Chapter 1311: Year-End Assembly (Part 8)

"I understand, Father. Rest assured, I will not compete with my brother for this position. If you hadn't asked me to participate, I wouldn't even want to meddle in these matters."

"As for this Gold Bank you mentioned, I have also figured out the general operating principles. However, I have also discovered that this behavior of taking a single portion of grain, turning it over several times, and using it for several tasks is truly too dangerous."

"It seems like deceiving people. There clearly isn't that much grain, yet you promise so much to others, giving them the false impression that the grain actually exists. If a clever person discovers that our Huaxia doesn't actually have that much grain and that we are just using paper to trick them, what should we do then?"

"Moreover, if we need to turn this grain over several times and then use currency instead of grain to pay wages, then the quantity of currency issued should be greater than the quantity of grain. Otherwise, it is effectively the same nature as Grain Coupons; however much grain is in circulation, that much in Grain Coupons must also circulate."

"And there are also those consumed and wasted; how should those be calculated when the time comes? The issuance of currency should be even more troublesome, right?"

Baifeng looked at Changle with even greater satisfaction: "You are even a bit stronger than your brother; you think more. I feel that you are more suited to handle finance and assist your brother."

"Everything you said is correct. Currency can also be called a general equivalent. Current Grain Coupons are actually just vouchers; for however much grain there is, that much in Grain Coupons is printed. Once the corresponding grain is consumed, the Grain Coupons must be withdrawn and can no longer circulate."

"But currency cannot be that way; it needs to circulate constantly. Therefore, when issuing it, one must take into account that the grain itself will be consumed, as well as the different annual yields, and the output value of industry and animal husbandry. These all affect the issuance volume and value of the currency."

"Of course, regarding this matter of turning it over several times that you mentioned, the value of the currency also depends on our national credit. As long as everyone trusts us enough and does not go to purchase the corresponding grain with the currency, that risk will remain suppressed."

"It looks very dangerous, like a pig's bladder, ready to burst at any moment. But as long as that balance is maintained, our Huaxia's economy is like a pig's bladder blown full of air—much larger, bigger than when it wasn't inflated. Even if we know it's empty inside, isn't it still better than being shriveled and having nothing at all, right?"

"A situation where everyone loses faith in the value of the currency and all come to exchange it for grain is called a Bank Run, and it may occur in the future."

"There are not many solutions. The most important thing is to stabilize people's hearts and make the majority stop the Bank Run. The best way to stabilize hearts is to make them believe that our grain is very sufficient, just as it was before."

"In order to ensure that after circulating several times, the currency issued exceeds the value of the grain in stock, and that there is still grain to handle such a situation when a Bank Run occurs, the Gold Bank needs to keep a certain Risk Mortgage Deposit."

"These Risk Mortgage Deposits are best kept in grain; this is the most secure. And it must account for at least thirty percent of the total value of all the currency you have circulated. This is the minimum; it can be higher, but not lower."

"Before using up this thirty percent, you must stabilize the Bank Run. If you still haven't succeeded, then the government must step in and use the National Treasury to stabilize the situation."

The two brothers, Changle and Yulong, were now taking notes directly. Each held a sheet of paper and used their father's pen. Writing was too slow, so they only recorded the main, most important information.

Another benefit of this was that if others saw these individual terms, they wouldn't understand them at all, which allowed for better secrecy. Only the two brothers knew the specific content, and in the future, they could rely on these terms to recall details when writing more detailed plans or ideas themselves.

However, when Baifeng said this, Yulong, having realized something, raised his head and asked in confusion: "The government steps in and uses the National Treasury?"

"Father, shouldn't this Gold Bank be managed by the government and merged with the National Treasury? Why would it still need to use the National Treasury?"

Baifeng held up two fingers and separated them, saying: "The National Treasury is the National Treasury, and the Gold Bank is the Gold Bank. The Gold Bank is considered a Genus of the Ministry of Revenue, responsible for issuing and supervising the production, circulation, and so on, of currency."

"Another thing is managing private assets, making reasonable use of the grain they deposit into the Gold Bank. The National Treasury can borrow from it, but that does not mean it belongs to the National Treasury; it must be kept separate."

"The grain in the National Treasury is the output from our public lands and what is obtained through taxes. How it is used depends on the plan we formulate for the year."

"The grain in the Gold Bank is something we are only storing on behalf of ordinary people. But because the quantity is large enough and it is idle, it can be borrowed for the state to use. This does not need to be told to those who come to deposit grain, as long as we ensure that when they come to collect their grain, there is grain for them to take."

"Therefore, the Gold Bank and the National Treasury are in a state of mutual dependence. When the Gold Bank faces a Bank Run crisis, the National Treasury must step in to help. As long as we can rely on the Risk Mortgage Deposit plus the grain stored in the National Treasury to survive the Bank Run and let everyone regain confidence and deposit their grain back in, then whose grain it is will be returned, and things will continue as they should."

Yulong was enlightened: "Ah! So that's how it is. Father, in that case, it seems the Gold Bank still needs to be relatively independent. It would be best if I don't manage the Gold Bank; I should manage the Ministry of Revenue, or I manage the Gold Bank and let go of the Ministry of Revenue."

"I have roughly envisioned the same. The overall rank of the Gold Bank is half a level lower than the Ministry of Revenue, and it needs a higher degree of freedom because it is currently in the conceptual stage, and everything is too unfamiliar to you."

"Even if you two understand what it means, it will likely be too difficult to operate. I will be responsible for the Gold Bank first. When one of you becomes more adept and understands it better in the future, you can take it over, or someone else who is more trusted and capable can manage the Gold Bank. As long as you hold down the Ministry of Revenue and strengthen supervision, there will be no problem."

The two brothers agreed repeatedly. It was better for their father to straighten everything out first. Such completely new matters were too difficult for them; they might not be able to complete the task well, and it would be troublesome if they messed things up.

Baifeng tapped the table again, signaling that he still had key points to make. The two brothers held their pens steady, raised their heads, stared at their father's face, and prepared to listen with their ears and take notes with their hands.