962 FINANCIAL REFORM AND THE ECONOMY
CONCLUSION
The leading advocates of cash in the seventeenth century wanted to promote
the extension of its circulation throughout the country by an aggressive policy
of converting tax payments to cash. That policy had proved successful in stim-
ulating the spread of cash throughout the country. but positive support for the
minting of cash was ruined by unregulated and uncontrolled minting and the
concentration of the volume of money in the capital and other special market-
ing areas long before sufficient cash had circulated throughout the rural
provinces to justify the conversion of all taxes to cash payments. When cash
dropped in value and created commodity price inflation in the 1690s, King Suk-
chong sought first to limit, and then to prohibit the minting of more cash after
1697, a policy that remained intact when King YOngjo came to the throne twenty-
seven years later.
The success of the campaign to introduce cash into the Korean economy in
the seventeenth century led to a gradually increasing demand for more cash to
meet the needs of the market, but the government was not able to understand
that the growing market justified a renewal of minting to balance the supply of
coins with the demand for them. Instead the reaction against the inflation of 1696
was inherited by Ki ng YOngjo after 1724, and he persisted in maintaining a harm-
ful deflationary policy.
King YOngjo did not perceive of himself as a money manager with the respon-
sibility to regulate the money supply to ensure stable values and prices, nor did
he inherit the seventeenth-century spirit to bring Korea up to the economic level
of China by promoting the circulation of cash. If he had had his way, he would
have abolished cash altogether and returned to the era of cloth and grain of the
late sixteenth century because he naIvely believed that those two media of
exchange had the magical property of insulating the ignorant peasant against
sharpsters and manipulators. The battle to defend metallic cash had to be fought
all over again because of the ill consequences of an earlier inflation and the artif-
ically induced problems of price deflation and high interest rates caused by regal
mismanagement and blindness.
Because a large number of influential officials understood the basic mechan-
ics of regulation. they persuaded Y6ngjo that his own prejudices were unwork-
able. Hong Ch'ijung's compromise solution of 1726 was the natural product of
a stalemate between the king and his officials. YOngjo was persuaded that the
use of cash in private markets had to be retained if only to permit the expendi-
ture of government cash reserves, and that bolts of cloth might just as readily
produce the same difficulties as cash since any medium of exchange would be
subjected to the same rules of supply, demand, and price. Hong was also able
to persuade YOngjo to accept cash commutations in tax payments in emergen-
cies, and convince him that eliminating cash from government finance while
preserving it in the marketplace would reduce the demand for cash, decrease
the value of currency, and eventually restore some equilibrium or stability to