clawgrip wrote:I figured that a government dealing with dwindling silver resources coinciding with colonial occupation would cause trouble and incite currency reform. Also, as Yabushio entered the modern age, it would need to abandon foreign coinage and develop its own currency. I've gone with 圓 yen as the currency, since this root is the origin of real-world Japanese yen, Chinese yuan, and Korean won.
I think you may have a bit of a problem. In your initial post, you say that Yabushio traded with both Japan and Europe. A brief search for 'sakoku' doesn't seem to indicate that you've changed your mind. But this is impossible, because it would mean that trade between japan and europe was possible via yabushio. This may seem like a minor loophole, something that wouldn't be exploited on a large scale. But it's not, it's something that would completely change history. Because of how currency works. At least, bullion and currency trades between japan and yabushio would have to be prohibited.
Gold, Silver and Bimetallic Standards
A gold standard means your currency is 'backed by' gold. You promise to pay your citizens a certain amount in bullion for each coin they give you. This is easiest if your coins actually are gold of that weight. Otherwise, your citizens are essentially loaning you money, and if they all ask for it back at once then you're stuffed. A silver standard is the same, but with silver. A bimetallic standard means that you'll pay in either metal if they ask for it, and generally means you have coins of both types circulating.
[But do be aware, there are actually four different things here. One is 'legal tender' - you accept certain coins as payment of taxes, and may force private citizens to accept them as payment of debts as well. Another is backing - you give bullion in exchange for the coins. A third is free coinage: traditionally, you would accept bullion and turn it into coins for a fee, no matter how much bullion they brought. And a fourth is trade money, what actually gets circulated in the economy. Generally, earlier societies could have more complicated trading currencies. But as the government got more powerful, what the government defined as 'legal tender' became more important.
Europe had a variety of standards. Usually a place would have either a gold or (more often) a silver standard - in that they would only repay with silver (and tried to keep the silver the right weight), and would only freely coin silver (you gave them silver, they gave you it back in coins, minus a fee, but they wouldn't do it for gold, or at least would only coin a certain amount of gold) - but they would still accept gold as legal tender at a fixed price ratio with silver.
Pretty much everywhere adopted a silver standard in the early modern period, after the discovery of Pitosi.
Now, all metallic standards tend to produce deflation - that is, the coins get more valuable over time (i.e. things get cheaper). This is because a) there is a finite supply of precious metals, so as the economy grows there is less currency to go around, and b) people hoard a percentage of their precious metals, either in big piles of shiny gold, or by turning it into jewellery, statuettes, dinner plates, etc.
Deflation is bad. It produces depression - there is less investment, because why invest your money if you know your money is getting more and more valuable just being left in your hoard? Before fiat currencies, depression was the norm, but varied seasonally depending on how good the harvest was.
Inflation is the opposite - your coins get worth less and less. So there's a lot of pressure to invest them, so the economy grows. However, not everyone benefits equally. The poor don't care if there's inflation or deflation, because they have no money anyway. But the middle-classes hate inflation, because the middle-classes like to save up their money, and inflation obliterates savings. The landed aristocracy don't much like inflation either, because they're the people with big hoards of gold who would be benefiting from deflation ("idle holders of idle capital", as the saying goes).
<b>Good and bad money</b>
Silver standards produce less deflation, because there is more silver and it is less desirable. Gold standards produce more deflation. In theory, bimetallic standards would be the most stable of all, because the money supply would be greatest. But they're a bugger to get to work.
The problem is, there's a thing called 'Gresham's Law': bad money drives out good. What this means is that there is a natural price ratio between gold and silver, and if the legal price ratio between gold and silver coins differs from this (either because they were fixed wrongly in the first place or because one type of coin has become more debased than the other), the more-overvalued coin will be used, and the more-undervalued coin will disappear out of the economy. This is because people will hoard the undervalued coins, but will spend the overvalued ones. [Or, in a world economy, they'll spend the undervalued ones abroad, in a place where they're worth more]
This is what happened after Newton in the UK. Officially, gold and silver were both legal tender; but because the legal ratio between them was fixed at the wrong level, silver stopped being used and the country adopted a de facto gold standard.
Japan around 1600 adopted a bimetallic standard: both gold and silver were legal tender and I believe freely coined, at a fixed ratio. Over time, all the coins were progressively debased, creating troubling inflation, with occasional increases in weight resulting in devastating deflation.
Now, debasement isn't just to make the government richer. It's also to increase the money supply and combat deflation. Because it's really awkward when your currency is stupidly expensive - it's hard to carry around 1/1000th of a gold coin, after all. Japan tried to get around this by using very cheap brass or bronze coins, mon, at 1000 (or later 4000) mon to the ryoo, but that was still awkward for paying for expensive things [250 bronze coins make for a heavy purse]. So in the 18th century, Japan moved to an underlying gold standard. This allowed them to keep relatively sound gold coins while heavily debasing the silver coinage. This presumably would have had the effect of creating a de facto silver standard in terms of trade money, as people hoarded the gold.
But Japan had a huge problem. Japan had fixed the value of gold at five times the price of silver. But ever since the discovery of Pitosi, the European price of gold was between 15 and 16 times the price of silver.
This is why you can't have Yabushio as a portal between the two economic spheres. Europeans would take a tonne of gold, buy 15 tonnes of silver, take that silver to Yabushio and exchange it for 5 tonnes of gold, and get a 500% profit. That is, indeed, exactly what happened as soon as Japan relaxed her borders. All the gold flooded out of the country. Japan had to respond by overwhelmingly debasing its gold coins to reach the correct ratio, which caused inflation. They didn't have the gold reserves any longer to back the debased currency, and had to resort to unbacked paper money, which caused even more inflation, and a general collapse in faith in the government. The government collapsed, the Meiji restoration happened, and the first thing the new regime did was create a new currency.
[In fact, I see you've copied the "we'll steal all your underpriced gold!" clause into the Treaty with the British - Article VIII.]
The yen wasn't really an independent currency - basically, it was a japanese-minted dollar, the same way that euros are made in different countries. The Japanese chose at first to adopt a bimetallic standard, in common with Europe and south america. When Germany joined the UK on a gold standard in 1871, and in the process crushed the armies of bimetallist France, silver prices worldwide fell. As a result, the bimetallic Japanese dollar (the 'yen') fell to only half the value of the gold standard american dollar, before japan finally rejoined the gold standard.
Yabushio would face a choice early on: either freely trade with the Europeans, or seal themselves off (or, at least, insist only on barter trade with the rest of the world). With trade, their Tokugawa currency system would collapse with the influx of Spanish silver. This would a) cause inflation, which would not be welcomed by either the aristocracy or the middle classes (artisans, etc), and b) diminish the significance of control of the silver mines. Free trade in bullion with Europe would also mean no access to Japanese gold. They could then either abandon the currency system and just use dollars (or their local equivalent), or they could heavily debase their gold, use that as a currency (along with the cheap mon, of course) and ship all their silver abroad in exchange for foreign goods.
Alternatively they could remain more or less isolated. Or, they could try to barter worked goods for foreign goods. In that case they could keep their traditional currency system, and would presumably follow Japan's move to a legal gold standard (but probably more widespread use of debased silver).
My instinct would be that, given their small size, they would probably swallow a lower deflation rate (which would, after all, actually be good for them anyway) and just adopt the spanish dollar/peso as their currency right from the 17th century on, or at least a localised variant of it, enabling greater trade with the wider world. After becoming a British protectorate, they would presumably switch over to the gold standard, and would probably introduce a gold coin. For convenience, the gold coins introduced would probably be equal in weight to British sovereigns or half-sovereigns (or double sovereigns).
At that point, the actual currency in use in Yabushio for normal purposes could continue to be the dollar (but heavily debased, purely as a token coin). Alternatively, they could use coins/notes given multiples of the mon. I think it would be something like 2000 mon to the sovereign? All else being equal, that would mean something like 1 mon to 5 modern pennies.
, I would:
- start out with tokugawa kobans
- become isolated from japan and trade with the wider world, adopt the dollar, possibly calling it the peso.
- become british, introduce new gold standard based on the sovereign, with the yabushionese sovereign being called the 'yen'
- for small quantities, continue to use mon
- after independence, quietly drop the 'yen', or use it only for bullion purposes, and just use mon, with a lot of zeroes.