first time in China's history.

"If it is only mild inflation, it is not entirely a bad thing. The money in people's hands will gradually depreciate, which will make them afraid to save and consume a lot, which will promote the prosperity of commerce. However, if a large amount of money is released all at once and the goods do not increase, it will lead to severe inflation, which is completely useless and will only lead to the collapse of the country's economy.

"That's right, I'm talking about Bao Yuan's opening of the river to change the currency."

Lu Jin wrote down the key points on the blackboard, and everyone gathered around the tables and took notes. After they finished taking notes, Liu Zhang, who was in charge of printing money, said, "So in the future, when we issue money, we have to judge whether there is inflation based on the prices of goods in society. If prices go up, we will reduce the amount of money we issue."

"No." Lu Jin immediately shook his head. "The rise or fall of prices will be affected by many factors. Simply put, things are more valuable when they are scarce. When the quantity of goods decreases and is not enough to meet the needs of the people, the price will naturally rise.

"There are many reasons for the reduction in the quantity of goods. For example, cotton may have been affected by a disaster this year, resulting in a significant reduction in cotton production, which will naturally lead to a rise in prices. Alternatively, cotton production may not have decreased, but a river or road may have been cut off, resulting in a stagnation in transportation. Cotton may be stuck somewhere and cannot be transported to where it is needed in a short period of time. This will lead to a short-term shortage of materials in the area, which will also lead to price increases. Similarly, unscrupulous merchants hoarding goods will also lead to price increases."

Liu Zhang frowned upon hearing this and asked, "Then how do we determine whether there is inflation caused by excessive money supply?"

Lu Jin explained again, "Of course we look at prices, but not the price of a certain commodity, but the price of all kinds of commodities in the whole society, including food, clothing, housing, transportation, and various materials.

"And as I just said, a single region will be affected by various factors and may not reflect the normal real prices. What should we do? This is actually a mathematical and statistical problem. In the face of this situation, we should collect data from all over the country and compare the prices of the same categories in various places.

"And it's not enough to just compare the prices of different places in the same year. You also need to collect statistical data every year and compare the price gap between previous years and this year. If there is a gap, you also need to analyze the reasons for the gap and whether it is related to the amount of money issued.

"Let me give you an example. Now is a time of war, so prices are definitely a little higher than normal. Let's say a piece of cotton cloth costs 200 wen. When the country is unified and peaceful, and people live and work in peace and contentment, and production resumes, the price of cotton cloth will surely drop to a normal price of 150 wen a piece.

"But after another two or three years, you find that a piece of cotton cloth has become 50 wen, or even 30 wen. How do you judge? What caused the cotton cloth to drop so much in price?"

"How is this possible?" Liu Zhang said without thinking, but thinking that Lu Jin was just making an analogy, he analyzed again. "If the price of cotton cloth drops by 30% or 40%, according to the theory that things are valuable because they are scarce, either the output of cotton cloth has increased greatly, or there is less money in society, and the money is more valuable than before, so that prices will fall.

"But according to what the Marshal said, we also need to compare the prices of other commodities, such as grain. If the price of grain remains the same as in previous years, and only the price of cotton cloth drops significantly, then it is not a question of the amount of currency, but the amount of cotton cloth has increased."

Papapapa, Lu Jin immediately applauded and praised, "That's right, this is a comprehensive analysis. Not only should we compare the prices of the same type of goods in different places and in previous years, but we should also comprehensively compare the prices of other commonly used goods to determine whether the currency is over-issued."

Everyone nodded when they heard this, and Liu Zhang said, "Then it's not an easy job to investigate prices and statistics in various places. Doesn't the court have to set up a special government office to do this?"

Lu Jin said immediately, "If we want to better manage the country's economic development and let the court have a clear understanding of the people's economic activities, then we should indeed set up such a government office, called the National Bureau of Statistics, and put it directly under the State Council, with a rank comparable to the Nine Ministers, and then station statistical sub-bureaus in various provinces. Of course, this is just an idea, and we can discuss how to do it specifically.

“In addition, this statistics bureau should not only count prices. If it is just for price survey, local officials or inspectors stationed in various places can just take some time to go shopping and write a report. There is no need to set up a new government office, which will only increase redundant officials and staff.

“Therefore, if we must set up a statistics bureau, we should collect statistics in more detail. In addition to the prices of local commodities, we should also collect statistics on industrial and agricultural production activities across the country, and finally summarize the data to be called the national gross industrial and agricultural output value.

"Let me give you an analogy. If governing a country is like treating an illness, then the role of this statistics bureau is equivalent to the doctor's observation, smell, questioning and palpation. If the court has production data from all walks of life, it only needs to compare it with previous years to find out which industry is developing and which industry is regressing. It is like using observation, smell, questioning and palpation to check a person's internal organs to find out where the lesion is. In this way, the court can diagnose and treat the disease and prescribe the right medicine.

"For example, the imperial court wanted to move people to Liaodong, and the winter in Liaodong was very cold, so a lot of cotton clothes were needed. But according to statistics, this year's cotton production was less than last year. So we had to analyze the reasons for the reduction, solve the problem, and introduce corresponding policies to encourage more cotton production."

This theory that governing a country is like treating an illness and statistics is equivalent to observing, smelling, asking and palpating is really novel. Everyone nodded their heads. Qin Conglong also said, "It seems that the role of this Statistics Bureau is still not small. If it is determined that paper money will be the main currency in the future, then in order to avoid repeating the mistakes of the Song and Yuan dynasties, it is indeed necessary to set it up."

Wang Guangyang also asked, "My Lord, if this statistics bureau is established and the court discovers deflation or inflation in time, how should it deal with it?"

Lu Jin continued to explain.

"If it is deflation, then naturally there is less money in society, or if there is no increase in money but more goods are produced, in this case, more money will naturally be distributed, but it will not be distributed directly per person, but the court will spend the money.

"For example, large-scale construction and infrastructure building. If a prefecture or county needs to repair a city, they can apply to the court for funds. The court will print money and approve it, and the government will organize the people to repair the city. This is another form of work-for-relief, which is called work-for-relief.

“If the cities in various places have only been built a few years ago and do not need to be repaired, the money can be used to invest in other infrastructure, such as repairing water conservancy facilities, repairing post roads and official roads, and then distributing the money to the people in the form of wages.

"In this way, the people made money, the amount of money in society increased, the country also increased and renovated its infrastructure, and its ability to deal with disasters became stronger. The court also released money to solve the problem of deflation. This achieved three goals in one fell swoop."

Upon hearing this, everyone hurriedly took up their writings to record this solution to deflation.

Wang Guangyang asked again, "What if there is inflation?"

Lu Jin explained again, "Inflation, as the name suggests, is either because there are fewer goods in society or because there is too much money. If we want to solve this problem, there is only one way, which is to raise interest rates to attract deposits!"

"Raising interest rates to attract deposits? What does this mean?" Chen Yu asked in confusion.

Lu Jin further explained, “The imperial court should set up a money house, or a bank, to be responsible for exchanging currency for the people, or for local storage, remittance to other places, and even lending and other businesses.

"This is the function that Jiaozi has had since its inception. Merchants felt it was inconvenient to carry copper coins when traveling far away, so more than a dozen merchants jointly guaranteed and issued Jiaozi. With the Jiaozi, merchants could withdraw the corresponding currency at any of these dozen shops. Banks should also have this kind of service.

"There is also the business of saving and lending. For example, people can deposit their savings in the bank, and the bank will pay people a certain amount of interest. For example, if you deposit 102 taels, the annual interest rate is %, and the people will be paid taels in the second year."

Chen Yu was a little dumbfounded. "Wouldn't the court lose money then? If the people deposited their money and earned the interest, how much would the court lose?"

Lu Jin raised his hand quickly to interrupt, "Listen to me first. Banks do more than just take deposits. They can also lend money to others. For example, if a merchant needs money to run a business, the bank can lend him a sum of money, but it requires physical collateral.

"For example, a merchant uses the title deed of a house as collateral and goes to a bank to borrow 2 taels of silver. The term and interest are set. Assuming that the bank absorbs deposits from the public at an annual interest rate of 5%, then it will give an annual interest rate of 105% when lending out. If the merchant borrows 3 taels, he will have to pay back taels next year. In this way, the bank will not only not lose money when absorbing deposits, but it can also use the people's money to lay eggs, and then lend it to merchants, earning a % difference in one year, which is the bank's profit."

Everyone was stunned when they heard this. Is it possible to play like this?

Lu Jin continued, “I said that the purpose of setting up a bank is not only to make money, but also to use the bank as a means to control inflation.

"Let's talk about inflation. It's because there is more money in society and fewer goods, so there is inflation, currency depreciation, and rising prices. If the court controls the banks, it can raise interest rates to attract deposits.

"For example, the annual interest rate of banks is 2%. People think the interest rate is too low and are unwilling to deposit money. But now I increase the interest rate to 3% or even 5%, but it is fixed. For example, if you deposit 115 taels of silver for a three-year term, you will get taels of silver after three years, including principal and interest. People will deposit their money into banks when they see that there is profit to be made. Then, won't the amount of money circulating in society decrease? Inflation will naturally be solved."

Wang Guangyang frowned. "Increasing interest and absorbing savings can indeed bring back the extra money, but this money has to pay interest. After three years, the court will have to pay a large amount of interest. Where will the court get this money?"

Lu Jin continued, "I just said that inflation is caused by too much money and too few goods. Raising interest rates to attract deposits only solves the problem of too much money, but you haven't solved the problem of too few goods.

“At this time, you can look at the data from the Statistics Bureau to see which industry is still lacking, and you can encourage merchants in this industry to grow and develop. If they don’t have money to expand their business, you can lend them the fixed-term savings that the bank has just collected, so that the merchants can make more money and return the principal and interest to the bank in three years.

"After three years, the bank paid off all the depositors' interest, the country developed its backward industries, and the government solved the problem of inflation. It was a three-pronged approach, and the bank even made a profit."

Everyone was dumbfounded when they heard this. They didn't expect that they could make money this way.
(End of this chapter)