Yu's ANALYSIS OF CURRENCY 887shortage of coins. This situation was just the opposite of the problem prevalent
in the early Han dynasty, the flooding of the market with cash through private
minting and the debasement of coinage - problems that Chia I had sought to
remedy. Chi a 1, himself, had mentioned that any attempt to reduce the money
supply by curtailing coinage might create a shortage of cash that would create
a deflationary situation.
In the Liu-Sung dynasty in south China during the yiian-cllia year period
(424-54) officials were faced with a shortage of the recently minted four-shu
cash in state coffers. One proposal was made to prohibit the private minting of
copper cash to allow the state to monopolize the copper reserves so that it could
mint the heavier five-shu cash, while others argued that the shortage of copper
cash could be solved by melting copper utensils down for more cash. Fan rai
objected because converting copper utensils to cash could create shortages in
the goods regarded as necessities.
What Fan probably did not understand was that the shortage of copper had
driven up the price of the metal beyond the face value of the coins in circula-
tion, so that there was an economic incentive to melt cash down to copper. He
reasoned that the the capacity of currency to sustain trade might not depend on
the amount of cash (in circulation?) because the government could avoid a short-
age of cash by maintaining what he called an "equal" circulation of it through-
out the economy. He probably meant that since cash gravitated to a few urban
areas or transportation routes, it left the rest of the country with a cash short-
age. If that cash could be distributed more equitably throughout the country, it
would enable meeting the demand for coins and stabilize prices by creating a
balance between the volume of cash and the amount of goods in circulation for
maintaining stable prices. It is unlikely that by "equal" circulation he meant high
velocity or rapid turnover in market transactions, a concept too advanced for
the time.
Fan rai did observe that the state would have been better off solving the cop-
per cash shortage by using tortoise or cowry shells, as it had in ancient times,
and preserve copper for the manufacture of useful products, but this was only
a frivolous suggestion because no one was willing to accept cowry shells for
money any longer. Despite Yu copying out Wang's point of view in his account.
he did not abandon his view about the priority of copper cash. IS As we will see
later, Yu believed that increasing the supply of copper was the only means of
providing the material for the minting of an adequate supply of cash that would
allow the circulation of goods at stable prices.
Multiple-Denomination Coins andAvariee. Another problem that plagued the-
oreticians of money in the era after the fall of the Han dynasty was the appear-
ance of the first mUltiple denomination coins in which the face value was far
greater than the metallic value ofthe coin. Sun Ch'lian of the Wu dynasty in the
third century A.D. minted two such coins, the sao-cash coin called the Ta-eh 'iian
wu-pai, and another I ,ooo-cash coin called the tanK ell 'iel1-ch' iel/. but the the
coins failed to gain acceptance possibly because they were too valuable for most