Tang dynasty flying money
Under Emperor Xianzong, Chinese tea merchants began depositing copper coins at the capital in exchange for paper receipts called 'feiqian', or flying money, redeemable at regional offices across the empire. The system solved a physical problem: a thousand copper cash weighed roughly eight pounds, and long-distance traders could not carry enough to fund caravans. Within a century, the receipts themselves were circulating as currency. By the Song dynasty in 1024, the government had taken over issuance entirely with the 'jiaozi', the first true state-issued banknote.
The practice was called 'feiqian' — flying money. Marco Polo, arriving in China six hundred years later, was astonished that 'the Great Khan causeth the bark of trees to be made into paper, and upon it something resembling the king's seal is impressed, and it is made current money throughout his dominions.'
03 · Paper Money
Paper money is a piece of paper that says, on its face, that it can be exchanged for something else. That something else — usually metal — stays in a vault. The paper circulates, the metal doesn't. The entire economy becomes a bet on whether the issuer can still deliver the metal. For most of paper's history, they couldn't.
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