As many of you know, everywhere in the world this day, January 1st, is a day off, especially because we all celebrated welcoming the new year with familiy and friends; nevertheless, I want to share with you a little bit of history on this day but on 1961, when the major currency reform in the Soviet Union came into force, as the Soviet government withdrew old banknotes and coins from circulation and changed them to new ones in ratio of 10 to 1, in order to simplify reciprocal payments.
As a result, all prices, salaries, pensions and so on were decreased proportionately. In addition, the new banknotes were smaller, than old ones, so their prime cost was lower and they were more convenient to use. When people found out about these news a year in advance, they rushed to the stores to buy expensive jewelry and fur, due to the idea that a monthly profit of the jewelry stores will tripled.The old money continued in circulation until April 1961.
Following the reform, the gold parity of the ruble had only increased by 4.44 points, not by 10 points, as it should have so as to sustain the value of the ruble. The US dollar rate changed in the same proportion: before the reform, one could buy a dollar for four rubles, while after the reform it cost ninety kopecks instead of the logical forty. Because of this, import prices grew, while imported goods became a real luxury for the Soviet people.
Whereas all kinds of merchandize in the state-owned shops were cheap, the black market prices increased. This led to an expansion of speculation, as the directors of the state-owned shops secretly sold the best goods, which normally came in small stocks, under-the-counter. When regular customers came to shop, they usually found nothing but empty shelves.
The collective farmers started to sell agricultural goods to the farmer’s markets instead to the state. When the government was unable to handle the situation, raised prices in public trading that caused a price surge in the private sector turning the prices out very high compared to the average salary.
Though it turned out to be damaging for the Soviet economy, the reform’s major purpose was an increase in oil exports, as after World War II, the production of oil in USSR grew. After the reform, oil workers began to earn almost the same amount of money in dollars and the oil export started to dominate the Soviet economy.