We tend to credit ourselves here in Western Europe with the invention of the printing press, but China had been printing (using wooden rather than metal blocks) for many hundreds of years before Gutenberg brought his invention to market in 1436.
Gutenberg’s invention didn’t sell, by the way, and he died penniless, with his presses impounded by creditors.
Money develops as technology develops, and the Chinese discovered they could use their presses to print money. It began in the 7th century with promissory notes from merchants to wholesalers (with the same function as the clay tokens representing sheep or barley baked inside clay balls by the merchants of Ancient Mesopotamia thousands of years earlier).
By the 11th-century paper money known as ‘jiaozi’, a form of promissory note, was circulating alongside coins. Europeans had attempted something similar with pieces of leather or cloth, but it never really caught on. By the 12th century the Chinese government was issuing its own state-issued paper money.
In the 13th century the Venetian merchant Marco Polo, at the age of just 17, together with his father and uncle, famously made his way along the Silk Road to China, on a voyage that would end up lasting some 30 years. In China, he fell into the favour (and employment) of the Mongol emperor Kublai Khan.
On his way home, in 1295, he was captured by the Genovese, enemies of Venice, and in a prison in Genoa he met a writer by the name of Rustichello of Pisa. Together they collaborated on a manuscript recounting the story of Polo’s adventures, called “Description of the World”.
Polo marvels at the great Khan and the wonderful things he saw in China: the palaces, coal, a postal service, eyeglasses. But there is one chapter I want to talk about today, which has the most wonderful title: “How the Great Khan Causeth the Bark of Trees, Made into Something Like Paper, to Pass for Money All Over his Country”.
“He hath the Secret of Alchemy in perfection”, marvels Polo, making money from the bark of mulberry trees – “trees so numerous that whole districts are full of them”. “All these pieces of paper”, he goes on, “are issued with as much solemnity and authority as if they were of pure gold or silver”. When various officials as well as Khan himself have put their seal on it, “the money is authentic. Anyone forging it would be punished with death”.
Indeed anyone who dared refuse these notes faced “pain of death” as well, no matter “how important he may think himself”. No surprise then that everyone took them “readily, for wheresoever 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”.
We then learn that any merchant arriving into the kingdom with gold, silver or pearls was “prohibited from selling to any one but the Emperor”, who then “pays a liberal price for them in those pieces of paper”. How easy it is to be generous with printed money that has no cost of production to it!
If the paper got damaged, merchants could take it into a mint and get a replacement piece – at a cost of 3%. So Khan made good there as well.
The net result of Khan’s money system was that he pretty much sequestered all the wealth of China and the surrounding empire, while everywhere else was left with his paper. “His treasure is endless”, said Polo, “whilst all the time the money he pays away costs him nothing at all”.
Merchants accepted Khan’s money and his prices. What choice did they have? But here we also see the convenience of paper money. Fast – “They are paid without any delay” and portable – Khan’s paper was “vastly lighter to carry about on their journeys – ten bezants’ worth does not weigh one golden bezant”.
Polo may have marvelled at Khan’s enterprise, but it was one almighty racket, not so dissimilar to the process by which wealth has been leaving citizens through today’s fiat money system. No wonder Khan had “more treasure than all the kings in the world”. And no wonder the Mongol Empire soon fell into irrevocable decline.
This combination of the centralised wealth, imposed fiat money and excess government control has led to many a paper money collapse throughout history.
So, back to Europe and Johannes Gutenberg. Gutenberg’s problem was that he had no network. He could print 100 copies of a pamphlet but he had no means to disseminate them and there might only have been a handful of people local to him who could read. So what was the point of all the copies?
It was the Venetians, the great businessmen of the time, who turned Gutenberg’s invention to profit. Venice was probably the epicentre of European trade in the late 15th century, a great hub of shipping, and news spread orally via their ships. You could print, 100 copies of a pamphlet in Venice, give a handful to each ship captain, and their contents could be carried around the known world.
In the destinations where the Venetian ships arrived, local printers could then copy the manuscripts and redistribute them internally, while the illiterate, which was most people, could gather and hear the news read to them.
Thus did Venice become the printing capital of Europe. And it would not be long before Venice and the rest of Renaissance Italy discovered promissory notes, bills of exchange and paper money.
This new financial technology had come to Europe.
* Dominic Frisby, author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.
Sign up to get the latest Glint news
Receive the GLINT newsletter with the most popular content, platform updates and software guides.