Folding Money

So on the eve of a rumored extinction – the last days of reading and writing via the printed word – here comes another electronic post from The Horse to you, our 631st over the past seven years. Ironically, this one is about the invention of paper and its impact on the course of civilization.

The prompt to explore this subject is a new book by Alexander Monro, The Paper Trail: the unexpected history of the world’s greatest invention. Dumb title.

In Monro and elsewhere, paper’s invention is attributed to a Chinese civil servant named Cai Lun, who in 109 AD (or thereabouts) figured out how to macerate mulberry bark and other plant fibers into a pulp, then dry and press the pulp into sheets.

Unlike clay or stone tablets, papyrus, animal hide parchments, or uterine vellum, these new sheets could be cheaply produced in quantity.

Rudimentary printing techniques soon followed.

Monro’s consuming interest is the role of paper in spreading knowledge, culture, and religion – moving from the Chinese to the Arabs, thence to the Europeans, where the new paper intersected with Gutenberg’s moveable type for a second great efflorescence of the printed word.

Though not part of Monro’s thesis, it would have been worth mentioning that, along the way, the proliferation of paper also leveraged two other deeply entrenched human tendencies – to liquidity and inflation, the seemingly magical pathways to magnifying wealth.

It had taken the Chinese less than a hundred years from the invention of paper to the realization that this new material was the perfect matrix for money – far more convenient than precious metals or any of the other units of commodities or livestock in prior use as a medium of exchange or a store of value.

This quickly led to the wondrous discovery that you could print as much money as you could possibly want.

By 200 AD parts of China were deluged by inflation, and paper was abandoned as a currency.

Paper and printing did not make inflation possible, just faster and easier. Debasement of gold and silver coinage was already a chronic government malady, from ancient times to the day before yesterday – as the Romans showed in the sad case of the denarius,

Introduced in 211 BC as a 96% silver coin of the realm (worth 10 asses), the denarius was progressively cheapened over 250 years until its silver content was a small fraction of one percent – a an early shadow of Rome’s irreversible decline.

As for liquidity, it used to be that if you owned 600 acres on the island of Skye, you might be able to swap some of it for sheep, but if what you really wanted was a house in London or a boat in the Mediterranean, the trade would be difficult to impossible.

Paper money and paper instruments of various kinds – deeds, titles, contracts, letters of credit, promissory notes, stock shares, bonds – have made assets of almost any kind, anywhere, readily convertible to almost any other.

These days much if not most of this traffic is electronic, and over half the activity on the stock exchanges consists of algorithm-driven high-frequency trading. Thousands, soon millions, of transactions per second leave regulators wondering how they can ever monitor much less control the soundness, integrity, accuracy, and crash-resistance of such a system.

Paper’s share of civilization’s business, leisure, culture, and religion may keep shrinking, but rumors of its extinction are surely premature.

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About Al

Editors of The Horse You Rode In On (listed below) hail from Boston, Pittsburgh, and San Francisco. All contributions are signed. When guest contributors are included, their comments will be signed in a manner consistent with their needs for discretion, witness protection, or yearning for personal adulation.