Chapter 71: Paper Money (Part 1)

Now, Liu Yu preferred to replenish his forces with trained captives and recruits. For groups like these who came over with guns, not only did they need to be supplied with weapons, but they also had to be properly placed in the army, which was quite troublesome.
“What kind of group is this?”
The person sent to communicate was also someone from Old Liu’s Camp assigned to the Tianyi Sect. He had thought things through very carefully for Liu Yu: “Commander, rest assured. We’re from Old Liu’s Camp and know what needs to be done.”
They were originally part of Lu Zhiping’s forces but were not in the encirclement at the time. Upon hearing that Lu Zhiping’s main forces had been defeated by Xi Liu Camp, they realized they couldn’t afford to provoke Xi Liu Camp, so they decided to surrender with their guns.
“There are over fifty of them, with more than a dozen British rifles. They’re all strong fighters, just waiting for you to take them in. They don’t want any positions; even being a low-ranking soldier will suffice. They’re willing to accept any conditions.”
Liu Yu was surprised: “There are such people?”
“They remember how lenient you are with captives. They’ve come to surrender and don’t seek any positions.”
Lu Zhiping was still trying to gather his remaining followers, hoping to hold on stubbornly. In history, he managed to resist for another year, but at this point, he clearly couldn’t cause any trouble. After all, Liu Yu had not only destroyed his main forces but also shattered their morale.
These fifty-plus people had originally intended to join Lu Zhiping, but now that Lu Zhiping’s situation was dire while Xi Liu Camp had a bright future, their leader said, “It’s better to join Xi Liu Camp as a low-ranking soldier.”
Xi Liu Camp’s soldiers all had new guns, new uniforms, and even new shoes. Hearing that they would also receive a salary—never missing a single payment—they were very satisfied with such treatment.
In total, seventy or eighty people were brought in. The soldiers temporarily put down their guns and were grouped together with the captives to form a new recruit camp, while the officers were organized separately for temporary training.
By now, Xi Liu Camp was far ahead of its time, so these officers could be sent out as deputy commanders, but they still needed to go through training first.
This time, by crushing Lu Zhiping, Xi Liu Camp returned with great gains. Once back in Shanxi City, Liu Yu first summoned Liu Qing to inquire about the preparations for the Black Flag Bank and the scheme of fraudulent loans during his absence.
Liu Da, the merchant, was very proud. He nodded slightly and said, “Lord Liu Yu, rest assured. I’ll handle things without any mistakes. This time, I borrowed another hundred thousand francs from the Oriental Bank of Commerce.”
That was a huge sum. Liu Da continued, “After deducting expenses and repaying old loans, we’ll have forty thousand francs left, which can be used as reserve funds for issuing currency.”
Borrowing one hundred thousand and getting forty thousand back meant there was a lot of manipulation involved. But since it was a risk-free deal, Liu Yu asked, “What will be used as collateral?”
Liu Qing replied, “The iron mines in Shanxi. We’ll also sell the coal mines soon.”
Liu Yu was satisfied: “Getting forty percent is quite good. With these forty thousand francs, how much currency do you think we can issue?”
Liu Da, with his professional insight, said, “Since this is military currency, issuing ten million isn’t too much. I suggest issuing smaller denominations first, and release larger amounts later.”
As he spoke, he handed the box he brought to Liu Yu: “Lord, this is a gift for you.”
“What?”

When he opened it, it was filled with money. Liu Yu examined it carefully; the words “Black Flag Bank” were written in Chinese, and “one thousand piastres” was marked in both Chinese and Arabic. “This is a small gift for you. This suitcase contains only two thousand piastres. I’ve also prepared eighteen thousand to give to Madam Jiang.”

Liu Yu didn’t refuse the bribe but asked, “My wedding gift?”

“That’s right!” Liu Qing said confidently. “You’re about to get married—just a small token!”

Liu Yu smiled like a fox. “That’s not enough!”

Liu the merchant replied, “At the Black Flag Bank, you’re the chairman. You can order whatever amount of cash you want—just issue an order, and we’ll handle it thoroughly.”

Liu Yu understood. “How many bills have you printed while I was away?”

Liu Qing was extremely proud. “Eight hundred thousand—eight hundred thousand exactly!”

Liu Yu was shocked by this figure. Liu the merchant was quite skilled at printing fake bills. With such a limited cash reserve at the Black Flag Bank, he still planned to issue eight hundred thousand piastres in bills.

Eight hundred thousand piastres—far from a small amount. It equaled over six hundred thousand taels of silver. If all of it were issued at once, it would quickly become less valuable even than French currency or gold certificates.

It should be noted that the Black Flag Army’s annual income was only about fifty thousand taels of silver. The Kingdom of Vietnam had even issued opium to raise funds, with Chinese people in charge of its monopoly, but its annual income was still only around three hundred thousand taels.

Now, Liu the merchant had prepared over six hundred thousand taels worth of paper money. If it circulated only in Shanxi—a region equivalent to a single county in China—it would soon be used to wrap windows instead of paper.

Liu the merchant said with a smile, “Don’t worry. I’ve covered all the printing costs myself.”

Liu Yu asked, “Then how do you plan to issue the bills?”

Liu the merchant had clearly thought this through. He said, “First, issue a small amount of low-denomination bills in Shanxi, then start promoting them in Xuan Guang and Bao Sheng.”

He estimated that there were about ten provinces upstream in the Red River, all under the influence of the Black Flag Army. He needed to find ways to spread the bills there as well.

He continued, “In the future, when giving gifts, we won’t use silver, gold, francs, or dollars anymore. We’ll just give our Black Flag Bank bills.”

“Including the Oriental Bank of Commerce?”

Liu the merchant replied firmly, “In Haiphong, since they’ve lent us so much money, they should take some responsibility.”

Liu Yu was speechless. Liu the merchant was truly ruthless—thinking of using paper money as bribes, and not just on his own side.

But he was still worried. “Isn’t the preparation for issuance insufficient?”

Including the forty thousand francs obtained through deception, it was still far from enough to cover the issuance of eight hundred thousand taels of silver. He had no intention of investing more himself. Liu Qing patted his chest and assured him, “That depends on my methods.”

Since Liu Qing had guaranteed it, Liu Yu naturally accepted the twenty thousand piastre bills he offered and took charge of the currency issuance himself.

September 1880.

In September, the pay at Xiliu Camp was not entirely in cash; 30% was in paper money. As a result, both officers and soldiers were skeptical about the paper money they received—would it even be usable?

In the villages of Shanxi Province, they faced the same problem. Xiliu Camp used to purchase goods from them for free or at half price, but now it used paper money—not francs or dollars, but bills issued by Xiliu Camp.

Throughout the ages, paper money has always been unpopular. People hesitated and watched cautiously, with many shops only accepting it under threat of bayonets.

Now, Xiliu Camp sent a special unit to oversee the issuance of paper money. This time, they issued only a few thousand yuan worth of paper money and provided ample supplies. All shops were forced to display signs indicating they accepted “Black Flag Bills.”

However, everyone doubted the credibility of this paper money. Many shops charged a high price for goods purchased with it. Some also found that, like ration tickets, Xiliu Camp’s canteens accepted this paper money, and quite a few people used it to feast in the canteens for two days.

But soon, the Black Flag merchant in Shanxi was discovered. This was the only merchant who accepted Black Flag Bills instead of foreign currency, and its prices were particularly high.

Yet everyone thought the prices were justified. First, there were those Schnider rifles, each costing fifty yuan, followed by rifle bullets, many front-loading foreign guns, and several shotguns.

From then on, the Black Flag Merchant became the only legitimate arms dealer in all of Shanxi. Even officers and soldiers had to obtain a pass from this merchant if they wanted to buy arms.

Everyone’s attention was drawn to those rear-loading guns. They thought the prices were too high, but in northern China, it was difficult to get good guns even if you had money. Having a few guns for protection was truly a status symbol.

While they were still hesitating, someone already spent a large sum of money to buy all the Schnider guns and bullets, making everyone realize that this paper money was actually useful.

It wasn’t anyone else but Luo Yanqiu’s Tianyi Sect who bought them. They acquired seven Schnider guns and 500 bullets. After that, they applied to Liu Yu to establish a guard force for the main church.

Liu Yu readily approved a force of thirty men but suggested that Luo Yanqiu’s plan to buy guns be postponed. The Tianyi Sect agreed.

At the Black Flag Merchant, although the Schnider guns were sold out, there were still many front-loading foreign guns, all captured by Xiliu Camp from various battles, along with other military supplies. In the underdeveloped Shanxi, these were considered premium goods.

So, not long after, many villages and wealthy people rushed to buy goods using Black Flag Bills. Eventually, they admitted that this paper money had some value. Although it wasn’t as good as real silver coins, it could be used at a 20% discount, which should be fine.

Many shotguns were sold at the Black Flag Merchant, but to everyone’s regret, just as they bought out the front-loading foreign guns, the merchant restocked with more Schnider rear-loading guns and bullets.

Moreover, there are now more places where Black Flag Notes are needed. Xiliu Camp has informed all villages and strongholds that this year, the taxes to be paid to Xiliu Camp can be paid in either silver, copper coins, lead coins, or Black Flag Notes. After some consideration, it was decided that paying in Black Flag Notes was more cost-effective.

Subsequently, under pressure from Xiliu Camp, the governor of Shanxi also announced that the small portion of taxes collected by the government could be paid in Black Flag Notes as well. Furthermore, Vietnam’s long-standing monopoly on opium trading was broken—those who wanted to buy opium had to go to Black Flag merchants, who charged twice the usual price. This time, they allowed payment in silver dollars at the same price as Black Flag Notes.

Through these measures, the credibility of Black Flag Notes in Shanxi was established, and soon branches in Xuan Guang and Bao Sheng were opened as well.