Kublai Khan (1215–1294 AD) is the grandson of Genghis Khan and the founder of the Yuan dynasty in China, which was a branch of the vast Mongol Empire. He took power in the mid-13th century and worked to integrate Chinese administrative systems with Mongolian military strength. Kublai Khan expressed a strong desire to revive Chinese history and benefit from practical and tangible ideas and institutions. He also made radical changes in the economic system of the state to enhance the speed and security of trade across the empire. Kublai Khan decided to generalize the use of paper money known as "Chao" and made it the only official currency accepted throughout China, instead of traditional metal coins. The new monetary system was fully utilized, and the money used at that time was made from mulberry bark paper, which was not well-known in Europe. The paper money was cut into rectangular shapes of different sizes, each distinguished by its value with a crimson seal. The paper currency was easier to carry than the bulky and heavy metal coins of the time. Marco Polo wrote that paper money was accepted throughout the empire, and anyone who refused to deal with it would face the death penalty. Most people accepted payment in paper money because it allowed them to buy anything, including pearls, precious stones, gold, and silver. The paper money, which was an alternative to rare precious metals at that time, had several benefits, including:
1. Reducing the cost of minting coins.
2. Facilitating trade over vast distances that included large parts of Asia.
3. Expanding state authority through direct control over money issuance.
4. Unifying the economic system in the face of diverse cultures and languages within the empire. Despite initial success, excessive printing of money without sufficient backing from precious metals led to inflation and gradual loss of confidence in the monetary system. As the Yuan dynasty weakened in the late 14th century, this system collapsed, and metal coins were reused. Kublai Khan's experience with paper money is considered one of the most important milestones in global monetary history, as it was the first relatively successful experiment in issuing national paper currency under state control. This experience paved the way for modern economic systems that rely more on trust and monetary policy than on metal backing.
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