Chapter 543: Gold and Silver Are Not Money by Nature

Two months passed in the blink of an eye. By early eighth month of the second year of Wude, as the leaves on the northern slopes of the Qinling Mountains began to yellow, Feng Yan had already returned from Hanzhong to the Chang'an court, having "not disgraced his mission."

To prove that his journey had not been entirely fruitless, during his report to the Emperor, he presented several Ba-Shu iron coins he had collected.

After the iron coins were brought up on a tray, Diwu Lun picked one up with his fingers and examined it. He found that its shape and design were no different from Han dynasty wuzhu coins. When weighed, its weight was also exactly the same. The only difference was that the characters cast upon it read "Wu Jin."

Seeing that Diwu Lun seemed to show a trace of interest, Feng Yan began to pour out the intelligence he had gathered in an endless stream.

"Your Majesty, the reason Gongsun Shu cast the characters 'Wu Jin' was to distinguish it from Han currency. Furthermore, Gongsun styles himself the White Emperor, aligning with the virtue of metal."

"But the strangest thing lies not in the inscription, but in the material. These iron coins—forgive your minister's ignorance—I have never heard of such a thing. In the past, when Wang Mang overhauled the currency system, there were five materials, six names, and twenty-eight varieties. The five materials were copper, gold, silver, cowrie shells, and tortoise shell—iron alone was absent."

No sooner had Feng Yan finished speaking than he was contradicted by Privy Treasurer Song Hong, who was also in the hall: "In the Warring States period, there were occasional iron coins, or mixed coins of copper clad with iron."

Fortunately, Song Hong still left Feng Yan some face: "But those were exceedingly rare. To cast them on a massive scale—Gongsun Shu is indeed without precedent."

Diwu Lun nodded and asked Feng Yan, "From these iron coins, what does the Director of the Grand Ushers perceive?"

Feng Yan hurriedly replied, "First, iron easily decays. Passed through countless hands and soaked with sweat, it rusts within a few years. To cast coins from iron has virtually no precedent in antiquity. This shows that Gongsun Shu was forced to do so out of necessity—because the Chengjia regime suffers from a severe shortage of copper!"

Diwu Lun glanced at Song Hong: "Is not Shu rich in copper mines? I recall that during the Former Han, Emperor Wen granted the Yandao copper mountain in Shu Commandery to a favored minister, who was permitted to mint his own coins. For a time, Deng Tong coins spread throughout the realm, circulating alongside the coins of the King of Wu."

The products of the realm were old Song's specialty; he could recite them all without consulting any documents. He replied, "Your Majesty, after a century of mining, the Yandao copper mountain's output is no longer abundant. Examining the registers of local tribute from the Xin dynasty period, Yandao, aside from a small annual tribute of copper, has long since had difficulty producing any surplus."

"Besides Yandao, aren't there also great copper mountains in the southern part of Shu Commandery, in the Qianwei and Yizhou commanderies?" Diwu Lun remembered that the mines in Yunnan could be dug for another two thousand years...

This was precisely the "classified intelligence" Feng Yan wished to report. He said, "Your Majesty, the commanderies of Nanzhong nominally submit to Gongsun Shu, but in reality, they are independent powers ruling their own territories."

"Take Qianwei Commandery first. When Gongsun Shu declared himself king, Qianwei refused to obey. Although Gongsun Shu dispatched troops and conquered it, the region is controlled by the great local clans—the Long, Fu, Yin, and Dong families. Gongsun Shu's edicts only reach the commandery seat; the various counties do not heed his orders."

"If Qianwei cannot even be controlled, the situation in Yizhou Commandery further south is even worse. Governor Wen Qi has allied with the great Yong clan. The officials dispatched by Gongsun Shu have repeatedly been robbed and killed by the 'barbarians' and are unable to take up their posts."

"Moreover, the two regions are full of many barbarian tribes, scattered in disparate settlements. The only road is the Five-Foot Road from the Qin dynasty, which is often cut off. Even if the area has abundant copper deposits, Gongsun Shu cannot send men to mine them and transport the ore to Chengdu for minting. Therefore, he can only use iron, since Shu proper has plenty of it."

Diwu Lun understood: "The year before last and last year, Gongsun Shu urgently contended for Liangzhou and also sent troops via the Ziwu Road to raid Guanzhong. It seems he initially looked down on the poor mountains and treacherous rivers of Nanzhong, coveting the north instead. Now that his northern advance has failed, Nanzhong has become a hidden threat. He cannot even obtain tribute copper. This White Emperor's 'five metals' are incomplete."

Feng Yan also reported on the origins of the "Southern Advance" faction within the Chengjia regime. It was men like Li Xiong who, seeing this point, believed they should abandon the northern campaign and concentrate their efforts on controlling Qianwei, Yizhou, Zangke, and other commanderies, then further expand into southern Jing and Jiaozhou.

But the problem was that the barbarians of Nanzhong were fierce and untamable. The local Han magnates only controlled the areas around the county seats; the villages and mountain forests were full of Bo, Dian, and other tribes. During the great rebellion that erupted under Wang Mang, local order almost completely collapsed. The region was extremely hostile to outsiders. To fully control it would be a bottomless pit. Especially in Zangke, the King of Gouding had established his own independent kingdom. Wang Mang sent over a hundred thousand troops and still failed to take it; Gongsun Shu had even less confidence.

Diwu Lun thought to himself with a trace of mockery: "Southern advance? Easier said than done—unless Gongsun Shu has a Zhuge Liang under his command who can pacify Nanzhong for him."

At this point, Feng Yan seized the opportunity to offer counsel: "Your Majesty, Gongsun Shu secretly ordered Fang Wang to enter the Western Qiang and incite the Xianlian Qiang king to wreak havoc in Hehuang, seeking to keep one arm of our dynasty festering without end. This time, when your minister was dispatched to Shu on orders, though I could not put Fang Wang to death, if the enemy can go, so can we! Your minister humbly requests that Your Majesty permit the Grand Ushers to send agents into Nanzhong to contact the four clans of Qianwei and the Governor of Yizhou, to disrupt Gongsun Shu's rear, leaving him no time to look elsewhere, and to prepare for the future pacification of Ba-Shu and the delivery of proclamations to Nanzhong."

Feng Yan had learned his lesson now. He knew Diwu Lun was sensitive about the distinction between Hua and Yi, so he only proposed reaching out to the Han great families in Nanzhong.

In this way, his mission would not be considered a return empty-handed, and he could also secure more funding and authority for the Office of the Grand Ushers. Ever since Diwu Lun had split the Chamberlain for Dependencies into two and established the Embroidered Uniform Guard to gather intelligence, Feng Yan's power had been squeezed. If he did not exert himself, he would be marginalized.

But Diwu Lun said, "The situation in Nanzhong is complex, nothing like a simple war between two Central Plains states. If it remains under the Chengjia Desk, mistakes are likely. Let the Grand Ushers, the Colonel of Dependent States, and the Embroidered Uniform Guard each contribute personnel to establish a dedicated Nanzhong Desk."

A "Desk" was an operational office, often established on a temporary basis, equivalent to a "XX Leading Small Group." The court had already established desks for the Eastern Han, Qingzhou, Chengjia, Jing-Chu, and others, each responsible for diplomacy, espionage, and related matters concerning a particular regional warlord.

There were also desks under the Colonel of Dependent States for the Xiongnu, Qiangzhong, Wudu, the Western Regions, Goguryeo, and others, responsible for dealings with the barbarians. They had established the Bureau of Nine Translations to recruit interpreters.

These new desks under the Nine Ministers' offices received large allocations of funds each year and had formal, salaried staffing quotas. As for the temporary staff they could recruit on their own authority, they were countless. Therefore, Feng Yan also hoped to secure a few more. The more affairs an office managed, the greater its power, the more officials it had, the larger its budget, and the more face its chief gained.

Now, hearing that the work he had painstakingly opened up would have to be shared with his rivals, Feng Yan was greatly displeased—until Diwu Lun smiled and said, "The affairs of Nanzhong shall still be under your full jurisdiction, Minister Feng. The personnel sent by the Colonel of Dependent States and the Embroidered Uniform Guard will be considered on temporary assignment, subject to your command."

Only then did Feng Yan cheer up again and continue his diligent report to Diwu Lun.

"The reason Gongsun Shu casts iron coins—the lack of copper is one major cause. But since the Chengjia regime is willing to make peace with our dynasty and focus on the south, if they control Qianwei within a year or so, copper from the south will flow endlessly. Yet Gongsun Shu cannot even wait a single year and is urgently minting coins. Why? Because state expenditures are insufficient!"

Feng Yan described what he had seen and heard in Chengdu: "Gongsun Shu has not actually occupied all of Yi Province. Though the fields of Shu are fertile, the great clans and magnates are also powerful, taking more than half the profits. The annual land tax and levies of the Chengjia regime are not even a tenth of our dynasty's."

"Yet Gongsun Shu, like Wang Mang, is fond of pomp and ceremony. Internally, his court is filled with every official post, the Three Dukes and Nine Ministers all complete, with salaries issued according to Han and Xin precedents. Gongsun Shu has also enfeoffed his two sons as kings and his various trusted followers as marquises, and has launched massive construction projects for ancestral temples and palaces."

"Externally, to expand his territory, Gongsun Shu has conscripted vast numbers of able-bodied men into the army. During the Xin dynasty, Yi Province's three campaigns against Gouding had already shown signs of exhaustion. Now Gongsun Shu, instead of letting the people rest, exhausts his military even further. Not to mention that the common people of Yi Province, supporting a sovereign of ten thousand chariots at home and supplying three armies abroad, can no longer bear their fate—the court treasury itself is likely already empty."

Feng Yan stated his conclusion: "Therefore, Gongsun Shu can only urgently cast iron coins, forcing the people to use them, using the money to purchase military supplies to fund state expenditures, and issuing them as salaries to officials to save on grain and fodder."

Diwu Lun did not stint on his praise: "Seeing the whole leopard through a single spot—worthy indeed of being my 'Zhang Yi.' Sir, your mission to Shu this time has yielded considerable results."

He picked up an iron coin again and looked toward the pensive Privy Treasurer Song Hong: "From this iron coin, I can see that Gongsun Shu's heart is set on quick success and instant profit, and that his petty court is stretched to its limits. It seems my national policy is correct. Ba-Shu need not be attacked first. In five or ten years, even if Gongsun's court still stands, the realm's commerce and people's livelihood will have decayed into chaos."

Feng Yan had only seen the part to know the whole, perceiving the Chengjia regime's predicament from the details. Diwu Lun's words, however, were a solid prediction.

Song Hong, famous for his bluntness, frowned and actually questioned the Emperor: "Ba-Shu has always been known for its wealth. Salt, iron, grain, and population are all abundant. It can trade with the Di and Qiang west of Shu for horses. Even if cut off from the outside world, it can be self-sufficient. How does Your Majesty foresee that its people's livelihood will rapidly collapse?"

Because the economy has its own internal laws, Diwu Lun thought. He gestured to the court historians nearby, instructing them to carefully record what he was about to say.

"Gold and silver are not money by nature, but money is by nature gold and silver!"

From the Warring States period through the Han and Xin dynasties, gold had been the de facto legal superior currency. This was beyond dispute.

But why it served as the superior currency, no one had ever clearly explained. Everyone took it for granted—until Diwu Lun, before these two ministers, revealed the essence of money.

He said that money is an equivalent that balances commodities. And gold and silver, as universal equivalents, are not only scarce, easy to divide, uniform in value, and aesthetically pleasing, but also, apart from their use as luxury ornaments, have little practical use in industry or agriculture. Therefore, they are the most ideal form of money.

As natural money, even when cast into gold cakes, they generally needed to be weighed during transactions.

Song Hong listened, half understanding, but still instinctively objected: "Your Majesty, gold has long been the superior currency, but as for silver, only the state of Chu, several hundred years ago, once used it as coinage. Later, Emperor Wu of Han ordered silver coins cast, but they were soon abolished." As for Wang Mang's silver currency, as a negative example, there was no need to mention it.

Diwu Lun only smiled mysteriously: "Minister Song, wait and see. The day when silver becomes a natural precious currency, circulating throughout the realm, is only a matter of time."

He continued: "As for copper, as money, it is far inferior to gold and silver. First, copper in lump form is difficult to cut for transactions; it must be minted into coins by the authorities."

"Second, copper is far more abundant than gold, especially in the south. Local magnates and regional lords who control the mines and mountains can often obtain it."

"Third, copper is commonly used to make weapons, structural components, and farming tools. When circulated, if too much copper is used for minting coins, it is truly wasteful."

Therefore, the value of copper coinage differs from that of gold and silver. Besides its own value as a "precious metal," it also possesses a credit value bestowed upon it by the regime—making it a form of fiat currency.

Moreover, this credit value, even for the smallest denomination wuzhu coin, often far exceeds the cost of casting the copper coin itself by several times. That is why illegal minting is such a wildly profitable business—even chopping off the heads of countless illegal minters cannot stop it.

Wang Mang is the best example. The larger the face value of the copper coin, the more rampant the illegal minting. Take a single "Dabu Huangqian": its cost was cheap, yet it was worth a thousand small coins. A 1000% profit—it was worth risking your head on your belt!

Diwu Lun looked at the Gongsun iron coin in his palm: "As for iron, when used for minting coins, it is even more inferior to copper. No wonder that since ancient times, few have ever used it to cast coins."

"It is even easier to obtain than copper and also more prone to rust and wear. It should be worth even less, yet Gongsun Shu assigns it the same value as Han wuzhu coins... Therefore, this act is no different from Wang Mang casting large-denomination coins to plunder the realm's wealth."

Relying on the Chengjia petty court's bureaucracy and army, Gongsun Shu could smoothly implement iron coins, this "under-valued currency." Using fiat currency with a cheap minting cost, he exchanged it for tangible goods like grain and Shu brocade, and conveniently issued iron coins as salaries, forcing them to circulate in the market.

But Gongsun Shu, after all, did not understand economics. Those who violate economic laws will inevitably be dealt a heavy blow by them!

Diwu Lun made his prediction: "Let the Grand Ushers and the Embroidered Uniform Guard keep a close watch. Within a few years, Gongsun Shu will be able to extract vast wealth from Yi Province. The Chengjia state treasury will be temporarily full, sufficient to meet the needs of military campaigns and shipbuilding."

"But this move will severely damage Chengjia's credibility. Coupled with the immense profits of illegal minting, Shu will soon be flooded with iron coins, real and fake indistinguishable. The price of grain and cloth will skyrocket. The people will refuse to use iron coins and revert to barter. Gongsun Shu's money will no longer be exchangeable for goods, and land tax and levies will also plummet. In this cycle, the commerce that Ba-Shu had so painstakingly restored will fall into dire straits. This act is undoubtedly drinking poison to quench thirst."

A currency without intrinsic value can only circulate through a government's coercive power and extremely high credibility; money issued by an unstable government is essentially worthless — not even worth scrap copper or rotten iron.

Diwu Lun finished speaking, only to find a long silence in the hall — only the court scribe was writing furiously. As for Song Hong and Feng Yan, they were both stunned speechless.

Feng Yan had understood practically nothing in the latter half, but he was deeply shaken, and could only hurriedly cheer Diwu Lun's brilliance and sagacity.

As for Song Hong, his admiration came from the heart. He had witnessed with his own eyes how Wang Mang slapped his forehead four times and changed the currency four times, pulling every trick in the book, until he had thoroughly wrecked the currency and, along with it, all trade under heaven. Old Song had since come to regard currency with awe and fear, feeling that this thing, seemingly ordinary, was in truth profoundly abstruse.

And since he had overseen the Privy Treasurer in the Xin Dynasty, he understood economics a little. From the books of Guanzi, Baigui, and Tao Zhu, down to the policies of Sang Hongyang — often denounced by the scholar-officials — he had eagerly read them all, seeking a way to salvage the situation.

But from beginning to end, no one had ever clearly explained the true nature of this thing called currency — until today, when Diwu Lun's reflections on Gongsun's iron coins finally struck him like a thunderclap!

Truly, no one understands currency better than Your Majesty!

Song Hong sighed in admiration and, from the depths of his heart, prostrated himself before Diwu Lun.

Well, of course — those words just now were, after all, the thought of Sage Marx. Diwu Lun borrowing them to speak was enough to "establish a doctrine."

That being the case, given Diwu Lun's temperament, he was certainly not going to be content with standing by and watching.

"Minister Feng, has the mutual trade with the Chengjia regime been negotiated?"

Feng Yan was taken aback. To him, this matter was a "trifle" — even a muddle-headed move by Diwu Lun. Although Ba-Shu was rich in resources and could be self-sufficient, lacking neither salt, iron, nor horses, it still had a need to sell goods abroad — things like Shu brocade, cinnabar, and leather could all be exchanged for goods from the Central Plains.

Therefore, trading with Shu was tantamount to aiding the enemy...

But since it was Diwu Lun's request, Feng Yan had gone ahead and negotiated with Li Xiong, and the other side had naturally been more than willing.

"The negotiations are settled. The Chengjia regime refuses to open the Qinling roads and is only willing to trade with the Nanyang side at Wudang County, between Han and Nanyang."

"Good. As long as there's a crack, we needn't fear nothing can leak through."

What goes in this time won't just be spies from the Chengjia Ya Gate and the Nanzhong Ya Gate.

Diwu Lun said: "Issue an edict at once. Have General Cen Peng, Defender of the South, personally supervise the Nanyang Three Offices in counterfeiting Chengjia iron coins."

Nanyang was also an iron-producing center. Besides good iron, large quantities of low-quality iron were inevitably produced every year, mostly used to make inferior farming tools — now, they could be put to much greater use.

"Not only shall we counterfeit this 'Five Metals' coin, we must also produce fake coins marked 'one coin worth a hundred,' 'one coin worth a thousand,' and so on, to confuse and mislead. Even if they cannot be used in the mutual trade, we must send men to smuggle them over the mountains and into Ba-Shu."

Diwu Lun smiled. "I want to give Gongsun Shu a helping hand — so that the Chengjia iron coins, along with the credibility of his petty court, collapse all the sooner!"