INFLATION AND DEFLATION 943
current debts, and increase the dependence of the poor on the rich for loans, an
argument echoed later by Yi Ikhan, Third Deputy Director of the Office of Royal
Relatives. Usurious interest rates, which several believed had been exacerbated
by the circulation of cash itself, would reappear under any other medium of
exchange as well. Obviously more cash had to be minted. but the king had been
blocked from doing so because opinion among his officials was divided - a rather
transparent distortion since everyone knew that Y6ngjo was the leading oppo-
nent of cash.
Kim admitted that if more cash were minted, the price of copper and the cost
of minting cash would rise, reducing the profits of seigniorage to nothing. Con-
trary to the argument of Censor-General Song Chinmyong that cash was irre-
placeable and had to be minted even without a profit because it was the king's
obligation to do so in a crisis, Kim believed that some profit from seigniorage
was necessary to provide an economic incentive for minting.
Kim explained that what he meant by the government's obligation to manage
cash in the right way referred to controlling the money supply: "If it is expen-
sive, make it cheaper, and if it is cheap, then make it more valuable. It only
depends on managing it in the right way [sonyong ]."
After making this spirited argument for additional coinage, one might have
expected him to have supported the idea of importing more copper from Japan,
as Yu Hyongwon had proposed, but instead he retreated to a reinstatement of
Hong Ch'ijung's compromise plan because it would eventually succeed in rais-
ing the money supply in the market simply by removing it from tax payments.
Kim introduced several significant ways of interpreting the role of cash in the
economy, Like Kim Yuk and Yu Hyongwon in the previous century, he treated
cash or money in an instrumentalist rather than moralist fashion by stressing the
government's obligation to manage or regulate the money supply. He believed
that the increases in interest rates through moneylending had not been caused
by some innate attribute of cash itself, but by the shortage of cash and its sub-
sequent rise in value, a problem that could occur no matter what the medium of
exchange happened to be.
This same instrumentalist attitude toward interest was also taken up by Cho
Wonmyong, the third minister of the Ministry of Works, who criticized the con-
ventional view that loans in cash had driven up interest rates and immiserated
the poor, It was true that rich moneylenders insisted on loaning only cash to the
peasants in the spring and multiplied the value of the nominal 50 percent inter-
est rate in the fall to as much as 500 percent because a cash loan of I yang worth
no more than 2 mal in the spring yielded IO mal when the principle and inter-
est in cash (1.5 yang) was converted to rice and repaid in the fall. Cash itself,
however, was not to blame for this, for if there were no cash, the lenders would
continue to refuse to loan rice or grain directly in the spring but use whatever
medium of exchange had replaced cash, The real problem had been the con-
traction of the money supply because of the government ban on minting, which
could be solved ifYongjo agreed to establish mints in Tongnae, Kyongju, Taegu,