930 FINANCIAL REFORM AND THE ECONOMY
Rising Interest Rates and InflationIt was at this point that a crucial turning point in general attitudes toward cash
occurred when more people began to blame cash itself for some of the evils in
the economy. Third State Councilor Ch'oe S6kchOng attacked the role of cash
for exacerbating the interest rate and the debt burdens imposed on poor peas-
ants. He said that prior to the introduction of cash, peasants in the villages bor-
rowed rice or cloth from others in the difficult spring planting period, and repaid
the debt in rice after the fall harvest. For every ten mal of rice borrowed in the
spring planting season, fifteen mal for the principal and interest combined had
to be repaid after the fall harvest, 50 percent interest for the time borrowed
(referred to as changni).
Ch'oe accepted this 50 percent interest rate (closer to 60 percent per annum
since the term of loan was probably around ten months) with astonishing
sangfroid because it was sanctified by tradition, but he was really angered because
the use of cash for loans had provided an opportunity for creditors to raise real
interest rates still higher. If someone borrowed I yang of cash in the springtime
when rice was in short supply and its price was high, the borrower could only
purchase 2 mal of it on the market. After the harvest in the fall the borrower
would have to repay I yang 50 mun (I.5 yang), but since the temporary surfeit
of grain on the market would have driven the price of grain down to 5 mal per
yang of cash, it would cost the borrower 7 mal 5 toe (7.5 mal) to obtain the 1.5
yang of cash to repay the lender's principal and interest, 3.75 times the grain
value of the original loan in cash borrowed in the spring, or 375 percent for the
growing season.IO
Furthermore, during the growing season interest was calculated at the rate of
10 mun per month on a I yang loan, but if the borrower had to delay repayment
for sixteen or seventeen months, he would have to pay as much as 1.6-17 yang
in interest alone. If cash was short and moneylenders were reluctant to grant
cash loans and peasants were desperate for funds, peasants would have to offer
as much as 100 percent interest for a cash loan during the growing season and
repay 2 yang for every yang borrowed. In that situation, if the fall price of grain
dropped to 5 mal per yang, the borrower would have to sell as much as J 5- 16
mal of rice in the fall to obtain enough cash to repay capital and interest on the
loan, an interest rate in grain at 800 percent for the growing season. Poor peas-
ants would have to spend the income earned by a year's arduous labor just to
payoff their taxes and private debts.
Since the standard interest rate on loans of silver and cash had been 20 per-
cent for the growing season ever since ancient times, even though the universal
interest rate for rice or grain loans repaid in grain in the fall had been 50 per-
cent for the season, Ch'oe believed that the rate for all loans in cash ought to be
set at 20 percent, or 20 mun (.2 yang) of cash for each yang borrowed. Since
cash had been put into circulation,