Chapter 40: A Genius of the World!

"Secondly," Lu Beigu continued, "dozens, hundreds, or even hundreds of great merchants, after purchasing the rights to transport military grain east of Kaifeng in segments, will use the water network to transport grain from the Southeast, Jinghu, Huaihe, and Shandong via water routes to the special military grain warehouse northwest of Kaifeng for storage. Similarly, merchants from Guanzhong, the Two Rivers, or the Central Plains, in order to obtain the 【Xie Salt Certificates】 issued by the Northwest, will either choose to purchase grain themselves and transport it to the Northwest, or choose to provide their own carts and horses, and after paying a deposit, take on the grain transport task from the special military grain warehouse northwest of Kaifeng, and then transport the grain to the Northwest."

"The reason the system design does not require segmented purchasing in the Northwest is that land transport differs from water transport. From Kaifeng to Luoyang and then to Chang'an, the route goes straight west along the official road on the south bank of the 'Yellow River-Wei River', with only this one path to take, so supplies do not require complex transshipment. However, transporting grain from the Southeast is different; grain must be collected from Jinghu, Jiangnan, and the Two Huai regions, and supplies require complex distributed transshipment through the water network."

"The fundamental reason why the 'Compromise Method' failed previously was that merchants needed to transport grain thousands of li from grain-producing areas to the Northwest front, where consumption along the way was too great. Coupled with the rampant private salt in the Northwest, even obtaining salt certificates could not make up for the losses. But if this cyclical method is followed, it will be different; merchants from different regions only need to bear a portion of the journey, thereby greatly reducing transportation costs."

Li Pan nodded slightly upon hearing this. He had stayed in the Northwest; that place was indeed the 'foundation of kingly and hegemonic power' with fertile fields stretching a thousand li during the Han and Tang dynasties, but since the end of the Tang, that was no longer the case.

Now, soil erosion is severe, arable land has shrunk on a large scale, and with so many armies stationed there, the Northwest region is completely unable to achieve self-sufficiency in grain.

Coupled with the constant risk of war, since the first Song-Xia war, civilian grain prices have remained high for years, and stability can only be maintained by relying on external grain imports.

The Song Dynasty's 'Compromise Method' is essentially no different from the Ming Dynasty's 'Kai Zhong Method'. Facts have also proven that if a single merchant is made responsible for the entire transportation of grain, no one can bear it; the result is either the policy is abandoned, or it is changed into actual segmented contracting.

Zhao Bian asked at this moment, "Then, is the purpose of setting an exchange ratio between the two types of salt certificates to adjust the proportion of salt certificates to achieve the goal of increasing or decreasing, accelerating or slowing down the supply of grain to the Northwest front?"

"Correct."

Lu Beigu nodded and said, "The current dynasty's commerce is developed, but merchants also have regional characteristics. Southeastern merchants may not really come to Kaifeng to exchange their 【Well Salt Certificates】 for 【Xie Salt Certificates】, and the same applies to Northwestern merchants. But if the court needs to transport grain to the Northwest quickly, by slightly raising the exchange ratio, countless intermediate merchants will flock to it for profit. At that time, both ends will be affected accordingly, and slowing down the grain transport speed works the same way."

It was a bit mind-bending; Lu Beigu was not clear whether these two great figures truly understood the principle behind it.

The principle here, stripped bare, is very simple.

First, regarding the physical goods: the same package of salt, whether Sichuan Well Salt or Hedong Xie Salt, is not of equal value in itself.

If there is only this one package of salt, then whether it is of equal value actually doesn't matter, because even if it isn't, the price difference for resale is very small, and the transportation costs are right there, so there is absolutely no necessity to travel thousands of li just to resell for the price difference.

But what if it is not one package, but one million packages?

Obviously, multiplying the price difference by such a huge quantity results in profits that are already very considerable.

However, one must still consider the corresponding transportation costs.

— But what if it is not a mountain of one million packages of physical salt, but a stack of salt certificates?

Then only profit exists, with almost no transportation costs at all.

In fact, this is also the strategy Lu Beigu formulated based on historical facts.

Historical research materials clearly record that as the issuance volume of salt certificates increased, the Great Song's salt certificates would soon break through their original function as 'salt withdrawal vouchers', acquiring monetary attributes in circulation, being able to offset taxes, be used for civilian transactions, and even possess the remittance function of 'flying money'.

In this situation, for example, if the official exchange ratio of 【Xie Salt Certificates】 is adjusted and their actual value rises, then inevitably intermediate merchants, in pursuit of profit, will buy them up in large quantities.

What is the direct consequence?

That is, the actual transaction price of 【Xie Salt Certificates】 will rise with the merchants' enthusiasm. Merchants who want to achieve arbitrage without transportation costs through such securities as salt certificates must purchase them from merchants who currently hold large amounts of 【Xie Salt Certificates】.

At this time, certainly, merchants who previously completed land grain transport will sell their 【Xie Salt Certificates】 to cash out in time.

But there will also be powerful great merchants who organize caravans to purchase grain themselves and transport it to the Northwest to exchange for 【Xie Salt Certificates】.

And more small and medium-sized merchants will choose to provide their own carts and horses, and after paying a deposit, take on the transshipment task from the special military grain warehouse northwest of Kaifeng, transport the military grain to the Northwest, and then exchange it for 【Xie Salt Certificates】.

This achieves the effect of mobilizing civilian forces to transport grain to the Northwest quickly during wartime.

Moreover, it can satisfy both the grain needed by the Northwest army and the grain needed by the Northwest people. Great merchants organizing caravans to purchase and transport grain themselves to obtain 【Xie Salt Certificates】 is different in nature from taking on the military grain transshipment task from Kaifeng; this portion of grain can, in emergencies, be released by the various prefectures of the Northwest into the market or used directly for disaster relief.

Then, what if the actual value of 【Well Salt Certificates】 rises?

That would lead to merchants reducing their enthusiasm for transporting grain to the Northwest because there is no profit to be made, turning instead to purchase 【Well Salt Certificates】 from other merchants, or buying 【Well Salt Certificates】 themselves.

In this situation, the inflow of copper coins from Sichuan will increase, and the issuance scale of Jiaozi will also increase accordingly.

And there is an unspoken meaning here: the reason for establishing a salt certificate exchange place in Kaifeng is to make more people benefit from the policy, thereby reducing resistance to the policy, which means the probability of actual implementation increases greatly.

Because in the actual execution process, it is not that a policy that looks good can be implemented; rather, only a policy from which the vast majority of people can benefit can be implemented.

Zhao Bian pondered carefully again, and finally managed to sort out all the key points within it.

Lu Beigu's design, which was both imaginative and yet perfectly interlinked, truly made him feel utterly amazed.

"All of this is voluntary behavior by merchants; it is merely the establishment of a system that guides interests according to the situation."

"I have never thought that the art of governing the country and saving the people could be designed this way! Today I have learned from you!"

Zhao Bian bowed respectfully to Lu Beigu with great admiration.

Lu Beigu hurriedly stood up to return the bow.

And Zhang Fangping looked at Lu Beigu, with deep surprise also revealed in his eyes.

Originally, he thought the salt certificate law formulated by Fan Xiang was already perfect enough!

But today, after hearing Lu Beigu's words, he finally discovered that it could actually be taken a step further on this basis!

"—A genius of the world!"

(End of this chapter)