Home > Anarchy > Paper Money and Central Banks*

Paper Money and Central Banks*

The first fully fiat* paper money was introduced in 1024 in Szechwan Province, China.  Its initial success led to it being adopted nationally.  During China’s subsequent 637 years five different paper monies were issued.

They all ended up collapsing… along with the five dynasties that introduced them.

The collapse of these paper representations of money brought economic destruction, invasion, starvation on a massive scale and political chaos.  Eventually it was realized that these events were rather inevitable and predictable.  The result was that in 1661 an act was passed by the new Manchu dynasty that forever banned the use of paper money.

By what seems to be one of those peculiar quirks of fate, in the same year, 1661, Sweden became the first western country to open a central bank and introduce paper money.

History of course does repeat.  The failure of paper monies was not due to any deficiencies of the Chinese people themselves, it was due to the absurdity of the notion that pieces of paper could ever act as real money.

The head of the world’s first central bank in Sweden, Baron George Heinrich de Goertz, was eventually put on trial.  He was found guilty of the charge of “ruining public credit with imaginary money“.

On March 3rd 1719 Baron George Heinrich de Goertz became the first central banker to be beheaded.  It was a popular decision.  Let us hope that history continues to repeat.

* Almost all the information in this short piece was derived from ‘Fiat Paper Money-The History and Evolution of our Currency’ by Ralph T. Foster.  The book is essential reading for anyone interested in the abject history of paper money experiments.

**fiat money means that ‘money’ which, whilst having no popularly accepted value, has a value established by decree of government.  This ‘value’ is enforced by law… thus, ‘legal tender’.

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