INFLATION AND DEFLATION 941predicted that the reduction in the government's use of cash would naturalIy drive
the value of cash down.^20
In 1726 Hong Ch'ijung succeeded in preserving the use of cash in the mar-
ket by blocking YOngjo's original inclination to abolish its use altogether. YOngjo's
moralistic condemnation of the evil effects of cash was far less "progressive"
than the sentiments of any king since Injo in the early seventeenth century and
most of the kings of the fifteenth century as wel1, who struggled to introduce
either cash or paper money into the Korean economy. Yongjo yearned for his
idyllic perception of a more natural and primitive, cash-free economy in which
the population never had to suffer the contrary risks of inflation and deflation.
He deplored the recent rise in real tax and interest rates caused by the cash short-
age, but he attributed the phenomenon to the propensities of cash itself, primarily
the ease by which moneylenders could manipulate seasonal shortages and sur-
pluses to maximize their interest and the automatic multiplier effect the pay-
ment of taxes in cash had on taxpayers.
Of the eight officials who expressed their views at this meeting, however,
only one agreed with Yongjo's moral condemnation of the evils of cash itself.
The other seven, whether positively or reluctantly, believed that minting more
cash was the most logical and reasonable solution to the current extremely high
value of cash in the market. By contrast with Yongjo, they were either the intel-
lectual heirs of the pro-cash advocates of the seventeenth century, or by their
practical experience and observation of market conditions, had realized that the
use and circulation of cash had progressed too far throughout the economy to
abandon it.
Failure of Hong's Plan, Search for other Media. Six months after Yongjo
decided to adopt this major policy change, however, he was forced to retreat for
reasons predicted in the preceding debate. The governor of H wanghae complained
that restricting provincial taxes to cloth was working a hardship on the people,
and current Second State Councilor Cho T'aeok reported that when he had vis-
ited Wonju (in Kangwon Province) many people were upset because the failure
of the cotton crop had driven both the cost of cotton and their tax payments too
high. Minister of Taxation Yi T'aejwa also pointed out that since the govern-
ment could no longer receive taxes or pay bills in cash (except for disposing of
current cash reserves), the flow of goods between the capital and the provinces
had been obstructed. eho requested that the taxpayers again be allowed to com-
mute taxes into cash if they desired, and Yi requested reinstatement of the pre-
vious rule that half the taxes be paid in cash. Yongjo conceded that the situation
in Kangwon probably represented other provinces as well, and he agreed to can-
cel his order restricting tax payments to cloth alone.2I
Since Yongjo did not. however, abandon his desire to abolish cash, he asked
his councilors what medium would be most suitable to replace it. Yi T'aejwa
and Cho T'aeok proposed paper money, and Cho remarked that it could be used
to pay for fodder or for official salaries except that the bills would not last long