Cash or Crash: Inflation in Ancient China

Today we discuss how unfettered imperial seigniorage broke economies and even dynasties in ancient ChinaInflation is a big concern for consumers and policymakers in major economies today. In the US, the consumer price index rose by 6.8 percent in 2021, the highest in nearly 40 years. In China, although the consumer price index, an indicator of inflation, only saw a mild increase of 0.9 percent in 2021, the producer price index rose by 8.1 percent. This rising cost of manufacturers may get passed on to end consumers in the future. Many cases of severe inflation tax could be found throughout Chinese history. why did ancient Chinese emperors keep using devaluation if it created more problems than it solved? In ancient China, copper was the main material for minting. China was rich in the metal, so there were no shortages to constrain government creation of inflation. By contrast, in many other countries, rare gold and silver were used for coins, which put natural limitations on the government’s minting activities.So why did China choose to mint with copper, rather than gold or silver in the first place?