892 FINANCIAL REFORM AND THE ECONOMYfrom the supply of food and clothing, and former rulers used it to store wealth,
govern the people, and pacify the world. While the wealth and prosperity, or the
poverty and destitution of nations and people depended on the production of
food and silk, the problems of a surplus or shortage of goods, and the inflation
or deflation of prices could be controlled through ever-normal price stabiliza-
tion operations - the inspiration no doubt for Liu Chih's recommendations a mil-
lennium later. As Kuan-chung had put it, cash was used to achieve a balance
between extremes in prices, and Tu Yu confirmed this judgment.
Tu Yu also criticized some of the methods of rulers and statesmen in more
recent times who tried to increase the supply of copper cash by economizing on
the amount of copper or simplifying the technology of minting, or minting mul-
tiple denomination cash to make greater profits from seigniorage. He deplored
counterfeiting and the private minting of cash, the failure of severe punishments
to bring it to an end, and the loss of agricultural productivity because peasants
gave up farming in the hope of making huge profits by doing it. It was neces-
sary to adhere to the rule set down by one ancient sage that the people should
not be allowed ready access to copper, and the authority to mint coins should
be controlled by the ruler.2s
Tu Yu summarized and represented a relatively conservative body of opinion
on currency. He approved of cash because it was extolled by sages and worthies
of the Chou period, not because it represented the tide of modem development.
He feared the potential for inflation that accompanied any form of currency that
inflated or misrepresented the intrinsic content of the symbol used for that cur-
rency. And he disliked the dangers implicit in free activity in the choice of occu-
pation, particularly the presumed loss of agricultural production and loss of
control over the money supply. While he deplored the use of violence as a means
of coercion. he still insisted on state regulation of cash in the economy.
Government Restraint on Cash Possession: Immorality and Private Accu-
mulation. At the end of the Tang dynasty in the early ninth century another period
of deflation in commodity prices occurred. What was interesting to Yu about
this case was not so much the phenomenon of deflation. but Emperor Hsien-
tsung's response to it. In 817 the emperor and his government decided that defla-
tion had not been caused either by a drop in the supply of copper or an increase
in the demand for cash that might have been a consequence of an increase in
commerce, but by the hoarding of cash by wealthy individuals. Hsien-tsung
assumed a self-righteous moral tone and denounced some of the regional com-
manders for accumulating vast fortunes in cash of a half million strings each
and driving up real estate prices by their purchases of land and house sites. He
was angered because wealthy merchants were justifying their own immense hold-
ings by claiming that they had full support from the military officials, and dis-
trict magistrates were unable to exercise any restraint on their control of wealth.
Hsien-tsung sought to solve the problems of cash shortage and high real estate
prices at once by decreeing that no single individual from civil and military offi-