IN FLATION AND DEFLATION 939
declaration that the use of bolts of cotton prior to the introduction of cash had
been trouble-free because local clerks had always been guilty ofrejecting cloth
tax payments on the false grounds of poor quality (chomt'oe) to demand bribes
or gratuities. Cash at least eliminated the perennial struggles over the quality of
the cloth. Yongjo conceded Kim's point but insisted that gratuities were less of
a problem than than those caused by cash itself.
Censor-General Sin Ch'osu opposed abolishing the use of cash because it was
bound to create a revenue shortage. He also warned Yongjo that converting taxes
to cloth would not eliminate shortages in the money supply because failure of
the cotton crop would cause the price of cotton to rise and peasants would have
to pay high prices in rice or grain to obtain bolts of cotton to pay their taxes.
Yongjo dismissed this objection by the feeble argument that prior to the adop-
tion of cash in the first place (163 I?) the country had been collecting taxes in
cloth for centuries even at times when the cotton (or ramie) crop was poor, pre-
sumably without any difficulty. Yongjo's assertion, however, was not backed by
any detailed knowledge or investigation of the history of cloth taxes, and he was
soon to be embarrassed when Sin's forecast came true.
Hong Ch'ijung granted the feasibility of Sin's point and conceded that cloth
might well appreciate in value just as cash had, but he argued that if any district
suffered a poor cotton crop and bolts of cloth became too expensive, the gov-
ernment could grant temporary permission for taxpayers of such districts to pay
their taxes in cash, especially since his plan would preserve cash as legal ten-
der in the marketplace. Nonetheless, it was still necessary to convert taxes from
cash to cloth because even after the catastrophic crop failure in Cholla Province
in 1726, the price of rice remained so low that peasants were still forced to sell
their entire crop to collect enough cash to pay their creditors and the tax col-
lectors. Furthermore, eliminating the demand for cash for tax payments would
also reduce the real interest rate on loans by increasing the money supply.
Yongjo was now ready to admit that it was possible that collecting the tae-
dong tax in cloth instead of cash might cause hardship for taxpayers, but Hong
was by now so fully committed to his compromise solution that he sought to
calm Yongjo's fears. He admitted that when crops were good, the value of cash
went up, and when crops were bad, the price of rice went up. Because the same
rule also operated for cloth and cash as well, the people of the capital were happy
to pay taxes in cash if the price of cloth happened to be high, but not if it were
cheap. Yongjo need not worry about shifting tax payments from cash to cloth if
a shortage in cloth caused a rise in its price because the government could pre-
vent that simply by fixing the cloth/cash exchange rate at 1 p 'it for every yang
of cash (that is, TOO mun or coins per p 'it of cloth, a 16.7 percent increase in the
value of cotton than the 120 mun/p' it exchange rate that Yu H yongwon prescribed
around 1670). What he failed to see was that if the market price of cotton rose
higher than the government price of cloth, the producers of cotton and cotton
cloth would either have to sacrifice profit, take a loss on sales, or suspend the
manufacture of cloth. Fixing the cloth/cash exchange rate might not work, and