Yu's ANALYSIS OF CURRENCY 911and the cost of labor, which might otherwise open the door to counterfeiting or
the destmction [melting down] of cash." Since Yu stipulated that each coin would
weigh I chi5n or. I yang and that 200 mun or individual coins of the new cash
would be equivalent to I yang of silver, then one coin would be worth .005 yang
of silver. He also remarked that the market price of brass from which he rec-
ommended that the coins be minted could be calculated from the present price
of I yang of silver for 25 or 26 yang of brass. Since a coin would weigh I chi5n
or. I yang, the cost of brass in one coin would be on the average 1/ 25. 5 yang or
1/255 chon, or .0039 yang of silver. In other words, the face value ofYu's new
coin (equivalent to .005 yang of silver) would be about 25 percent higher than
the cost of the brass. Because he made no specific calculation about the over-
head and labor costs for minting the coin, it is not possible to estimate what the
profits of seigniorage would have been without further study of minting oper-
ating costs in general. In light of his cash philosophy, however. he probably
planned to reduce the profits of seigniorage as much as possible to reduce the
incentive for counterfeiting.^49
Yu's calculations present a complex problem, however. If the metallic cost of
making a coin was .0039 yang of silver, then even if we did not consider the
labor and production costs, then 256 coins or mun is the maximum amount that
could be minted from I yang of silver's worth of brass. Any exchange rate lower
than that would have meant that the coins would have circulated at a value less
than the metal's intrinsic worth, if the cost of the brass remained constant. As
we will see, the price or exchange rate for copper coins after they began to be
minted again in 1678 was set at 400 mun per yang of silver, doubled in value
temporarily in 1679, and then immediately dropped to the original rate because
it was the real market rate at the time. Since this policy could not have succeeded
if the cost of minting had produced a net loss, one must assume that an increased
supply of copper and other metals like tin and zinc for an alloy with copper must
have bid down the cost of the intrinsic metallic value of the coin to allow even
for a minimum of zero profit. It cannot be determined just when he wrote his
essay on cash and made his calculations because he could have done so any time
between 1656 and 1670, but he must have based them on market prices for brass
at the time.
Yu opposed the use of multiple denomination cash because it would overvalue
the intrinsic metallic value of coins and stimulate counterfeiting by guarantee-
ing sure profits over the cost of minting, and he also opposed undervaluing coins
to the point where they would be worth less than their metallic value because
people would then melt their coins down to obtain more value for the metal,
reduce the supply of money in the market, increase the value of cash, and depre-
ciate commodity prices.^50
Providing ({II Optimum Money Supply
Yu stipulated that a certain amount of cash would be necessary to ensure its