Chapter 46: The Money Crisis Strikes!

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Someone asked, isn’t it a good thing that goods have become cheaper? It saves money; why the panic?

This touches on a financial issue. If prices gradually fall over time, that’s naturally a good sign—it indicates a prosperous economy, abundant goods, and increased purchasing power of currency.

But a sudden, sharp drop in prices across the market is disastrous because it signals a terrifying event: a shortage of currency.

A currency shortage, simply put, means there is less money circulating in the market while the total amount of goods remains unchanged. This leads to a situation where money is "heavy" but goods are "light," driving prices down rapidly—an economic phenomenon known as deflation.

Deflation, like inflation, is frightening. It disrupts the established financial order, halting commercial transactions and potentially triggering an economic crisis.

For example, a merchant invests five thousand taels of silver to purchase grain in Jiangnan, then transports it thousands of miles to Chang’an, expecting to sell it for ten thousand taels and earn a net profit of five thousand.

Now, with the currency shortage, prices have plummeted. Grain once worth ten thousand taels fetches only two thousand. The merchant not only loses profit but suffers a three-thousand-tael loss.

If the five thousand were his own capital, the situation is dire but manageable. If borrowed, however, the merchant faces ruin, forced by creditors to lose everything.

Worse still, after such a painful lesson, the merchant will no longer transport grain to Chang’an. What will the city’s million residents eat?

Grain is just one example—other goods like cloth, medicinal herbs, ironware, porcelain, livestock, and timber suffer similarly.

When that day arrives, Chang’an will face severe shortages of daily necessities; residents will have little to eat or wear. How will they survive?

…

Another puzzling matter: Li Zhao couldn’t understand why a shortage of currency had arisen suddenly. This problem had troubled the Tang Dynasty for a long time, yet in the recent Ministry of Personnel examination, he had written over a dozen solutions.

In recent months, the Left Chancellor, Li Shizhi, had implemented these measures one by one with notable success, greatly alleviating the currency shortage.

Now, with no war, famine, or plague, and social order stable, why had a currency shortage suddenly erupted? Something was amiss!

“White Rat, notify Jiang Hao and the others to immediately sell all the refined salt in stock. Then purchase a batch of grain, vegetables, cloth, charcoal, and other necessities to distribute to the undesirables—enough for at least three months.”

“Yes, sir!”

“White Bun, investigate what news is circulating in the market. Is anyone hoarding large sums of currency?”

“At once!”

After arranging this, Li Zhao returned home with the purchased goods.

In the afternoon, White Rat returned. Following orders, Jiang Hao and his team had sold all the refined salt and bought ample supplies, enough to feed all the undesirables and their families for four to five months.

They asked no questions; for them, Li Zhao’s command was like an imperial edict—no questions, just obedient execution.

At dusk, White Bun returned with much information. Among it was a crucial detail: recently, the Guo Trading Company had conducted massive transactions, only receiving currency and not releasing any—a deliberate hoarding of money.

The Guo Trading Company was powerful and renowned in the business world, owned by one of the Four Great Gods of Wealth—Guo Wanjin.

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Guo Wanjin, a native of Chang’an, began as an ordinary coppersmith, making a living crafting and selling copperware. Through shrewdness, he gradually became a major copper merchant, founding the Guo Trading Company and branching into other industries, amassing great profits.

But Guo’s specialty was collecting copper coins, melting them down to make copperware, which he then sold for huge profits.

Destroying currency to make copperware was illegal. If caught by the authorities, the offender faced confiscation of property and exile three thousand miles away at minimum, or at worst, public execution with the entire family.

To protect himself, Guo did one more thing: he offered his most beautiful daughter as a concubine to the Right Chancellor Li Linfu’s legitimate second son, accompanied by a lavish dowry, forging a familial alliance.

With the Right Chancellor’s backing, Guo grew bolder, openly destroying currency for profit and becoming one of the Four Gods of Wealth.

However, those who looked closely knew that most of Guo’s ill-gotten gains did not line his own pockets but flowed into the Right Chancellor’s coffers. The currency shortage was almost certainly orchestrated secretly by Li Linfu.

The purpose was to cause trouble for Left Chancellor Li Shizhi—remember, the two chancellors were bitter enemies at court.

With the background and motives clear, all that remained was to watch and wait.

…

Over a month later, just as Li Zhao predicted, the currency shortage fully erupted across the Chang’an region. Money in circulation plummeted, prices tumbled, and a severe deflation took hold.

The first to suffer were merchants. The lack of circulating currency severely hampered normal business, causing transaction difficulties and shortages of goods. The once bustling east and west markets of Chang’an suddenly grew desolate.

With commerce stalled and prices crashing, many merchants suffered devastating losses—some lost everything and even took their own lives.

No merchant dared to transport goods into Chang’an; the more they brought, the greater their losses. As a result, the market’s supply of goods sharply dwindled.

…

Next to suffer were the city’s residents. The market was bleak, goods scarce—grain, cloth, charcoal, meat, spices—all in severe shortage. Some had no food or clothing. How could they survive?

Many residents had no choice but to flee Chang’an, seeking refuge in nearby areas unaffected by the currency shortage, or face the risk of starving to death.

Countless abandoned their homes and livelihoods, leaving Chang’an eerily empty.

…

Lastly, the farmers around Chang’an were hit hard. In the golden autumn of October, during the harvest, it was time to pay the autumn tax. The Tang tax system was outdated; some taxes were paid in kind, others in currency.

Paying in kind was manageable—simply hand over the grain or cloth produced. Currency taxes were troublesome because ordinary farmers lacked enough money. They had to sell agricultural products to obtain currency to pay taxes.

For example, a farmer owing one thousand wen in autumn tax previously only needed to sell five shi of refined rice (during the Kaiyuan era, one shi of refined rice was worth two hundred wen).

After the currency shortage, prices fell by more than half; one shi of refined rice could barely fetch one hundred wen. The farmer had to sell over ten shi to raise a thousand wen.

This effectively doubled the tax burden and drastically reduced the family’s remaining grain, making starvation inevitable.

Such hardships were countless.

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Merchants were ruined, residents suffered, farmers were crushed—did anyone gain from this?

Of course. First and foremost, Guo Wanjin. By destroying currency to make copperware and selling it elsewhere, he earned a tenfold profit.

Meanwhile, he bought agricultural products cheaply in Chang’an and sold them at high prices elsewhere, reaping huge profits.

He also lent money at exorbitant interest rates to desperate merchants and farmers, relentlessly squeezing debtors until they lost everything.

Seeing Guo’s success, some officials and unscrupulous merchants imitated him—destroying currency, exploiting the people, and lending usurious loans. There was nothing they dared not do.

With their encouragement, the currency shortage worsened, spreading rapidly from Chang’an throughout Guanzhong. Wherever it spread, social order collapsed, and the people suffered immensely.

The currency shortage gravely endangered the state. Naturally, the court could not stand by. The Emperor, Li Longji, personally decreed Left Chancellor Li Shizhi to find a solution and promptly restore order.

Li Shizhi, upon receiving the decree, implemented several administrative measures. Unfortunately, they had little effect; the shortage worsened, and anxiety gripped the court.

As for Li Zhao, having prepared in advance, he suffered no losses during the shortage and even made a small profit.

He had long stocked up on necessities and lived comfortably, able to read, practice martial arts, and amuse the young ladies at home.

“General!”

“Marshal!”

“Hmm, your move!”

“Tactical surprise attack—I win! Haha!”

That morning, in the study, Li Zhao was playing chess with Wu Moyun. Not Go, which was too complex for the young lady to learn quickly, but a form of military chess newly invented by Li Zhao.

Military chess, also called “land battle chess,” is an intellectual game where pieces representing various weapons or units move on a battlefield-like board, turning unrealistic paper strategies into practical training on a board.

According to the original rules, military chess has red and green sides, each with 25 pieces: one flag, one commander, one general; two division commanders, brigade commanders, regimental commanders, battalion commanders, and bombs; three company commanders, platoon leaders, engineers, and mines.

However, these modern military ranks and weapon names were out of place in this era.

Therefore, Li Zhao adapted the game, substituting with ranks like Marshal Flag, Marshal, Grand General; two Generals, Commanders, Captains, Brigade Commanders, and Thunder Chariots; and three Squad Leaders, Fire Leaders, Shield Bearers, and Crossbowmen.

The board and pieces were made of sandalwood, finely polished to a beautiful color with a faint fragrance to refresh the mind. The pieces were lacquered red or green to distinguish sides.

The two were enjoying the game when a visitor arrived—Cui Zongzhi.

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