INFLATION AND DEFLATION 937tion, and he preferred Sim's recommendation to abolish cash outright. When
stationed in Pukchok (in North P'yong'an Province) he observed how the cir-
culation of cash had spread from the area around Kilchu to the districts south
of Hoeryong in the space of only two years - an observation that would have
thrilled men like Kim Yuk andYu Hyongwon because it proved that supposedly
"backward" Koreans had the capacity to learn the utility of cash as well as any
other people. Sim, however, was convinced that the spread of cash into com-
munities where it had never been used before was an evil to society because it
had created a cash shortage and made it rare and valuable, a phenomenon that
he believed would occur for any commodity if its circulation (or sale) expanded
in official and private transactions throughout the country.
Chang had accurately observed that the spread of the money economy had
increased demand for cash, which required more minting to maintain balance
in commodity prices, but instead he agreed with Yongjo that abolishing cash as
legal tender would benefit the lower class at the expense of the interests of the
wealthy (moneylenders). He urged Yongjo to confiscate all cash stored by gov-
ernment offices and private individuals and convert it into brassware. To pro-
hibit the use of cash by the government but permit it to ordinary people for their
private transactions under Hong's compromise would only "delude the people
[mangmin]," presumably by incorporating a moral contradiction into the law.
On the other hand Yi Pyongsang, an official in the Office of Royal Relatives,
defended Hong's compromise solution because eliminating cash taxes and cash
transactions by the government would reduce the burdens on the debt-laden and
taxpaying peasantry. When he had been stationed in the south he had noticed
that the wealthy were saving cash in anticipation of a further increase in its value,
while the poor had to sell almost their entire harvest to obtain enough cash to
pay their taxes because of the high value of copper money. The deflation of grain
prices caused by the increased value of cash meant that even after a moderately
successful harvest. it took a sam (I 5 mal) ofrice to obtain I .vang of cash (roo
coins, as opposed to only 5 mal under Yu Hyongwlln's exchange rates around
1670, a 67 percent drop in the cash price of rice or a 300 percent rise in the value
of copper money in the last half-century). Since the peasants had come to regard
a successful harvest as a disaster, Hong's suggestion to collect all taedong and
military support taxes in cloth was fully justified.
Yi Pyongsang and Brevet Fifth Rank Military Officer Yi Pong sang defended
the compromise and the legal use of cash in private markets because govern-
ment offices would at least be able to spend their current cash reserves and by
so doing lower the value of cash on the marketplace. Minister of Rites Sin Sachol
also wondered what the Ministry of Taxation, the Office for Dispensing Benev-
olence (that collected laedong taxes), and the Military Divisions and garrisons
would do with all their cash reserves if cash were abolished altogether. Yongjo,
however, scoffed at the idea that they would not be able to find a way to spend
their cash reserves. '"Just let them spend what they have already collected, and
they would lise it up overnight."