In 1875, a major debate erupted among the high-ranking officials of the Qing Dynasty, discussing whether or not to protect Xinjiang.

To many people today, this may seem like a no-brainer. Sovereignty and territorial integrity are non-negotiable, and Xinjiang is such a vast area. How could there even be a discussion about whether to protect it or not?

However, the younger generation, not yet hardened by the harsh realities of life, may not fully understand the issue of "where does the money come from." It is only when they have too many things they want to do but are frustrated by a lack of funds and ultimately fail to accomplish them that they gradually come to understand. The same is true for a country; during times of frustration, it is common to lose large territories.

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At that time, the eastern coastal region of our country was under threat from Japan, and the northwest was being infiltrated by Tsarist Russia. Ideally, both should have been addressed, but the Qing Dynasty had just finished fighting the Taiping Rebellion, and the wealthiest region of Jiangnan had been reduced to ashes. The debris from the recently sacked Nanjing had yet to be cleaned up. The problem for the Qing Dynasty was not which side to protect, but first to consider where to find the money.

In the end, Zuo Zongtang proposed borrowing money from Western banking groups and using that money to purchase American weapons. The United States had just finished the Civil War, and a huge amount of weapons were waiting to be sold at a discount.

Later events are well known. The Qing Dynasty ultimately approved this plan, and Zuo Zongtang, carrying a coffin, left the Yumen Pass. He used the borrowed money to curb the expansion of Tsarist Russia in Xinjiang.

Zuo Zongtang's troops were the first batch of "American-equipped" forces in China. American rifled muskets and German Krupp cannons formed a crushing advantage over the Agubai forces in Xinjiang. Agubai's forces were mainly equipped with Russian weapons, which were essentially a generation behind. Zuo Zongtang managed to pacify Xinjiang in less than a year.

This may be the most influential "national debt incident" in modern Chinese history.

However, there is a derivative result of this matter that is not often mentioned. At that time, the British bank agreed to lend money to the Qing Dynasty, but they required collateral, just like when you apply for a mortgage now, you need to provide bank statements. To borrow from the bank, you must first prove your ability to repay. So, what was Zuo Zongtang's statement?Yes, the customs revenue of the Qing Dynasty. After Zuo Zongtang borrowed money, the customs revenue of the Qing Dynasty directly went into the hands of the British, just like how we pay off our mortgages every month now.

This made Li Hongzhang's life difficult, as he could no longer secure loans to expand the navy, similar to how if you have an income of 10,000 a month, you can only afford a loan of about 900,000. If you want to borrow more, the bank won't agree.

The Qing Dynasty's customs could only support Zuo Zongtang's loan and could not provide another loan for Li Hongzhang. The Beiyang Fleet did not add any more warships in the eight years after its establishment, and the main battleships had not been repaired for seven years because the cost of repairing warships was also very, very high. Later, in the First Sino-Japanese War, they were defeated by the Japanese who were equipped with new warships, and the Northeast almost got divided by Japan and Russia.

After the mediation of the great powers, Shenyang was preserved, but a lot of territory was indeed occupied by Russia, and later it was further encroached upon.

I know many people want to talk about the "Empress Dowager using naval funds for building gardens," which is a bit complicated. If you are interested, I will tell you more later. Here, I just want to mention one thing, the expenditure of modern navy has always been outrageous, and the money for the Empress Dowager's garden has no impact.

Moreover, national defense is a supporting construction. The real tragedy of the Qing Dynasty in the First Sino-Japanese War was actually the land war. The modern Japanese army completely defeated the Qing army, captured the coastal artillery positions, and used the Qing's coastal artillery to sink the Qing's navy. Then the army threatened Beijing, forcing the Qing to sign the treaty.

Looking back now, if there was no bond issue, Xinjiang might not exist now. Of course, the strength of the Agubai in Xinjiang is far from comparable to Japan. Even if those loans were given to Li Hongzhang, the outcome of the First Sino-Japanese War might be similar.

Later, the Beiyang government borrowed again, and Xu Shuzheng's recovery of Outer Mongolia was funded by this loan. However, it was not defended after being recovered, because at this time, the Russian Empire was gone, replaced by the Soviet Union. The Soviet Union, in order to ensure the lifeline of the Far East, that is, the Trans-Siberian Railway, had to cut off Outer Mongolia. China's strength at that time could not protect Outer Mongolia.

2

It was not until the end of the 19th century that China began to engage in high-level financial operations such as "national debt," while Europe had been doing this on a large scale since the 16th century.When the Bank of England was established in 1694, the operation of the state borrowing money from individuals was institutionalized. In other words, the world's first central bank, the Bank of England, was originally established to lend national debt to the country.

When the state needs to fight a war or provide disaster relief, but tax revenues and the like have already been arranged, and there is really no surplus money, what should be done?

Then give the Bank of England an IOU, promising to repay the principal and interest with tax revenue in five years, and the bank gives the money to the government. How it gets the money is not the government's concern.

The bank will break down this IOU given to it by the government into countless shares and sell them to people who want to invest and make money. Wealthy individuals, businessmen, and even underworld organizations from all over the world can go to the Bank of England to buy this "financial product".

At first, everyone was a bit hesitant, worried that the British government would not repay the money. Therefore, when the UK wanted to borrow money, the interest rate was very high, similar to some "high cannon" financial products in previous years. Later, people found that the government never defaulted and always paid on time, and everyone was relieved. The UK could borrow money at a very low interest rate.

Moreover, these bonds are like printed banknotes, all looking the same, no matter who holds them, they can get the principal and interest from the bank in five years. You can also sell this bond to others at a discount, and government bonds have a secondary market. Good liquidity makes people more willing to buy, making the UK's financing ability reach a new level.

It is precisely by relying on this resource scheduling plan that is a generation ahead of other countries that the UK has successively won the War of the Grand Alliance, the Seven Years' War between Britain and France, the Napoleonic Wars, and the Crimean War.

This method of play was later basically taken over by the United States without any changes.

As we all know, the struggle between countries is often a consumption of resources, involving "big chess" or "strange strategies" not much, most of the time it is a step-by-step calculation.

Who can mobilize a large amount of resources at low cost for consumption, who is more likely to win the final victory. Of course, if you love the things of the big flag party, you will be surprised that they make a big move for you every week, and you feel very novel, but read more books, learn to look back from the back, and you will find that it is not the case at all, even if it is as good as Zhuge Liang, there is no strange strategy in his life, only hard work to deal with trivial matters.To delve further, the government that can issue national bonds at a lower interest rate has a higher probability of achieving ultimate victory.

Many people still do not have a profound understanding of interest rates. For instance, both the United Kingdom and Russia borrowed ten million taels of silver, with a thirty-year repayment period. A one percentage point difference in interest rates means Russia would have to pay an additional 1.5 million taels over thirty years. The issue is that the difference is often far more than one percentage point.

This also answers the question that often puzzles everyone: why did Europe initially have incidents of "kings killing creditors," but such things seem to have disappeared later.

It's simple: killing the creditor solves the current debt, but what happens when money is needed again after a while? At that time, if no one is willing to lend, it's doomed. In other words, once borrowing becomes a habit, killing the creditor will not solve the problem.

Some may wonder, why is it necessary to borrow money? Can a country not borrow money?

Half a century before the establishment of the Bank of England, the Ming Dynasty demonstrated how a country without a national debt system operates: it heavily taxed the people, eventually forcing them to sell their children to pay the taxes.

In order to increase revenue and reduce expenditures, large-scale layoffs of civil servants were carried out. Finally, the people were so poor that when a laid-off civil servant called for resistance, everyone followed, and a more chaotic and bloody cycle began. Of course, this is only an analysis from a fiscal perspective, and we won't discuss the "Little Ice Age" and the like.

The national debt system is more crucial for efficiency. When Zuo Zongtang made up his mind to defend Xinjiang, if the Qing court did not directly borrow money from Western banks, but instead squeezed the last few taels of silver from the people's teeth, and then sent it to the capital to buy weapons from the West. By the time the weapons crossed the ocean to China, not only might Xinjiang be lost, but Gansu might also be gone. Moreover, such extreme exploitation for tax collection might have reignited the Taiping Heavenly Kingdom that had just been suppressed.

In other words, a country borrowing money from big businessmen to fight a war or do something else may be the most efficient operation with the least pain for the people. 3The United States adopted this system of national debt order, laying the foundation for its subsequent upward trend against the odds.

A hundred years before the Qing Dynasty's "debate between coastal defense and border defense," that is, in the 52nd year of the Qianlong era of the Qing Dynasty, an event occurred across the ocean.

The United States, which had driven out the British, found that the various states could not get along. After eight years of war, they were in debt, and when it was time to pay, they found it too painful to continue. Representatives from all states gathered in Philadelphia to successfully hold the first American Congress to discuss a solution to this issue.

At that time, the gentlemen were generally mentally prepared to become deadbeats as soon as the country was established.

Later, under the promotion of Hamilton, the U.S. government decided to insist on repaying the money. The meeting also discussed several historical issues, and in the end, it was considered a united and victorious meeting. Many years later, it became a key point that American elementary school students need to mark in their exams, which is the U.S. Constitutional Convention.

In fact, Hamilton had a deeper plan. If the country became a deadbeat as soon as it was established, it would never be able to borrow money in the future.

If they did not become deadbeats, they could not only borrow new money to repay the old, but also borrow money for development, and then slowly repay the money. At worst, they could learn from the Dutch and issue perpetual bonds, only paying interest.

This national policy had a great impact on the United States in the future, and it can even be said to be decisive, supporting the United States in the next three national fortune wars.

The first was the Civil War.

The Civil War was basically synchronized with the Taiping Heavenly Kingdom Movement, and there was no strategy in both wars, just the two sides consuming each other with lives. The Xiang Army played "big python besieging the city," and due to insufficient military pay, they often massacred the city after capturing it. The Civil War was the North using a tragic casualty ratio to consume the South, burning a Southern city to the ground after capturing it, completely cutting off the Southern war potential.The South had no financial market or government bond system, so it had to overissue paper money, which eventually led to an inflation rate of 1800% and a collapse.

The Northern federal government relied on Wall Street to issue government bonds, allowing ordinary people and the wealthy to contribute funds for the war, and also attracted overseas wealthy individuals to purchase government bonds. Ultimately, the North wore down the South. Without Hamilton's decision at the time, the United States might have completely collapsed after the Civil War and returned to the agrarian society of the Southern plantations.

The second war was World War II. In fact, the movie "Flags of Our Fathers" is about this. At that time, war heroes were made to perform like actors on tour, urging people to contribute funds to buy government bonds, otherwise the government would not have money to build warships.

The third war was the arms race with the Soviet Union. At that time, American citizens were also bearing a very high tax burden, which was still not enough, and still required a huge amount of government bonds to develop military technology. Moreover, private capital also supported a large number of Cold War technologies to "military to civilian" conversion, and recovered investments through technological iteration. The United States eventually won the Cold War, and everything else was secondary, mainly because it was ahead in technology.

The Soviet Union did not have this ability and could only rely on oil. After the oil price collapsed, it had no cards to continue to compete with the United States.

So, is it good for every country to borrow money for development?

Not really.

For example, Argentina has been borrowing money all the time, and it can't repay it. After a few years, the country goes bankrupt, and the interest rate for the next loan becomes very high after default, making it even more difficult to repay, and continues to go bankrupt.

Now it is a habitual bankruptcy. Whoever lends money to Argentina is waiting to be defaulted. A few other countries are similar, such as Brazil, Turkey, Sri Lanka, and so on. You may think Argentina is quite outrageous, and there are a bunch of rotten countries whose currency is not even as good as waste paper, and they change it every few years.

This also illustrates one thing: borrowing money is an accessory of "development". If your development is weak, borrowing money may not only fail to solve the problem, but it is likely to end up very badly.In fact, it's quite similar when it comes to us as individuals. Those wealthy people are often the ones who owe a lot of debt, mainly because they are good at making money and have sufficient cash flow, so they are not afraid of owing a lot of money. They earn while owing, and owe while repaying.

Ordinary people with insufficient cash flow often borrow money, and it's highly likely that they will become deadbeats.

What about internal debt? Raising money from one's own people should not be affected, right?

It's the same.

If the economy is developing forward and there is an increase every year. Today, the government issues bonds to the people, and after a few years, if the economy develops well, the economic scale expands, and the government's tax revenue increases, the money owed can always be repaid with interest. The country relies on debt for emergency, and the people can invest in government bonds to earn some money and enjoy the dividends of development, which is a virtuous cycle.

On the other hand, if economic growth is not very good, and the government still issues a large amount of debt, what will happen in a few years?

At that time, if it cannot be repaid, it can only be repaid with new debt, borrowing more and more, until it is completely unable to be repaid in the end.

At this time, there is only one way, which is to print money to repay the debt. The essence of printing money is to rob those who are the most honest and diligent savers in the country, and the money they have in the bank is diluted.

Now everyone understands, the government issuing government bonds itself does not lead to inflation, because the money has not increased or decreased, it has just been transferred.

The real problem is that all governments in the world have an impulse to secretly print money to dilute debt. This is also why when the government deficit is high, inflation often follows.Just look at the US dollar, and you'll see that since the establishment of the Federal Reserve in 1913, the dollar has lost 95% of its purchasing power.

Of course, the dollar is just an example here. On a global scale, the 95% loss of the dollar over a century may seem exaggerated, but it's actually quite good compared to other currencies. Most countries don't just face devaluation; their currencies can't last that long.

Other economies often lose this much in just 20 to 30 years. In recent years, some extreme countries have seen their sovereign currencies devalue by about ten times in just three to four years.

In the past two years, the US has been printing money like crazy, but the dollar's status still seems very strong. Other countries' currencies have depreciated against the dollar, which shows that people around the world are voting with their feet to hold dollars. This is mainly because, compared to other economies, it hasn't printed as much as people might think.

As for some people saying that the high interest rates of the dollar make people willing to hold it, Russia has a benchmark interest rate of 15%, but people still don't hold rubles, right? This shows that interest rates are not the key.

4 Conclusion

I originally wanted to talk about the recent issuance of one trillion yuan in government bonds, but later found that there was nothing to talk about, so I delved deeper to make this article still worth reading for a long time.

Many friends ask whether issuing bonds will lead to inflation?

The above text has already made it very clear that simply issuing bonds will not, mainly depending on the subsequent economic situation, whether it will borrow new to repay old, and whether the growth of debt is far faster than tax revenue.

It's like your ability to earn money is far behind your ability to borrow money. If you have the superpower to print money, what would you do?In fact, since the inception of fiat money, mild inflation has been an inevitable shadow, something that cannot be helped. Governments that exercise restraint print less, while those that are outrageous have no lower limit, similar to the case of Venezuela.

Most of the time, governments just want to deal with emergencies and "make the people suffer a bit." Sometimes, after the suffering, things get better, but sometimes they don't, and then the suffering continues, with hyperinflation ruining the economy. When people realize that saving money is like being robbed, and no one saves money anymore, and everyone starts selling their national currency, it is equivalent to the people shorting their own country's currency, and from then on, it is uncontrollable.

Hyperinflation does not necessarily require printing a lot of money. Once it reaches a certain level, and the people realize that they must not hold any currency in their hands, that currency is doomed. Of course, our country has experienced painful lessons in history and has always been restrained.

Some friends ask, is there a way for ordinary people to fight against inflation?

Inflation is a kind of tax. If ordinary people fight against inflation, who will collect this part of the tax?

There are indeed things that can truly resist inflation, but they often have an outrageous threshold, or you have some information difference, and you realize in advance that some things will appreciate in the future, such as Bitcoin in the past few years. Ordinary people don't think about it. I have seen some people who have been playing with Bitcoin for a long time, working hard for many years, and finally, they played in vain and got nothing.

Generally speaking, mild inflation will not make people bankrupt, but the fear of inflation often leads to bankruptcy.

The most inflation-resistant thing for ordinary people may be to work, mainly because there is nothing else to rely on. The poor don't have to be afraid. I forgot who said it, as long as you are poor enough, inflation cannot rob you. It is indeed necessary to worry about deflation, because deflation is often accompanied by the inability to find a job. However, in general, it is difficult to have deflation in the era of fiat money, only inflation.

So the key is whether the economy can maintain growth in the next few years. Debt seems terrifying, but as long as the economy continues to grow, there is no problem. Once the growth slows down, all kinds of demons and ghosts will emerge, and debt is just one of the problems. So no matter how much emphasis is placed on economic construction, it is not excessive.

As for the future, I am not sure, but I am still quite confident overall. However, everyone should still remain cautious, do not blindly act, do not mess with things they don't understand, improve their own survival skills, exercise well, and wait for the opportunity to turn.The full text is complete. Since you've read this far, if you think it's good, please give it a like with a simple click.