patrick.net

bob2356 says

Actually the first paper money was introduced in the 7th century by the tang dynasty. Called flying cash because it could blow away. Not fiat money at all, it was more a receipt that could be redeemed. You are actually talking about the song dynasty which was the first to make extensive use of paper notes starting in 960. By the 1100's the government took over all the printing issuing the jiaozi.. Again not fiat money at all. The notes were backed. When the song dynasty fell to the mongols in 1279 the mongols printed paper notes called the chao that were not backed. That was the first fiat currency. The ming dynasty ousted the mongols in 1368 and continued to print until 1450 then stopped, silver became the money used in china until the 1800's. There were no massive bubbles and collapses during the mongol empire or the early ming empire.

The "Flying Cash" of the Tang Dynasty was more like checks and bank drafts. The early Song privately issued paper notes had to be backed or faced bank-run's when such backing was in doubt. By the 12th century (we both agree on this, your "1100's" is my "12th century"), the Song government took over all the printing and issuing of Jiaozi. We agree so far. Why did it have to be government exclusive printing and issuing? For the same reason that the Federal Reserve was founded: politicians and banksters want a central bank for fiat money creation without the risk of bank runs exposing the under-backing/over-issue fraud: by transferring such risk to the public via government issued fiat currency. It took only a few years for massive inflation to take place after Song government started the fiat currency regime. "Monetary reforms," striking off multiple zero's off the number like Zimbabwe did a few years ago and Venezuela about to do soon, were frequent in late Song Dynasty, throughout Mongol Yuan Dynasty and early Ming Dynasty, every few years to a handful of decades. Ask yourself, why did Ming Dynasty give up the printing of paper money? The silver money was not a government choice, but the people's choice starting in private practice. In fact, initially Ming Dynasty waged wars on the coast against "Japanese pirates" that were shipping silver mined in Japan to China; the "Japanese pirates" were often Chinese merchants and bootleggers involved in the shipping of a money that was more readily acceptable to the Chinese public than government issued paper money was due to the latter's constant massive inflation . . . just like the USD became de facto currency in Zimbabwe when the Zim Dollar hyperinflated. By mid-Ming Dynasty, the government gave up on the enforcement against silver money, and stopped printing of paper money as paper money became literally worthless. That also explains why the Chinese silver money during Ming and Qing dynasties were lump metal of weight, not any officially denominated coins, despite the country having known coinage and saw widespread use of coins from about 300BC to 1000AD: the fiat moneys of late Song, Mongol and early Ming had so thoroughly discredited government issued money that even the Chinese population (despite their traditional faith in centralized government) figured out that the only thing the big centralized government can do to a lump of precious metal is making it worth less in the long run by debasing content in similar coins while keeping the same image on the outside.

The repeated massive / hyper- inflations in late Song, Mongol Yuan and early Ming dynasties of course produced economic bubbles and busts in the market place (price inflation does not hit all sectors at the same time; massive increase in money supply create bubbles in certain sectors). The Chinese court historians simply had more important things to write about, such as wars, conquests and mass slaughters (some accounts claim China lost more than half of its population during Mongol conquest and occupation, which lasted only some 80 years or so, a very short dynasty by Chinese standards). The most pernicious bubble during those 100-200 years was actually the government bubble: the fiat money essentially financed the Mongol conquest of not only most of Asia but also the Middleast and Eastern Europe, through the mobilization power of a fraudulent promise (the money/credit promise) that is more sophisticated than the 72-virgin martyrdom promise and the usual paradise/reincarnation promise. Fiat money has tremendous mobilization power during wars, able to reel in a somewhat sophisticated population not easily swayed by the 72-virgins. The Mongol use of it led to the biggest empire in term of land area, ever in human history . . . with unimaginable misery and strife for humanity. That was the most significant bubble from the Song-Mongol/Yuan-Ming fiat money episode, before the people of east asia rejected all paper money and all government minted money, embracing lump metal as money despite government violent enforcement against honest money.

bob2356 says

John Law was fraud plain and simple, not fiat currency. He issued bank notes that were supposed to be backed but weren't.

John Law was in charge of French government finances, and implementing those policies in the name of the French government. Yes, all governments are forms of fraud and con game to some degree. It is a fictiticious entity for a small group of people to defraud the gullible public.

Most of the bubbles and collapses in history happened in hard money societies, either paper money backed by hard currency or just hard currency. They were caused by credit speculation or plain old fraud, not fiat money. Tulips were speculation on futures contracts with a 2.5% down payment. South sea bubble was classic pump and dump stock fraud. the bus and panic of 1819 was also fraud since the bus never acquired the gold backing as required in their charter, etc., etc..

The bust and panic of 1819 was due to prior suspension of gold standard during the Napoleonic War. British central bank was set up to run gold standard during peace time, then suspend gold standard during major wars in order to mobilize societal resources. There had been massive monetary/credit expansion during the Napoleonic Wars. After Napoleon was captured for a second time and sent to the island of Helena in south Atlantic, the central bank had to contract money supply and return to normalcy. In the other instances, government sponsored credit speculation and fraud were/are by definition not hard money societies.