E. Preobrashenski


The So-Called Denomination of the Currency

(13 January 1922)

From International Press Correspondence, Vol. II No. 4, 13 January 1922, p. 31.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
Public Domain: Marxists Internet Archive (2019). You may freely copy, distribute, display and perform this work; as well as make derivative and commercial works. Please credit “Marxists Internet Archive” as your source.

At first a few words on the idea of denomination. By denomination is meant a new issue of paper money whose nominal value is to approach the buying power of a metal ruble and which is to take the place of the old depreciated paper money. The difference between denomination and devolution is as follows: Under a devolution the government must issue new paper money which can at any time be exchanged for metal money; at the same time the whole of the depreciated paper currency can be bought in at the market price. After a fixed date all the old money which has not been exchanged is declared to be of no value and is no longer accepted. With us, for instance, a devolution at the present time would have the following significance: Considering that our ruble has a value of 1/70,000 of the pre-war ruble, then the market value of our entire currency is equal to the total number of billions we have on hand, divided by 70,000. Supposing that the quotient is 150,000,000, then it would mean that our whole currency is worth 150,000,000 gold rubles. The government issues 150,000,000 new rubles which are backed by gold, and fixes a certain period of time, let us say one month, in which the exchange of the old for the new rubies is to take place. Thus 70,000 old rubles will be worth 1 gold ruble, for, anybody will at any time be able to present the new paper ruble at the treasury and get a gold ruble in return. After the end of the month all the old money is declared invalid and the only money in circulation is the new ruble of full face value.

A denomination also means an exchange, but not against rubles which have a gold backing and which must necessarily have the same buying power as the old currency. From this point of view the new issue of paper money which is about to be decreed is not exactly a denomination, for, this decree does not intend an exchange of the old currency for the new. The new currency will circulate together with the old and the new ruble will have the value of 10,000 rubles now in circulation, and 10 rubles will have the value of 100,000.

But what is the idea behind all this? First of all we must simplify our currency system and make it more convenient for our population. We are already counting in millions, billions and trillions. The greater part of our population is not well versed in these figures. Thus, instead of a million rubles, one hundred will take their place, instead of a billion, these will be simplified and will approach those of pre-war times. Already the market calls a 50,000 note fifty kopecks, a 100,000 note one ruble, etc. As we see, the market went much further with its original “Denomination” than the Soviet decree which sets the value of one new ruble as 10,000 old ones.

The second advantage is that a big transaction will not require so many paper certificates. The buying power of a million old rubles is very small, but the payment of a million rubles requires 1,000 thousand-ruble notes. This leads to many technical difficulties.

Another important fact must be taken into consideration. The Council of People’s Commissaries decreed that the 1922 issue of paper money is to be limited to a certain definite sum based upon gold. In other words the new issue is not to exceed this sum. This opens the possibility of a gradual limitation of the issue of paper money by means of taxes. The Council of People’s Commissaries has already decided that in case the tax yield should exceed expectations, the 1922 issue will be considerably reduced.

This means that our currency is already taking a turn for the better. Under these circumstances it is very difficult to retain our fictitious “millions” in circulation and it is necessary to take the first step in assigning to these “millions” values which correspond more to their real buying power in relation to their pre-war value.

Many citizens fear that the issue of new rubles may ruin the possessors of the old ones. This fear has no foundation whatever. The new money will circulate together with the old one, and it will make no difference whatever to the buyer as well as to the seller whether they give or take one new ruble or 10,000 old ones for 10 pounds of potatoes, particularly when the new certificates are technically of better quality than the old ones and permit of counterfeiting.

The old money will circulate as small change. An old 1,000-ruble note will have the value of 10 kopecks, a 500 ruble note, 5 kopecks, and according to the market-price standard a new ruble will have only one half the value of a pre-war gold ruble.

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Last updated on 4 May 2019