TL: Rui88
“Precisely.”
Paul looked at Eileen and said, “The money becos less valuable. This phenonon, we can call it inflation. The term ‘currency’ in this context refers to the money that serves as a dium of exchange in socioeconomic activities. As the na suggests, it has expanded like a bubble, but its quality…that is, the corresponding material wealth in society…has not increased.”
“And conversely, suppose the Lord of Light perford another miracle and reduced the number of gold coins in human society to five. In that case, each gold coin would correspond to two loaves of bread, double what it was before. With less money circulating in society, this phenonon can be called deflation.”
Paul’s explanation made the two sisters nod repeatedly, but Catherine could not help but ask, “But what does this have to do with what we were initially discussing?”
Where was the “immature idea” Paul had ntioned at the beginning?
“Alright, alright, we are getting to it now. Be patient, do not rush.”
Paul smiled. That explanation had been a bit of a show-off, and he had unknowingly said a bit too much.
“The materials that make up money cannot be sothing found everywhere, nor can they be easily obtained, like water, soil, or stones. Otherwise, everyone could effortlessly create a credit certificate, and the phenonon of inflation I just described would occur imdiately.”
“And precious tals like gold, silver, and copper, they are difficult to extract and rare in quantity, but not so rare that they are impossible for anyone to obtain. This ‘just right’ characteristic makes them excellent materials for making coins.”
“Now I have a proposition…coins made from such precious tals have a natural tendency towards deflation.”
Catherine and Eileen exchanged a glance and asked strangely, “A natural tendency towards deflation? According to what you just said, does that an the total amount of tal currency in the world will beco less and less?”
“Yes, it will beco less and less. Uh… I an, it will beco less relative to material wealth,” Paul nodded.
Eileen was very puzzled. “How can that be? After everyone receives coins in a transaction, they will spend them in another transaction. The coins are just circulating; the total amount will not decrease. Unless…”
The little princess blinked her big eyes. “Unless it is like in the example you just gave, where the Lord of Light made the coins disappear?”
“Haha.” Paul laughed out loud. “The Lord of Light would certainly not do sothing so boring.”
“In reality, there are many reasons that can cause the amount of circulating tal currency to decrease. Note, I said circulating currency.”
Under the curious gazes of the two sisters, Paul explained.
“First is a relative decrease. You see, as the population grows and certain technologies improve, people produce more material wealth. But the speed of minting new coins often cannot keep up with the speed of wealth growth…the mining and slting of precious tals is a major issue. Am I right?”
Catherine and Eileen nodded.
“Then there is a real decrease. tal coins do not decay easily and are easy to preserve. And any normal person has an instinct to save money. So, unless it is absolutely necessary, people will keep their money in hand as much as possible, rather than spending it.”
“That makes sense,” Catherine agreed.
Paul continued, “Especially those great nobles and wealthy rchants! Many families have vaults that only take in money and never let it out, passed down from generation to generation.”
“So of them have broader channels of inco than ordinary people and can obtain a large number of coins. The rate at which many of them spend is much smaller than the rate at which they earn. So even take their money to the grave with them. This leads to more and more tal currency being hoarded, and less and less circulating in the market.” ṞΆℕỖBЕ𝙨
“Thus, deflation, or a money famine, occurs. And there is another problem in all this. We know that gold and silver coins are not pure gold and pure silver; they are always mixed with so other tals. And the fineness of coins minted by different countries in different periods varies. Therefore, there is a distinction between good currency and bad currency. People tend to hoard the good currency with higher fineness and spend the bad currency with lower fineness. This eventually leads to only bad currency circulating in the entire market. This is the so-called bad money driving out good. So…”
Paul paused for a mont.
Eileen imdiately had a look of understanding and preemptively said, “From an overall perspective, the amount of money the kingdom’s governnt can collect is destined to beco less and less, and there will always be a shortage of funds.”
Catherine, anwhile, had long been frowning in deep thought.
“That is right.” Paul nodded. “Unless there is drastic social turmoil that causes the owners of money to willingly…or be forced to…let their hidden money see the light of day again and continue to circulate, only then can this situation be alleviated.”
The two princesses’ faces turned grim. How much turmoil would that take? When that ti truly ca, it would be hard to say if the Kingdom of Ordo would still be ruled by the Rodneys.
Paul said, “Alright, I have said a bit too much again. But as Eileen just ntioned, the kingdom’s governnt will definitely be short of money. But what it lacks is those tal coins. If we ignore those shiny, scattered pieces of tal and look only at the material wealth that can satisfy people’s needs for food, clothing, shelter, and transportation…grain, cloth, livestock, minerals, and so on…is the kingdom’s governnt lacking in these things?”
Catherine thought for a mont and shook her head.
Paul said, “Yes, the kingdom’s governnt does not lack wealth at all. The royal family directly rules over the most extensive and fertile lands in all of Ordo. The output from these lands is countless. Logically, they should be the wealthiest in the entire country. It is just that due to the deflationary nature of tal currency, they may never be able to exchange it for a sufficient amount of currency.”
“So you an?” Eileen asked, “The royal family should pay soldiers’ salaries not with coins, but directly with goods of equivalent value…like grain or cloth?”
“Well, that is one thod.” Paul nodded. “There have been many similar asures in history, such as using salt as military pay for soldiers, but these are all temporary, expedient asures that definitely cannot last for long.”
“If we directly use the primitive thod of distributing goods to pay soldiers, it will an a lot of trouble. Suppose a soldier’s garrison is near an orchard owned by the royal family. So, we pick a pile of apples from the orchard and give them to the soldier as military pay. This pile of apples is equivalent in value to the soldier’s salary in coins. In theory, we have not shortchanged the soldier, and it is very convenient.”
“But the soldier needs to eat and drink, to wear clothes, and even to support a family. A pile of apples alone cannot do all these things. He will inevitably have to take them to the market to exchange for money. Can he sell them all? Most of the apples will just rot before his eyes. And think of the scene of all the soldiers in the entire barracks selling apples together after payday. How ridiculous! And the soldiers still have to march and fight. Are they supposed to march and fight with their property…a pile of apples?”
“Haha!” Eileen was amused by Paul’s description.
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