Paper Money & Marco Polo
Secret of alchemy in perfection
Paper money seems normal to us now, but it wasn’t always.
Legendary traveller Marco Polo in his book The Travels of Marco Polo reported coming across paper money for the first time.
It was also one of the first encounters of fiat money.
(For anyone who doesn’t know, fiat money is money that exists without being tied to gold or silver. Pounds, dollars, and euros are all fiat currencies at the moment, as they are not backed by gold, they’re just backed by trust).
Back in the day, money was still a token or a specific IOU for metal, or any other valuable item.
Money being valuable in itself was still far-fetched.
Marco Polo came across Kublai Khan’s empire, grandson of Genghis Khan in 1260.
He discovered that he was running a society with money made from paper:
You might say the Emperor has the secret of alchemy in perfection, and you would be right.
The Emperor makes his money of the bark of a certain tree, in fact of the mulberry tree, the leaves of which are the food of the silkworms, these trees being so numerous that the whole districts are full of them.
What they take is a certain fine white bark or skin which lies between the wood of the tree and the thick outer bark, and this they make into something resembling sheets of paper, but black.
When these sheets have been prepared, they are cut up into pieces of different sizes. All these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver; and on every piece a variety of officials, whose duty it is, have to write their names, and to put their seals. And when all is prepared duly, the chief officer deputed by the Khan smears the seal entrusted to him with vermilion, and impresses it on the paper, so that the form of the seal remains imprinted upon it in red; the money is then authentic.
Anyone forging it would be punished with death. And the Khan causes every year to be made such a vast quantity of this money, which costs him nothing, that it must equal in amount all the treasure of the world.
With these pieces of paper, made as I have described, he causes all payments on his own account to be made; and he makes them to pass current universally over all his kingdoms and provinces and territories, and whithersoever his power and sovereignty extends.
And nobody, however important he may think himself, dares to refuse them on pain of death. And indeed everybody takes them readily, for whosesoever a person may go throughout the great Khan’s dominions he shall find these pieces of paper current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold.
Furthermore, all merchants arriving from India or other countries, and bringing with them gold or silver or gems and pearls, are prohibited from selling to anyone but the emperor. He has twelve experts chosen for this business, men of shrewdness and experience in such affairs; these appraise the articles, and the emperor then pays a liberal price for them in those pieces of paper. And with this paper money they can buy what they like anywhere over the empire.
So he buys such a quantity of those precious things every year that his treasure is endless, while all the time the money he pays away costs him nothing at all.
Perhaps the first line “secret of alchemy in perfection” sums it all up the best, as if paper money is the best way to extract the most amount of value from the least amount of work.
The similarities to the modern day can be seen quite clearly:
The actual value of the money is zero
Heavy punishment for counterfeiting
Widely used and accepted by all
Benefits the ruler above all else, and costs them nothing
Money described in this way from Marco Polo’s perspective carried a sense of amazement and novelty.
But this is exactly what we gladly accept today.
Currency is used not only as a medium of exchange but as a system of control.
It is used to keep control of the people within an economy, but often assert dominance of one nation over another.
Leave a comment as a suggestion: why does the head of state need to be on all the money?