Rouble

ROUBLE. The rouble is the monetary unit of Russia (U.S. S.R.), and before the World War it was divided into 'co kopeks. The par of exchange with sterling is R. I0= 2IS. 2d., while, since 1922, a new unit called the chervonetz has been created equiva lent to ten roubles.

The main currency in circulation before the war were "credit notes" issued by the State bank. Originally circulating at par with the rouble, they fell during the latter part of the 19th cen tury to a heavy discount. By the law of 1899, this depreciation was legally recognized. Under that law, the ten and five rouble gold pieces were made legal tender for fifteen and seven and a half roubles respectively, thus being written up 5o% in nominal value. As their gold content remained unaltered, this was equiva lent to establishing a ratio of three to two between paper and gold. The credit notes were successfully maintained at this ratio until 1914. In fact, at the outbreak of war, the "credit notes" had a gold backing of over 00%, as the State bank held 1,743 million paper roubles worth of gold against a note-issue of 1,63o roubles. Rather over 500 million roubles in gold and 23o millions in silver, too, were in circulation. Thus, the rouble was well protected against any ordinary shocks. Unfortunately, Russia, like many other countries, made little or no attempt to finance its war ex penditure either by taxation or by long-term borrowing. Inflation was the chief method employed, and under inflation the gold standard was abandoned and the rouble steadily depreciated. This depreciation began prior to the revolutions of 1917, and by Jan. 1 of that year, the note issue had expanded to over 9,000 million roubles.

With the advent of the Bolsheviks to power, the final collapse of the old rouble took place. For a time the only use of the rouble was to enable the Government nominally to pay its way by continually issuing fresh notes. By Jan. 1, 1921, the total issue reached the astronomical figure of 1,168,000 million roubles. As a result the internal purchasing power of the rouble was exceed ingly small and varied greatly from place to place.

The Chervonetz, 1922.

One of the first points of the "New Economic Policy" of 1922 was the establishment of a new cur rency, the chervonetz, created in Oct. 1922, and equal to ten pre war gold roubles. The law creating it laid down that it should have a 25% cover of gold, platinum or stable foreign exchange, and that the remaining 75% cover should consist of marketable goods, short-term securities and approved bills of exchange. It was to be issued by the new State bank, itself also the offspring of the new economic policy.

Paper roubles were not withdrawn from circulation, and for a time the two currencies circulated side by side. The relation be tween the two was continually changing in favour of the cher vonetz, for although the old paper roubles had been replaced, at the ratio of one million to one, by "Soviet" or 1923 roubles, in themselves a paper currency, these in turn were sacrificed to balance the budget and to maintain the stability and value of the chervonetz. By early 1924, the volume of Soviet roubles amounted to 178,000,000,00o millions, and their value had fallen to a point at which it took 200,000,000,000 of them to equal one chervonetz.

New Roubles, 1924.

In Feb. 1924, the next step in monetary reform was taken. The commissariat of finance was authorized to issue currency rouble notes, which were made legal tender. Their volume was limited to half the number of chervontsi in circulation, less those owed to the State bank by the Treasury. Apart from their limitation, no definite cover was provided, and no fixed ratio between "new roubles" and chervontsi was laid down. The withdrawal of Soviet or 1923 roubles was then ordered at the ratio of 50,000 Soviet roubles to one new rouble.

Towards the end of 1924, a ratio of ten new roubles to the chervonetz had been established, and on Oct. r the currency circulation amounted to 49 million roubles in silver coin, 202 million roubles in Treasury notes and 346 millions of chervontsi —making, with various small coinage, a total circulation of rou bles and chervontsi combined of 622 millions. This was too small for the needs of the country, and during 1925 it expanded rapidly to 1,270 millions, or by rather more than roo per cent. This in crease was largely a natural one, due to trade demands and not to budget deficits, which, by then, had been reduced to manageable proportions. Nevertheless, the increase was too rapid, and during the next three months, the volume was reduced to 1,204 millions, only to rise again under demands for crop financing to 1,490 mil lions at the beginning of 1927. During that year, the position im proved, as an increase in production led to a fall in prices and so to an improvement in the purchasing power of the currency. Up to a point, the new currency had, by early 1928, been re-estab lished upon a gold basis. It must be remembered that foreign trade, and the import and export of currency, are rigidly con trolled, and that if the chervonetz•is quoted at par against the pound or dollar in Moscow, unofficial rates in neighbouring for eign centres at times do not of necessity agree.