World of Coins

Modern European coins except the euro => Russia and USSR; Belarus, Ukraine => Topic started by: Bimat on January 17, 2013, 04:06:05 PM

Title: The Golden Age of the Russian Ruble
Post by: Bimat on January 17, 2013, 04:06:05 PM
The golden age of the Russia ruble

17.01.2013

One hundred and sixteen years ago, Russia produced its first gold coins. On January 15, 1897, the Russian Empire switched to gold money, which marked the beginning of the era of economic monetary reforms conducted by Finance Minister Witte. As a result of those reforms, the gold ruble became the hardest currency in the world, pegged to gold reserves of Russia.

Before the advent of gold coins, the Russian Empire had a silver standard. At the end of the 19th century, the need for reforms was prompted by changes in the global economic arena, when gold currency became the basis oft the single monetary system that developed countries created. The introduction of the gold standard in Russia was largely based on favorable conditions in the field of public finance. However, initially the reform by Sergei Witte was met with hostility. The transition to gold was inevitably accompanied with the devaluation of the ruble. Moreover, The majority of representatives of the State Council, who were in charge of the fate of the state, considered the devaluation of the national currency a "humiliation of public esteem."

However, there was another reason not to allow the stabilization of the ruble. Foreign financial circles and the Russian bourgeoisie were against it. For them, the volatility of money was a factor that increased their income, including the income from the exports of grain. Thus, Witte's reforms were going against all speculators, who were getting rich on the difference of currencies. In this context, the preparation for the transition to the gold standard during the 1880s was conducted secretly. The results were made public only after Sergei Witte won the favor of Emperor Nicholas II.

Choosing an orienting point among neighboring European countries, Finance Minister Witte decided to opt for the gold standard, which was in vogue in England. The industrial growth that began in 1893 in the Russian Empire accelerated the currency reform. In 1895, there was a right to trade for gold, whereas the State Bank obtained an opportunity to buy gold coins and effect payments with them.

That same year, the State Bank, government agencies and offices of railways began to accept coins made of the precious metal. The rate of the paper ruble was set on the level of 7 rubles 40 kopecks per gold semi-imperial worth 5 rubles. After 1896, the rate inched up 10 kopecks. The royal decree "On the minting and issuance of gold coins" by the great economic reformer Witte was published on January 3, 1897.

One new ruble was equal to 0.7774234 grams of pure gold. The coins of precious metal were produced at face value of 5 and 10 rubles. There were also imperials (15 rubles) and semi-imperials (7.5 rubles). A coin of ten rubles, or the so-called St. Nicholas ducat, which depicted the portrait of Nicholas II, contained 7.74234 gram of pure gold. The coin weighed 8.6026 grams. The Russian gold ruble, from the point of view of the content of gold, was twice as heavy as the Mark and twice as light as the dollar.

Paper banknotes were in circulation in the Russian Empire as well. The balanced circulation of both coins and banknotes was quite stable due to the balance of gold reserves and paper assets. This balance was strictly regulated by law, according to which the banknotes in circulation were not to exceed gold reserves by more than 300 million rubles.

Interestingly, in contrast to other economies of the world that recognized the ruble the hardest currency in the world, Russian people did not recognize their own gold coins. People did not like them: they tried to get rid of them as quickly as possible. The coins were commonly referred to as "zheltyak," - the word derived from adjective "zholty" which means "yellow."

However, people's discontent, or, perhaps, fear of gold coins did not stop the government from improving its investment appeal. The gold reserves, to which the new currency was pegged, shielded the economy from external factors, and the ruble - from inflation. The State Bank increased gold assets from 300 million to 1095 million rubles. Thus, the coins of precious metals corresponded to the number of banknotes in circulation - 1121 million rubles. As a result, it became possible to exchange banknotes for gold without restrictions.

In addition to the five- and ten-ruble coins, which in Moscow were referred to as "matildors" in honor of Witte's wife, and "wittekinder," Sergey Witte proposed to introduce a small coin, called "Rus". However, the money with the patriotic name was never produced to avoid confusion.

Pretty quickly, Witte's reforms strengthened the internal and external exchange rate of the ruble. Capitals began to flow in owing to the improved investment climate. Another plus of the reforms was the weakening of negative effects of the industrial recession of the early 20th century, which was accompanied with massive bankruptcy of Russian companies.

From 1900 to 1903, up to 3,000 factories were closed in the country, resulting in the growth of unemployment. Industry started to overcome the crisis only in 1903, when the Russian Empire was on the verge of the Russian-Japanese War. However, the economic strength and stability of the state helped Russia survive the war. Even the defeat of the Russian Empire in the war with Japan did not revert foreign bankers and industrialists from cooperation with Russia - they were still certain of the hardness of the Russian gold ruble. The free exchange of paper money for gold stopped in the Russian Empire during the beginning of the First World War.

On July 29, 1914, during the beginning of mobilization to military districts on the border with Austria and Hungary, Minister of Finance Witte signed decree No. 2096 that marked the end of paper-to-gold exchange. As a result, 629 million gold coins settled in people's pockets, because people did not want to give their gold coins to the state.

The consequence of that was the cash crisis, which occurred due to the shortage of banknotes. However, balanced budgets allowed Russia to save more than 5800 million of free cash by the beginning of WWI, which helped the country survive the war with dignity.

Maria Snytkova

Source: Pravda (http://english.pravda.ru/russia/economics/17-01-2013/123506-golden_ruble-0/)
Title: The Golden Age of the Russian Ruble
Post by: Bimat on January 29, 2013, 03:14:29 PM
Next part of the article:

Russian kopeck goes down in history yet again

29.01.2013

The Russian kopeck coin changed its appearance many times, but steadily lived in purses and pockets of the Russians. After celebrating its 460-year anniversary, it briefly went down in history, but was revived, still depicting George the Conqueror on a horseback. Now it is time to say goodbye. Recently the Central Bank of Russia announced that the kopeck will not be minted any longer.

During the reign of Elena Glinskaya, the mother of Ivan the Terrible, it was common to cut silver coins. As a result, they lost weight, thus causing lack of trust among people. The old money, regardless of their integrity, was banned and replaced. The first kopeck appeared in 1534 and had an image of a horseman with a spear in his hand. Vladimir Dahl in his Explanatory Dictionary of the Russian Language, published in 1881, proposed a theory that   the name "kopeck" originated from "kopeet'" ("save") money. The first kopecks looked like watermelon seeds, were irregular in shape, made of silver, each weighing 0.68 grams. The money was carried in belts, and if the amount was small, it was easy to put it behind the cheek.

The kopeck preserved this weight for nearly a hundred years, and only at the beginning of the Polish-Swedish intervention in 1610 its weight was reduced. In the 17th century its weight was reduced several times and in the beginning of the reign of Peter the Great it reached the weight of 0.4 g. Peter himself called these coins "old lice."

In 1704 Peter the Great implemented a monetary reform. The kopeck was now produced from copper and increased in size. For the first time the kopeck acquired its usual round shape and had a date engraved on it. The old silver wire coins were minted for another 14 years. The image of a rider with a spear on the kopeck lasted until the end of the 18th century.

Some copper and silver coins of Peter's time had interesting marking of value. For literate people the denomination was indicated in words, for illiterate ones - with a number of dots or dashes. This method was used until 1810.

In 1915, the royal government of Nicholas II, trying to cope with the costs of the war, dramatically increased printing of paper money, including kopecks. There were banknotes of 2, 3, 5 and 50 kopecks.   

The first Soviet kopeck went into circulation in 1924. Until 1927, half- kopeck coins were minted. Since coinage production required copper necessary for the industry, it was decided to discontinue the copper kopeck. Since 1926, the country has moved to the coinage of gold alloy of bronze (copper-zinc alloy) in denominations of 1, 2, 3, and 5 kopecks. From that moment the weighs of the kopeck was precisely one gram, two kopecks - two grams, three kopecks - three grams, and the Russian ruble had 100 grams of small change. The cost of the kopeck was the most expensive - 8 kopeck to mint one coin. It cost about 16 kopeck to mint the Russian ruble. During the Soviet money reforms small coins remained unchanged. In the reform of 1947 it was not touched, and in the reform of 1961 old bronze coins of 1, 2 and 3 kopecks remained in circulation alongside the new money.

After the collapse of the Soviet Union the inflation gained momentum and "ate" the kopeck. The Central Bank of Russia officially stated that, before its 460th birthday, the kopeck would cease to exist, and would go down in history. However, the coins issued in 1961-1991 (and even coins of 1, 2 and 3 kopeck of earlier editions) remained legal until 31 December 1998.

As a result of the Russian ruble denomination on January 1, 1998, Russia revived the kopeck as its 1/100. New kopecks had different denominations and weight. Like in 1535, they depicted a horseman with a spear. The cost of production of all Russian coins up to 5 rubles exceeds denomination of these coins. For example, the cost of minting a 5-kopeek coin is 69 kopecks, and 1 kopeck - 47. Last year, the Bank of Russia stopped minting small denomination coins of 1 and 5 kopeck.

Under Ivan the Terrible one could buy 3 kg of rye with one kopeck, 7 kopecks would buy an axe, 5-10 - a padlock. A cow and a horse cost one ruble, clothing (compared to grain and tools) was expensive: a simple robe cost the farmer 20-40 kopecks.

Under Peter the Great the average wage of unskilled workers was 5-8 kopecks a day. For comparison, 16 kilograms of meat cost 30 kopecks, 16 kilograms of bread - 10 kopecks. In a day a laborer earned 2.5-4 kg of meat.

Between the times of Ivan the Terrible and the reign of Nicholas II the kopeck dropped in value.

Under Tsar Nicholas II daily earnings of a roofer were 2 rubles and 8 kopeck, a carpenter - 1 ruble 92 kopecks, locksmith and blacksmith at 1 ruble 90 kopecks. At the time of the last Russian Tsar 1 kg of meat cost 30 kopecks, bread - 5 kopecks, 100 g of chocolate - 15 kopecks, Sturgeon - 8 kopecks, a bucket of pickled tomatoes was 8 kopeks, and a cow was worth 8 to 10 rubles.

Even with the start of the First World War in 1915, the prices in the markets were quite acceptable. Beef and lamb could be purchased for 25 kopecks per kilogram. A Christmas goose could be bought for 85 kopecks, chicken - 30, and partridge - only 15 kopecks. 

One kopeck in the late Soviet period could buy a piece of bread in a canteen, a pencil, a box of matches, two envelopes without stamps, or a glass of soda. In recent years, a kopeck cannot buy anything.

The largest kopeck was issued in 1726 during the reign of Catherine the First. It was minted at the Yekaterinburg Platov yard, its weight was 16.38 g. It was of square shape and its size was 23 × 23 mm.

The heaviest kopeck was issued in 1755-1757 under Elizabeth. It was minted in St. Petersburg, Yekaterinburg, and Moscow Mints, its weight was 20.48 g.

Tatiana Onaverina

Source: Pravda (http://english.pravda.ru/business/finance/29-01-2013/123608-russian_kopeck-0/)