![]() ![]() ![]() Of course, I didn’t have to travel to Mongolia in particular to learn the perils of fiat money. The Mongol’s inability to stabilize their economy called into question their power, and gave rise to opposition forces that toppled the dynasty in 1368. Eventually, the currency lost all credibility, which resulted in depreciation and long bouts of inflation. So he issued money that was, in the words of Marco Polo, “made…out of the barks of trees.” Initially his currency was backed by silver, but there was so much demand for the notes that their convertibility to metal was suspended. He gained millions more subjects, but there wasn’t enough money to go around. ![]() The trouble began after Kublai Khan conquered the Song Dynasty in China and established the Yuan Dynasty in 1279. But economic historians also point to fiat money, runaway spending, and raging inflation as key reasons for its decline. The empire vanished likely because the plague killed a large amount of the population. It’s a glimmer of what it once represented: the seat of the powerful Mongol Empire, which is long gone. Over time, merchants traveled to Karakorum to win the graces of the powerful Khan, who rewarded them with lucrative payments for their goods.īut today Karakorum is a collection of trodden ruins. At first these notes were backed by silver and silk. Ogodei, the son of Ghenghis Khan, built Karakorum in the 1230s and adopted paper money because it was easier to use than heavy coins. After exposure to the east, Europeans started to wear pants instead of tunics, bowed their string instruments rather than plucking them, and began experimenting with paper money. The Mongols fostered commercial and cultural exchange between the east and west. Their empire stretched from Asia to Europe, one of the most expansive in world history. In the thirteenth century, the Mongols ruled the world. And without learning the lessons of money history, we here in the US risk being destined to repeat it. It may create the mirage of short term riches, but it often results in the long term demise of a society, like what happened to the Mongol Empire in China. A monetary system that is based on fiat currency, money not moored to metal, presents a Faustian bargain. But it was my trip to Mongolia that brought to life the perils of paper money. I traveled to over twenty-five countries while researching my book Coined: The Rich Life of Money And How Its History Has Shaped Us. I was shocked with the damage that it caused, and I began a global quest to better understand the history of money. In 2008, I began working on Wall Street just months before the great financial crisis. And it was here that some of the great Mongol emperors ruled not just with bows and arrows but paper. I was in Karakorum, Mongolia, the ancient capital city of the early Mongol empire. There was a yurt in the distance with goats scattered nearby. Walking through a grassy plain, next to rolling hills, under a majestic blue sky. In order to learn about the history of money, I went to the middle of nowhere. The author at the Kharakhorum Museum in the Orthon Valley, Kharkhorin, Mongolia (Photo via Kabir Sehgal). ![]()
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