Paper Money

Article excerpt

MANILA, Philippines - "Why don't we just print more money?"This is a question that has probably crossed our minds, especially in times of financial need.Printing more money for everyone sounds cool: With more cash we can buy more goods. But if it's really that simple, why does the Bangko Sentral ng Pilipinas strictly regulate the number of bills it prints?History probably has the best answer to this question. The experience of China's Ming Dynasty with the earliest paper money will help us understand the need to control the amount of cash in circulation.British Museum Director Neil McGregor, in the recent BBC Radio 4 series "A History of the World in 100 Objects," said that one of the first bank notes ever printed traces its roots to 15th century Ming Dynasty.Before the advent of paper money, McGregor said most of the world exchanged money in coins of gold, silver, or copper with an intrinsic value that could be judged by weight.However, he said, that the Chinese eventually saw that paper money had apparent advantages over the coin: It is light, easily transportable, and big enough to carry words and images that announce not only its value, but the authority of the government that backs it, and the assumptions on which it rests."Properly managed, paper money is a powerful tool in maintaining an effective state," McGregor said.When the Mongol Empire disintegrated in 1350, the Ming Dynasty took over China and re-established the currency by issuing paper notes.Keeping the worth of the new currency intact was one of the challenges faced by the Ming empire, McGregor said. The Ming's key monetary decision was to ensure that the paper note could always be converted into copper coins: The value of the paper would equal the value of a specific number of coins. …