All of which doesn't explain a Russian gold coin dated 1979. Here is the story.
In the early seventies, the South African authorities discovered a market niche. In 1969, the EU had introduced a common method to levy sales tax, the Value Added Tax (VAT). In most countries, it consists of three tariffs: high. low and zero. Where coins and banknotes were classified, they were listed with zero-tariff goods, which makes sense - in principle. In practice, coins and banknotes were not defined strictly and the South Africans discovered that EU member-states (led by Germany) would not levy sales tax on their gold coins as long as they bore a current denomination, but they would levy sales tax on gold bars.
This was the time of
stagflation and, just like now, nervous US small time speculators drove up the price of gold in bubble territory. Small German speculators were not immune to the gold hype and to them, the difference in tax was more than enough to start buying gold Kruger rands. These pieces contained exactly 1 ounce of pure gold. Of course, they did not circulate. The price of the rand was always very close to bullion value plus 4%, the low VAT tariff.
Like South Africa, Russia was an important gold producer. They wanted part of the gold retail market and so they started offering the chervonetz as an alternative in 1975. Taking the 1923 issue as an example, the chervonetz had an important advantage over the rand: it contained only 1/4 ounce of gold, so they could be used for even smaller speculations. The South Africans reacted in the early eighties by offering half and quarter rands. In addition, by that time the EU had got wise on the retail gold traders. Non-circulating coins were moved to the low VAT tariff. making them more expensive than gold bars, which did not carry the 4% margin. The two moves finished off the chervonetz, but through clever marketing, the South Africans could still sell their pieces to the stupid fringe of the retail gold market. I am sure they are doing good business again today.
Anyway, the modern chervonetz was never a trade coin (or even a coin), as KM claims, but only a coin-like alternative for the smallest of gold bars, owing its success to a tax quirk.
Peter
