Without money, what is the point of being a traitor?

Chapter 718: Peeling off the cocoon
The last of the silver from the Taicang warehouse was used to buy fodder.

Then, the most important salt certificate silver for the coming year was directly poured into the military reserves at the first court meeting in the eighth year of Zhengde.

Then, the unpaid grain tax in various places was also broken down bit by bit, like a butcher dissecting an ox.

Then they began to drastically reduce taxes and grain rations in various places.

Pei Yuan could almost imagine the catastrophic financial situation that would be faced in the eighth year of Zhengde's reign.

In this situation, if the imperial court encountered any trouble, the best solution they could come up with to deal with the resulting silver shortage would be to use the plan from the fifth year of the Zhengde reign, which would stop collecting paper money at the seven major customs posts on the Grand Canal and start collecting silver instead.

At the same time, they would also use various means to levy additional taxes and extort silver from the people.

This artificially created demand for silver will greatly increase the value of the blood-sucking silver, and it will once again wield its sickle against the people.

However, these reckless individuals probably never imagined that the Mongol prince would launch a continuous series of attacks on the Ming Dynasty, leaving the Ming Dynasty in a state of utter chaos.

Pei Yuan felt a pang of sadness as he thought about A Zhao's difficult situation.

This is truly being forced to bow one's head!
Why do I suddenly feel a little bit protective?

Pei Yuan stopped keeping him in suspense and said to Zhu Houzhao, "I have a way."

The simple four words made Zhu Houzhao's eyes light up.

He exclaimed excitedly, "Tell me! Tell me!"

Pei Yuan immediately worked with him to slowly clarify the situation.

"Your Majesty, after listening to what the Minister of Revenue has to say, do you feel that the affairs of the state are extremely difficult?"

The light in Zhu Houzhao's eyes dimmed slightly, and he nodded silently.

Pei Yuan continued, “Our Great Ming Dynasty covers a vast territory, with a registered population of 60 million. There is no idle land in the four seas, and last year we had a bumper harvest. There are iron smelting workshops, both public and private, everywhere, producing countless quantities of pig iron and crude steel every year. The cotton cloth and silk woven every year are also countless.”

"It can be said that with the strength of the entire Ming Dynasty, it would be an easy matter to support the military supplies of several border towns and to provide relief to disaster victims in several places."

"The reason why we are now in a situation where we are constrained at every turn is because of the overall national strength of the Ming Dynasty. We simply cannot mobilize that little bit of stagnant silver."

Zhu Houzhao couldn't help but agree, saying, "That's right."

Pei Yuan continued, "Since the root of the problem lies in money, then we must solve the problem by addressing money."

Zhu Houzhao clearly wanted to appear more composed, but upon hearing Pei Yuan's words, he couldn't help but ask, "We can't just raise taxes, can we?"

Pei Yuan looked at Zhu Houzhao and said very solemnly, "No tax increase. Since silver won't work, then we'll use paper money to buy it."

Zhu Houzhao was taken aback upon hearing this and quickly said, "No, no!"

"It's not even possible for the merchants to accept such a thing; even the high-ranking officials in the court wouldn't approve it."

"Now that the paper money has finally started to improve, if we issue another bad policy and force purchases at this time, I'm afraid the paper money will have a hard time recovering."

Pei Yuan was somewhat gratified to hear this. Ah Zhao had indeed taken the matter of the precious paper money to heart, and all the effort he had put into explaining the matter of the cowrie shells to him had not been in vain.

Pei Yuan vehemently denied it, saying, "Who said it's a bad policy?"

“In the past, the imperial court’s use of paper money to purchase goods was considered a bad policy, simply because paper money could not retain its value and there was no good way to recover it.”

"When the people suddenly receive a large amount of paper money, and cannot use it for a while, its value will naturally fall."

"In this situation, once the price starts to fall, those who hold precious banknotes will rush to use the rare channels for buying back these banknotes to cash out their money. Merchants who buy back precious banknotes will also take the opportunity to drive down the price, causing the price of precious banknotes to plummet again."

Zhu Houzhao looked at Pei Yuan with some confusion, "Isn't this a bad policy? No matter what the process is, it's unreasonable for the court to use paper money that is destined to depreciate to buy things from the people."

Pei Yuan sighed and finally said, "If no one wants the paper money, the court can just take it back itself. I've heard of a method called the Single Whip Law."

Originally, Pei Yuan intended to remain behind the scenes and was unwilling to take responsibility for the consequences of the reforms.

To this end, he also prepared two firewalls, Wang Qiong and Yan Song, to stay out of trouble and avoid getting burned.

But now that the opportunity is right in front of him, Pei Yuan can no longer hesitate.

The Ministry of Revenue has finally managed to pull off a foolish scheme to increase military preparedness in the northern border region and even distribute money to soldiers at various passes. Pei Yuan absolutely cannot miss this golden opportunity to bolster military preparedness.

In Pei Yuan's memory, all of the Ministry of Revenue's plans were successfully carried out.

In the first month of the eighth year of Zhengde's reign, Zhao Zige squandered all the government's funds, at the cost of which the paper money was essentially phased out of history.

Fortunately, when the Mongol prince launched his unreasonable and relentless attacks, the bewildered Ming Dynasty was able to buy time thanks to its ample reserves at the front lines.

Therefore, Pei Yuan had to do two things at once this time: protect the Ming Dynasty's precious paper money, not only make sure the Ministry of Revenue's plan was implemented, but also take advantage of their willingness to give them a huge boost.

Moreover, this might be the best opportunity to implement the Single Whip Law.

Zhu Houzhao was somewhat bewildered. "The Single Whip Law, what does that mean?"

Pei Yuan succinctly explained, "From now on, when taxes are levied, they will no longer be collected in kind. Instead, all taxes that the people have to pay will be collected and converted into cash, thereby eliminating corruption and exploitation of the people."

Zhu Houzhao glared at Pei Yuan in surprise, "Are you crazy? Where did those farmers get so much silver? Once taxes are levied, those grain merchants will drive down prices. Isn't this pushing them to their doom?"

Pei Yuan did not back down at all because of Zhu Houzhao's words, but calmly said, "He's not crazy. The court uses the Single Whip Law to bind the Ming Dynasty's paper money!"

Zhu Houzhao was even more incredulous, "The Great Ming Treasure Note?"

Then he angrily retorted, "Nonsense! What use is all this paper to the national treasury?!"

"Can it be eaten? Can it be worn? Can it be used to pay the salaries of officials and to pay the soldiers' wages?"

Do you know how much revenue the Ming Dynasty had last year?

"We have 22 million shi of rice, 4.6 million shi of wheat, 31,500 jin of raw silk, 170,000 jin of cotton, 120,000 bolts of silk fabric, 1.6 million bolts of cloth, 110,000 jin of cotton, 26 million bundles of fodder, and a considerable amount of other miscellaneous items in exchange for silver, grain, and cloth." "Our Great Ming Dynasty operates precisely because of these abundant resources. What use is it for you to ask me to collect these precious notes?"

Pei Yuan knew there was no time to explain the benefits to Zhu Houzhao in detail.

He had to immediately come up with something that would seriously challenge Zhu Houzhao's beliefs and gain his support quickly.

Pei Yuan thought for a moment and then said, "Your Majesty, I have a few very simple questions to ask you."

Zhu Houzhao frowned and said, "Speak."

Pei Yuan said, "Ever since the memorial submitted by the Directorate of Keys before the new year, the court has resumed collecting paper money on the Grand Canal..."

Zhu Houzhao interrupted, saying, "Commercial taxes are commercial taxes, but the imperial taxes are the foundation of the nation and cannot be arbitrarily levied."

Pei Yuan said, "I haven't finished speaking yet."

Zhu Houzhao was slightly annoyed. If he hadn't thought that this guy was also trying his best to help him, he would have really wanted to have Pei Yuan dragged out and beaten up.

Zhu Houzhao gritted his teeth and said, "Speak."

Pei Yuan continued, "Since the news of the memorial submitted by the Siyue Treasury spread, the price of the Ming Dynasty Treasure Notes has fluctuated considerably. I heard that after the latest official price was released, the price of the Ming Dynasty Treasure Notes even surged to over 'one string of Treasure Notes can be exchanged for four coins'."

Zhu Houzhao added, "These prices are all fictitious. Once the court uses paper money to purchase these items, it will inevitably lead to a large accumulation of paper money among the people, causing the price of paper money to fall again. The credibility that has been painstakingly built up will collapse once more."

Pei Yuan remained silent for a moment.

No matter how much Zhu Houzhao refuted Pei Yuan, he was only expressing the temptation in his heart. How could he not hope that Pei Yuan would persuade him to come up with a plan that could save the Ming Dynasty from its dire straits?

Seeing that Pei Yuan remained silent, Zhu Houzhao became uneasy and pressed him for an answer, "What's wrong?"

Pei Yuan had no choice but to say again, "I haven't finished speaking yet."

Zhu Houzhao angrily retorted, "Speak! Then speak!"

Pei Yuan slowly said, "In the past, the price of the Ming Dynasty Treasure Notes even dropped to several tens of strings of cash for one coin. At that time, when people heard that someone wanted to buy the Treasure Notes, there were still quite a few people willing to put them up for sale."

"Now the price of the Ming Dynasty Treasure Note has reached 'one string of Treasure Notes can be exchanged for four coins,' its value has increased many times over, but the market trading volume has not increased much."

"This shows that after this period of hype, many people have begun to believe in the value of the paper money. Although they have seen good prices, they are still willing to hold onto it and see if there will be a better opportunity."

Zhu Houzhao's lips moved, but he ultimately remained silent.

Pei Yuan continued, "Therefore, in my observation, the value of the paper money depends solely on its usefulness. The more scenarios in which the paper money is used, the faster it circulates, and the greater its potential for appreciation, the more willing the people will be to continue holding it."

"Without a sell-off, the price will naturally remain stable."

Pei Yuanxian gave Zhu Houzhao this concept, and then continued slowly, "His Majesty just mentioned the court's annual revenue."

"I would like to ask, if we really follow my idea and use the Great Ming Treasure Notes to collect taxes, how many Great Ming Treasure Notes would be needed to cover the tax burden on rice, wheat, silk, cloth, cotton, and fodder?"

As Pei Yuan spoke, he also patiently reminded him, "The current exchange rate for one string of paper money is four coins. Your Majesty may wish to use this as a rough estimate."

Zhu Houzhao was speechless upon hearing this.

Does this even need to be calculated?
If one shi of rice is exchanged for half a tael of silver, and half a tael of silver is equivalent to 350 good coins, then 22 million shi of rice alone would be an unimaginable astronomical figure.

Not to mention the other enormous quantities of supplies.

Pei Yuan then asked, "Then may I be so bold as to ask, what was the approximate amount of the paper money bestowed by the court in previous years, as well as the paper money recovered through various channels?"

Zhu Houzhao pondered for a moment and replied, "In normal years, the expenditure is around 70 million strings of cash. Last year, because we wanted to reward the soldiers who quelled the rebellion in Bazhou, we spent 90 million strings of cash. It was precisely because of the excessive expenditure of paper money that the Treasury submitted a memorial requesting that paper money be collected again at the customs to make up for the shortfall."

Pei Yuan asked, "Let's set aside the paper money that's been accumulating in the hands of the common people. Just considering the paper money that's in circulation, do you think it can cover the taxes levied by the court?"

Zhu Houzhao replied without hesitation, "Of course not!"

Pei Yuan tried to guide Zhu Houzhao's thinking, "The people need to use Ming Dynasty paper money to replace the more than 20 million shi of rice tax, the several million shi of wheat tax, and the taxes on raw silk and cotton cloth. Where will these huge amounts of surplus paper money come from?"

Zhu Houzhao's eyes widened. "You mean printing more paper money?"

He continued to object, saying, "This won't do, this won't do! During the reigns of my ancestors, Emperor Taizu and Emperor Taizong, it was precisely because of the printing of more paper money that the paper money suffered a severe decline in value. How can I repeat the same mistake?"

"Besides, the people's taxes are fixed. Whether they pay in kind or exchange it for paper money, aren't we taking the same thing from them?"

Upon hearing this, Pei Yuan asked another very simple question.

"Your Majesty, let me give you a simple example. Suppose—and I mean suppose."

"If a certain resource, for example..."

Pei Yuan, fearing that Zhu Houzhao might simply make a simplistic assumption, said, "Take stones for example. The court wants to convert this portion of tax revenue into paper money. The current circulating paper money is 90 million strings of cash, while we need to print an additional 900 million strings of cash."

"So, is our tax collection process the court first taking out these 990 million strings of cash to exchange for the stones in the hands of the people? And then the people use these 990 million strings of cash to pay taxes to the court?"

Zhu Houzhao did not quite understand Pei Yuan's meaning.

He said, "That's right, in the end we still get these stones, and we still have to spend time trading with the people for nothing."

Pei Yuan asked calmly, "Then didn't Your Majesty notice that 900 million strings of Ming Dynasty banknotes appeared on the market without causing any impact?"

"The imperial court received both the stone and 99 million strings of cash."

Zhu Houzhao's eyes widened in disbelief, and he was speechless, almost unable to comprehend what was happening. "How...how could this be?"

Pei Yuan said, "This newly added 900 million strings of cash is tied to stones. In the process of trading these stones, there is a buyer and a seller, and one stone corresponds to one string of cash."

“In monetizing these stones, we receive wealth of equal value on a one-to-one basis. If the issuance of paper money decreases, the value of the stones corresponding to the paper money will increase. If the issuance of paper money increases, the stones will depreciate in value.”

(End of this chapter)