Tales of Soft Money — Chinese Counterfeiters
One chapter of Money Dethroned details the emergence of copper money in Ancient China, and the many difficulties the Emperors there had with counterfeiting, or unlawful money production. Although, as we now know, many medieval travelers observed the paper money of Mongol China, perhaps little did the very same travelers know of the metallic monies used there before the Song dynasty's lucrative invention.
The destructive monetary system of the 14th century Mongol rule of China was not random, and not only connected to a long-running streak of authoritarianism in the area. It was in fact, in some ways a faulty "solution" to another long-running problem: counterfeiting, which Alison Hingston-Quiggin has detailed in her work. Ancient China, after emerging from monetary darkness into monetary systems of cowries, salt, cloths and tea, can indeed be said to later have evolved into an empire of counterfeiters.
It has already been established that etymology supports the presumption of old seashell money in China, as the symbols for "seashell creatures" and later also for "money" were remarkably similar (Quiggin, 1949, p. 225). Multiple historical documents point to the use of seashell money as well (Einzig, 1949, p. 255). It should then come as no surprise to learn that copper- and bronze imitations of seashells in the 6th and 7th century B.C. perhaps functioned as money as well, just as their metallic oxen counterparts had done in Ancient Greece. Hingston-Quiggin hesitates to call them money as they could have been charms of some sort, but it fits remarkably well with evidence emerging from other civilizations. What was certainly money, however, were the bronze and copper tools used in these agrarian societies, which is why metallic token versions of such items later emerged as money as well.
It is also established that not until the 3rd or 2nd century B.C. were cowries slowly phased out in favor of metallic coinage (which to a varying degree had been in place in the Chinese provinces for centuries). The coins themselves very rarely portrayed the current emperor or king, since it was deemed beneath the rulers to ever let filthy peasant hands touch such depictions. This has made it incredibly hard for numismatists to pair certain coin issues with specific rulers. In any case, round copper coins with central, square holes were minted and functioned for a while as money in parallel with seashells. Due to widespread debasements, the thin coins of the Chou dynasty became so light as to float on water (Quiggin, 1949, p. 243). This triggered a harsh reaction from the first Emperor of China:
A new era starts with the triumph of Ch'éng Wang of Ch'in, 'the Napoleon of China', who took the name of Shih Huang Ti, the first sublime Emperor in 221 B.C. Much of the uncertainty of earlier Chinese history is due to him, as, in his desire for progress, he determined to break all links with the past. He destroyed the old books, instituting a new script; he abolished the earlier forms of currency (cowries and (?) tortoiseshell, silk and grain, spade-, pu- and knife- as well as roundcoins are mentioned) and issued a new coinage. His dynasty, founded for 10,000 years, lasted 15 [...]. (Quiggin, 1949, pp. 243-244)
His copper coins, while surviving a century or so, became debased, adulterated and shrunken in size, weight and value.
To the Qin and Han period, Chinese historians attribute the inevitable birth of wide-spread forgery. Emperor Wu Ti (140-86 B.C.), issued silver and tin coins. The largest one was worth 3 000 "pieces of money", but did not circulate even for a year due to private- as well as state forgers (Quiggin, 1949, pp. 229-230). As Chinese coinage largely consisted of copper, any house with a capable smith could issue replicas despite various edicts against such practices. Notwithstanding harsh punishments, 100 000 forgers were discovered in one year alone, resulting in issues being withdrawn a re-cast, with accompanying confusion among merchants and other subjects. Hingston-Quiggin has one source on the subject of near uncountable mints:
In England there is something infinitely respectable about the word mint. It is otherwise in China. In the civil wars of that country the first sign that a protagonist has arrived (though not necessarily to stay) is his acquisition or construction of a mint, and also, if possible, an arsenal, but the mint is much the more important of the two (Fleming, 1936, pp. 301-2). It is not surprising, therefore, that the total number of Chinese issues is reckoned at some 10,000. (Quiggin, 1949, p. 231)
The return to crude barter in cloths was not unheard of in some areas. One king ordered the reversal of the monetary system to grain- and silk money, only to find that the acts of forgery followed suit, putting moist grain in grain bags, and weaving thin and fleecy silk not made for actual use. The Government of Emperor Yuan (48-32 B.C.) was close to giving up the metal-based monetary system altogether as well, and almost ordered a full reversal to grain, silk, cloth and cowry money. Yet another similar edict was actually implemented by Wang Mang the Usurper in 10 A.D., which threw the economy into chaos after it banned all monies except cowries and various knife-monies - both which had not been in use for hundreds of years. At the time he was murdered, the people had reverted to barter. (Quiggin, 1949, p. 245)
The forgery impetus to later, disastrous paper money experiments may be considered well represented by Qin dynasty emperor Shih Huang Ti, who had banned the use of many primitive monies in 221 B.C. As the copper money had been utterly debased during continuous wars, he decided to issue what may have been the world's first bank notes. Since he knew that making such notes from leather would incentivize the forgers to simply copy the scheme from their own leather sources, he had his own extremely rare and beautiful white stag put aside for the purpose. Each bank note made out of its skin was assigned an arbitrary value of 400 000 copper coins. Though of course harder to counterfeit - and individuals would surely find a way over time - the low number of notes made the money insignificant, if not innovative, in the end. (Quiggin, 1949, p. 248)
Did the copper monetary systems of China have any advantage at all? An Arab merchant operating in China in the 9th century A.D., noted one curious benefit of such coins. A thief breaking into the house of any merchant that only dealt with copper, could very well not escape with all the burdensome wealth the merchant had accrued. This relationship did not hold true for houses containing silver or gold. Although perhaps an advantage for the individual storing his copper money, the low value per weight unit obviously hurt commerce due to transportation costs. But the Chinese stubbornly held true to their copper, knowing full well that hidden dilution awaited the money if cast in silver or gold. It is not clear exactly how widespread various assessment techniques and technologies were in Ancient China, and how that influenced the decision to stick to copper. It is likely, however, that as soon as the cost to assess silver- or gold content of coins decreased, it would increase the opportunity costs of using abundant copper as a medium of exchange.
The widespread forgery, and dilution, naturally hurt the saleableness of Chinese copper money. Copper is, after all, rather abundant in nature, and so forgery may be considered an inevitability. The recurring regressions to barter had often to do with decreases in saleableness stemming from harsh laws passed by kings and emperors, but it is clear that what the authorities termed "forgery", which is just competitive money production, would have had the copper money dethroned naturally as well.