Chapter 633 Military Notes 2

"Exactly."

Paul looked at Erin and said, "Money is no longer valuable. We can call this phenomenon inflation. The word currency refers to the currency used as a means of circulation in social and economic activities. As the name suggests, it is like a bubble. It has expanded, but its quality—that is, the corresponding material wealth in society—has not increased.”

"Correspondingly, if the Lord of Light appears again and reduces the number of gold coins in human society to five, then each gold coin corresponds to two loaves of bread, which is double the original number. There will be fewer coins circulating in society. This phenomenon can be called deflation.”

Paul's explanation made the sisters nod repeatedly, but Catherine couldn't help but ask, "But what does this have to do with what we discussed at the beginning?"

What about the “immature thoughts” Paul spoke of at the beginning?

"Okay, okay, it's time to mention it next, be patient and don't be anxious."

Paul smiled. The explanation just now was a bit showy, and he unknowingly said too much.

“The materials that make up money cannot be found everywhere and cannot be easily obtained, such as water, soil, and stone. Otherwise, everyone can easily create a credit certificate, and then there will be what I just said inflation phenomenon.”

"As for precious metals such as gold, silver, and copper, they are difficult to refine and are rare in quantity, but they are not so rare that everyone rarely sees them. This just right characteristic makes them excellent materials for making coins."

"I have a conclusion below - coins made of this precious metal are naturally compressible."

Catherine and Irene looked at each other and asked strangely: "Naturally compressible? According to what you just said, the total amount of metal coins in the world will become less and less?"

"Yes, it will become less and less, uh... I mean less and less compared to material wealth." Paul nodded.

Erin was puzzled: "How could this be? After everyone receives coins during a transaction, they will spend them in another transaction. The coins are just circulating, and the total amount will not decrease. Unless..."

The little princess blinked her big eyes, "Unless it was the Lord of Light who reduced the number of coins like the example you just gave?"

"Haha." Paul laughed out loud, "Of course the Lord of Light would not do such a boring thing."

"In reality, there are many reasons that lead to fewer metal coins in circulation. Note, I am talking about coins in circulation."

Under the curious eyes of the two sisters, Paul explained.

"The first is a relative decrease. You see, with the growth of population and the improvement of certain technologies, people create more material wealth, but the speed of minting new coins often cannot keep up with the growth rate of material wealth - precious metals Mining and smelting is a big problem, am I right?”

Catherine and Erin nodded.

"Then there is real reduction. Metal coins are not easy to perish and are easy to preserve. As long as a normal person has the instinct to save coins, so when it is not necessary, people will try their best to keep money in their hands instead of Spend it out.”

"That's the truth." Catherine agreed.

Paul continued, "Especially the big nobles and the rich! Many families have built vaults that can only be accessed and cannot be accessed, which are passed down from generation to generation."

"They have broader income channels than ordinary people and can obtain a large amount of money. Many of them squander the money at a much slower rate than the income speed, and some even take the money to their graves. This leads to More and more metal coins are being deposited, while fewer and fewer metal coins are circulating in the market.”

"As a result, deflation or money shortage occurred. And there is another problem. We know that gold coins and silver coins are not pure gold or pure silver. They are always mixed with some other metals, and each country, each country During the period, the quality of the coins minted was There are differences, so there are good coins and bad coins, and people often like to keep the good coins with good quality and spend the bad coins with poor quality, which will eventually lead to the entire market being filled with bad coins. , this is what is called bad money driving out good money. So..."

Paul paused.

Eileen immediately looked like she had realized something and said first: "From an overall perspective, the money that the royal government can collect is bound to become less and less, and the money will never be enough to spend."

Catherine had already frowned and was lost in thought.

"That's right." Paul nodded, "Unless there is a violent social unrest, the situation can be alleviated by allowing the owners of money to actively - or passively - let the hidden money see the light of day and continue to circulate."

The two princesses looked ugly. How much turmoil was there? At that time, it would be hard to say whether the Aldo Kingdom would still have the surname Rodney or not.

Paul said: "Okay, I have said a bit too much. But Irene also said just now that the Royal Government will definitely be short of money, but what it is short of is those metal coins, and if we don't take care of those shiny scattered metals , only looking at material wealth such as food, cloth, livestock, minerals, etc. that can satisfy people's clothing, food, housing and transportation, does the royal government lack these wealth? "

Catherine thought for a moment and shook her head.

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Paul said: "Yes, the royal government is not short of wealth. The royal family directly rules the largest and most fertile land in the whole of Ordo, and the output on the land is countless. It should be the richest in the country, but because of the contraction of metal currency, it may never be able to exchange for enough currency."

"What do you mean?" Irene asked: "Let the royal family not use coins to pay soldiers, but directly use physical objects of equal value - such as food and cloth - to pay soldiers?"

"Well, this is one way." Paul nodded, "There are many similar methods in history, such as using salt as military pay for soldiers, but these are temporary expedients and are definitely not long-term."

"We directly use the primitive method of distributing materials to pay soldiers Money means a lot of trouble. If the soldiers' station is near an orchard owned by the royal family, then we pick a bunch of apples from the orchard as military pay for the soldiers, and this pile of apples is equal to the soldiers' military pay in currency. In theory, we don't owe the soldiers anything, and it's very convenient. "

"But the soldiers need to eat, drink, wear clothes, and even support their families. They can't do these things with just a bunch of apples. They have to take them to the market to exchange for money. Can they sell them all? Most of the apples can only rot. Think about the scene of the soldiers in the entire barracks selling apples together after paying. How funny! The soldiers still have to march and fight? Take their property - a bunch of apples - to march and fight?"

"Haha!" Irene was amused by Paul's description.