CHAPTER 25
A Cycle of Inflation and Deflation
By stimulating the exchange of goods the taedong refonn created a need for
a better medium of exchange to regulate calculations of value if only to main-
tain an equitable assessment of taxes. The taedong system itself involved the
use of a kind of dual currency system based on grain and cloth, but the manip-
ulation of the grain/cloth exchange rate and the use of the chomt'oe or "check-
off' system by which clerks had rejected cloth payments on the grounds of poor
quality had caused discontent and created more pressure for the use of metal-
lic currency as a more reliable and less easily manipulated medium of exchange.
In other words, the expansion of market transactions had stimulated the demand
for copper cash, and the state took responsibility for supplying cash to the mar-
ket. But once that decision was made in 1678 by King Sukchong, the problem
of controlling the money supply emerged. Sukchong decided it was preferable
to limit the minting of coins to a single source, preferably in the capital, but
since the cost of transporting the cash to the provinces was too high, he had to
allow local officials to mint cash on their own, which weakened central controls
over the money supply. Local officials were prone to mint as much cash as pos-
sible to pay for their own expenses, and to mint inferior coins to increase the
profits of seigniorage. This debasement of coins only destroyed public confi-
dence in the money and drove its value down. Instead of cash replacing cloth
as a medium of exchange, the reverse began to take place.
Another stumbling block that appeared was slow circulation. The central gov-
ernment's agencies were dependent on the remission of cash tax collections in
the countryside to make purchases of goods in the capital market, but provin-
cial cash receipts were slow to arrive. King Sukchong then authorized addi-
tional minting by various capital agencies to provide them with the cash for
purchase of goods, and this additional minting raised the money supply and
caused price inflation. In addition, the king was under pressure to mint cash to
provide relief in case of crop failures and famine conditions, and this function
also led to the increase of the money supply by the late 1680s. Thus, by 1689,
the surplus cash had returned to the capital, inflating the prices of goods, but it