Thursday, March 22, 2012

The Very First Chinese Inflation?

After spending every market hour reading everything financial, in the late evening I like to settle in with a good book.  Having just re-read a couple of Ron Paul's tomes, imagine my surprise as I read A Brief History of Khubilai Khan by Jonathan Clements last night, and discovered the following passage about one of his (and my) favourite economic topics: Khubilai Khan used all means to conquer China, and, starting in 1252, "as one of Khubilai's incentives, he did as his brother had done, and authorized the printing of paper money. Mongols had little use for actual money, but were intrigued by the concept that a roundel of copper might be traded for something more than its intrinsic value, simply because of the number it bore on its face. It was a short step from this discovery to money made out of paper, bearing values that bore no relation to the cost of the paper itself. In the early stages, such chits allowed the Mongol pacification bureau to draw huge numbers of workers into their realm, and to keep them there, as the paper money was worthless outside Mongol territory. In time, of course, the temptation was irresistible to simply print more money if times were hard, as inevitably happened, creating inflation that would threaten later periods of Mongol rule."  Am I crazy or does Helicopter Ben Bernanke resemble this guy?  Yikes!