The world's first paper currency collapsed after the Song dynasty printed too much of it
The world's first paper money system, introduced by the Song dynasty in 1024, suffered a catastrophic collapse after the government printed excessive notes to fund military campaigns.
Centuries before paper currency appeared in Europe, the Chinese Song dynasty issued 'Jiaozi' notes to solve a shortage of heavy iron and copper coins. Initially backed by tea and salt taxes, these notes were a massive success, facilitating trade across the empire. However, the temptation of seigniorage—the profit made by issuing money—led the government to print notes far in excess of their metallic reserves to pay for border wars.
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