Summary of Key Points
This article examines the red financial practices from over 90 years ago in Ruijin and Zunyi, such as the "Shoulder Pole Bank," the Soviet currency "Su Bi," and the "Red Army Tickets" of Zunyi, revealing three core principles upheld by the early red financiers: Stable currency value is the foundation of monetary credibility, Currency issuance must be based on economic needs, not fiscal deficits, and Finance must serve the people (to prevent harm to their interests). The article contrasts these principles with modern monetary theory (MMT), which advocates for the central bank to fund fiscal deficits, emphasizing China's current practice of not directly financing the government and ensuring that currency serves the real economy. This approach represents a continuation of the original ideals of red finance.
Detailed Analysis
1. The Shoulder Pole Bank: The Legend of Carrying National Credit During the Long March
In 1932, the National Bank of the Chinese Soviet Republic was established in Ruijin with only 5 employees and 200,000 silver yuan in capital, making it the "smallest national bank in the world." During the Long March, 14 bank staff members carried more than 100 loads of assets (silver yuan, gold, printing equipment, etc.) on their shoulders, accompanied by a security team—this was the "Shoulder Pole Bank." Despite the harsh conditions of the march, they gradually reduced the weight of their loads while ensuring the safety of the assets. By the time they reached northern Shaanxi, only 8 out of the 14 staff members remained, but not a single silver yuan was lost. The essence of this story is not the act of carrying the loads; rather, it highlights the red financiers' commitment to national credit: they were willing to sacrifice anything to maintain the foundation of currency issuance (gold and silver yuan) and prevent the money in the hands of the people from becoming worthless.
2. Su Bi and Red Army Tickets: How to Win the Public's Trust in Paper Money
At that time, the currency was based on the silver yuan standard and was convertible. However, the Soviet areas faced shortages of goods and large trade deficits, leading to potential runs on the currency. The red financiers addressed this issue with two strategies:
- High reserve requirements + asset backing: At least 30% of the Su Bi issued had to be backed by silver yuan (later increased to 60%). It was also discovered that essential goods could be used as collateral; for example, the "Red Army Tickets" in Zunyi were backed by confiscated salt and cigarettes (1 Red Army Ticket could buy 7 pounds of salt, which was six times more valuable than silver yuan, offering a discount to the public).
- Timely exchange to avoid deception: Before leaving Zunyi, the Red Army set up exchange points throughout the night, allowing the public to exchange Red Army Tickets for foreign currency, currency from non-Soviet areas, or goods, even at a ratio of 1:1.2 (with an extra 20% in foreign currency). In contrast to the old warlords' currency, which became worthless as soon as they left, the Red Army's actions demonstrated that currency credibility is earned through action, not just printing words on paper.
3. Mao Zedong's Principle of Money Printing: Economic Needs First, Not Fiscal Deficits
Mao Zedong summarized the principle of currency issuance as follows: "It must be based on the needs of national economic development; fiscal needs should be secondary." This means that money should not be printed excessively for the sake of warfare or government spending. Although the Soviet areas were short of military funds, printing too much money would lead to inflation and a decline in the quality of life for the people, undermining the foundation of the regime. Fiscal problems should be solved through economic development: for instance, Mao Zemin served as the general manager of a tungsten mine, using the produced tungsten sand to exchange for goods; trade teams were organized to break through blockades, and he emphasized the importance of saving every resource (embezzlement and waste were considered crimes). In other words, money should follow real goods and transactions, not the government's budget.
4. Reflections for Today: Learning from Red Finance on How to Print Money
Today's currency is based on credit (not gold) and national credibility. However, the principles of red finance are still relevant:
- Compared to MMT, which suggests that the government can print money to cover fiscal deficits, China's "People's Bank of China Law" clearly states that the central bank cannot directly buy government bonds or fund fiscal deficits. This is to prevent inflation and protect the public's money.
- Current challenges include the pressure of local debt, with some suggesting that the central bank should print more money to assist the government. But red finance teaches us that credibility is the lifeblood of currency: if too much money is printed, prices will rise, and people's savings will decrease, damaging the government's credibility.
- The lesson is clear: no matter the economic pressure, we must maintain stable currency value and finance that serves the people; the public should not bear the cost of fiscal deficits.
5. Finance for the People: The Essence of Red Finance
The Red Army provided "exchange coupons" for pigs in Zunyi, which were still valid for Renminbi 17 years later. They also exchanged Red Army Tickets throughout the night before leaving, ensuring that the public did not suffer losses. These details reflect the fundamental principle of finance for the people:
- Currency is not a tool for the government to extract funds; it is a means to serve the people.
- The government's credibility is demonstrated in the smallest actions, such as not deceiving the public.
As the article states, the original intention of red finance was to uphold integrity and always act for the people. This is what we should keep in mind when considering how to manage money today.
Conclusion
The history of red finance is not just a relic from the past; it serves as a reminder that the essence of currency is credibility, and the foundation of credibility is **responsibility to the people.* Regardless of how economic theories evolve, the principles of stable currency value, economic priority, and finance for the people remain the fundamental guidelines for money printing. By adhering to these principles, we can ensure that the money in the public's hands remains valuable and useful.