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Soviet Diamond. The rise and fall of the red coin
Material posted: Publication date: 21-12-2014

In the history of Russian Finance is a very interesting period, which, for all its apparent popularity studied obviously insufficiently. Speech on the introduction of the gold Ducat in 1924. Who prepared this reform, to stop hyperinflation and revive the Russian economy, now almost do not remember.

"In the people's Commissariat of Finance permanent large expenditure to purchase new light bulbs. The population of acute shortage of electric light bulbs, and employees of people's Commissariat Unscrew them and take home. Commissar falconers finds an ingenious way out: the plant that supplies the bulb, ordered to engrave on each light bulb: "stolen in the Narkomfin"," recalled Stalin's former Secretary Boris Bazhanov. Who is this man, so ingeniously solved the perennial Russian problem?

Girsh Yankelevich Brilliant (aka Grigory Yakovlevich Sokolnikov) was born in the town of Romny, Poltava province in 1888, the family doctor of the libavo-Romenskaya railway, collegiate Councilor Yankel Moiseevich Diamond. Shortly after the birth of her son, the family moved to Moscow, his father takes the pharmacy on Trubnaya square (this building has been preserved until now). Hirsch-Gregory graduated with honors from the 5-th Moscow gymnasium (in the same class studying Osip Brik, and two classes under Boris Pasternak), and entered the law faculty of Moscow University. However, to get higher education in Russia failed.

In 1905, Gregory enters into the Russian social-democratic labour party (RSDLP) which leads underground work in Moscow, takes an active part in the December uprising. Despite his young age (he's only 17 years old) becomes a member of the Sokolnicheskaya of the revolutionary Committee of the party and takes his party pseudonym falconers. In the autumn of 1907 he was arrested and after a year and a half investigation by the verdict of the Moscow court chamber exiled to Siberia in exile. Fish in the village Sokolniki of the Yenisei province was delayed for a while. Six weeks after arriving at the settlement he runs abroad and in the autumn of 1909 come to France.

Grigori Sokolnikov
Photo: wikipedia
 

In addition to his party work, in exile falconers don't forget about the education. After enrolling at the Sorbonne's law faculty, he completed it in 1914 and begins research work in doctoral studies of the faculty of Economics. In April 1917 the former Diamond along with former Ulyanov arrives in Petrograd.

Immediately after the October revolution, in November-December 1917 29-year-old falconers led the nationalization and reorganization of private banks, December 30, 1917, the Commissariat is headed by the former private banks, soon became part of the people's Commissariat of Finance (Narkomfin). Participates in negotiations with Germany — his signature under the Brest peace Treaty. Merit, frankly, questionable. During the Civil — member of Revvoensoveta different levels, commander of the 8th army, the commander of the Turkestan front.

It is Sokolnikov was one of the initiators of engaging in the ranks of the red army of the so-called military experts — officers from old Imperial army. He sharply opposed the "decossackization". In Turkestan in the spring of 1921, Sokolnikov, who were fighting not only with me but also with the economic problems in the region, decided to completely withdraw from circulation the local currency (the so-called turkbey) by exchanging them at the rate of 10 to 1 for Soviet rubles (the Soviet notes). Thus was achieved the unification of currency circulation, but also severely reduced no secured money supply in Turkestan.

In the autumn of 1921, Sokolnikov was appointed member of the Board of Finance, in the spring of 1922 — Deputy people's Commissar of Finance, in the autumn of the same year the people's Commissar of Finance of the RSFSR, and in July 1923 after the formation of the people's Commissariat of Finance of the USSR he became the head of the institution. The situation in the country was extremely difficult, the ruble by the autumn of 1921, compared with 1914 depreciated in tens of thousands of times. The Soviet government drew to solve the problems a number of financiers and economists, who had experience in the institutions of pre-revolutionary Russia. However, this measure was severely delayed because of the poor harvest of 1921, the flow of food to market has decreased dramatically. As a result of price from October 1921 to may 1922 were grown in 50 times.

The rise in the cost of food has forced the government to raise wages, and thus enable the printing press. Excess issue of sovznaks has led to a sharp rise in inflation, which would put an end to the economic recovery after the Civil war. These panic actions of the Soviet government falconers reacted extremely rigidly: "If we near the Iversky chapel on the wall is written: "Religion is the opium of the people", then I would suggest near SEC to hang the sign: "Issue — opium for a national economy"".

In the autumn of 1921 the decrees of the Council of people's Commissars (CPC) and the all-Russian Central Executive Committee (VTSIK) established the state Bank of the RSFSR, even without emission rights. In Finance held its first major meeting on regulation of monetary circulation with the participation of invited experts. Most of them looked at the prospects of the ruble very skeptical, believing that a stable currency can only appear as a result of economic recovery. For example, member of Collegium of people's Commissariat of Finance of Otto Yulievich Schmidt (later the famous polar Explorer) believed that this issue should return no earlier than ten years. Falconers, remaining in the minority, said that with the falling sousnike to restore the economy, and therefore we must look for ways to create a sustainable currency.

A former banker and a former millionaire and now a simple goverment clerks Vladimir Tarnovsky suggested that the Narkomfin hard, but very effective stroke. The emission of rapidly depreciating Soviet notes covering the budget deficit, not to stop. However, in parallel to issue banknotes secured by gold and foreign currency they will launch commercial circulation. On the one hand, the financial system stabilized — people are limited in the Soviet notes and any confiscatory measures by the government have been taken. On the other — formed the impetus for open Commerce and in fact dismantled the black market.

Sokolnikov believed that the state should be given the right to issue its paper money, called unlike state banknotes (of sovznaks) "credit tickets of the State Bank". The tickets of the state Bank must be owned by the Bank and laid him in gold, precious metals, foreign currency and other values and goods, as well as bills and obligations. The stumbling block was that Tarnovsky was thinking very ambitious and believed that the Soviet gold ruble should be entered not as temporary but as permanent a financial instrument and, in addition, initially positioning it as a world currency.

Falconers wholeheartedly stood on the side of Tarnowski and in no time was able to overcome the resistance of professional revolutionaries, who considered money a relic of the capitalist past and an instrument of exploitation of the workers. However, the catastrophic situation in the RSFSR, lucidly explained the difference between Marxist theory and practice.

July 25, 1922 was adopted by the decree of Council of people's Commissars "On granting the State Bank of the right of issuance of Bank notes". In October of that year the Sovnarkom issued the decree "On granting Gosbank the right to issue Bank notes". In December Soviet gold coins appeared in circulation. About the name new currency was also conducted heated discussion. Ardent revolutionaries wanted to call it "Federal". There were old-style and offers: alcovy, the hryvnia and the chervonets. Celkovy in the population was associated with a silver ruble, hryvnia has been compromised during the existence of the UNR and under the coins all realized gold coin issued in the reign of Nicholas II, so the differences here could not be.

Leonid Yurovsky
Photo: wikipedia
 

During the preparation of the reform one of the main proponents of the introduction of the gold circulation of the economist Leonid Yurovsky was appointed Deputy head of the monetary authority, and the scope of activities included the regulation of all monetary policy and development of measures on improvement of monetary circulation. The Secretary Stalin-Boris Bazhenov: "the people's Commissar of Finance Sokolnikov, conducting monetary reform, submits for approval of the political Bureau of the appointment of a member of the Board of Finance and head of the monetary authority of Professor Jurowski. Yurovsky is not a Communist Politburo does not know it. Some of the Politburo members asked: "I Hope he's a Marxist?" "What are you, you are in a hurry to meet falconers, is the monetary authority, there must not talk, but to be able to do business"".

12 days after the appointment on August 22, Jurowski was placed under house arrest. Together with his friends begaiym Nikolai and Semyon Frank he had to leave the country, and only the intercession of sokolnikova saved him from deportation. What was the reason for the arrest? The fact that Jurowski in his article in the journal "Economic revival" has been suggested for reducing the budget deficit to reduce military spending. Of course, vigilant comrade Vladimir Sarabyanov saw this as a call for the elimination of the red army with clear consequences for Jurowski. In 1938, Yurovsky was shot at the site "Kommunarka". Sarabyanov died in 1952 and buried at the Novodevichy cemetery in Moscow.

Thanks to the efforts sokolnikova in October 1922 Yurovsky was appointed representative of the people's Commissariat of Finance at the Council on equity cases in the state Bank. He became the "eyes" of Grigory Yakovlevich, who watched the money machine. In December 1922 Yurovsky Sokolnikov writes: "once again earned the printing press will run a lot of hands and some hands are very strong." Threat to monetary reform was still the issue of sovznaks. In the first half of 1923, about one-third of budget expenditures was financed through the issue. Furious falconers at the meeting of the Central Executive Committee proposed to shoot the leaders of departments and enterprises requiring the issue to cover debts on wages and contracts. Soviet oligarchs escaped with only slight shock. However, in the summer of 1923 the Central Executive Committee adopted a decree according to which from January 1, 1924 the USSR issue to cover the deficit continued.

Unfortunately, to implement this resolution failed, because by the fall due to expectations for an ambulance socialist revolution in Germany has significantly increased military expenditures. Their growth hidden from the experts, the gaps were closed with additional issue. Reform has stalled. However, the process of formation of the foreign exchange market was already running. In February 1924 the Soviet government has stopped issuing and began the exchange of sovznaks for paper rubles. The initial rate was set at half a million Soviet notes 1923 (or 500 billion old rubles) for one gold Ducat or 10 rubles. Because of the acute shortage of small denominations in several regions the rate was 20-30 percent higher. In April 1924, the Soviet notes stopped walking. Formally, the new rubles were not tied to the coin, but in fact set rate is 10 rubles gold coin not changed, and two parallel existed in the country of the currency have merged into one.

25 червонцев, 1922 год
 
25 ducats, 1922
Photo: wikipedia

Ducat Sokolnikov-Jurowski-Tarnowski consistent with the pre-revolutionary Ducat and provided a quarter of the cost of gold, precious metals and foreign currency, and 75% of goods and short-term commitments. In 1925 the Soviet chervonets was officially listed on the stock exchanges of several countries in Europe and Asia, and operations were conducted in the UK, Germany, USA and many other countries. At that time it was one of the strongest global currencies, appreciated above the British pound and costing more than US $ 5. In may 1924, Zinoviev complained of the XIII party Congress: "On foreign trade have accumulated one hundred million of foreign currency — don't know what to do".

Interestingly, gold coin as gold coin, minted in 1922, simultaneously with the issue of paper gold, initially failed in the global market. Aliens absolutely do not want to work with coins, decorated with Soviet symbols. Falconers with a terrible scandal forced a change in the design of coins and... to the West are in the Soviet Union minted gold coins with two-headed eagle and the profile of the last Tsar.

At the XIV Congress of all-Union Communist party (Bolsheviks), VKP(b), in 1925 Sokolnikov was the only one who advocated the removal of Stalin as Secretary-General of the party. His support of Zinoviev, Kamenev and (at the time) Krupskaya cost him the post of Commissar of Finance, and his membership in the Politburo. Saying goodbye to colleagues in Finance, he said, "Only due to the fact that the Commissariat and public opinion employees sufficiently provided the opportunity to deploy the work of Finance science and Finance practice, only because of this were possible and those pros who have reached construction work Nchina". Grigory Yakovlevich received an honorable discharge in the form of a post of the Deputy Chairman of Gosplan. Two years later, at the XV party Congress, Sokolnikov opposed the policy of collectivization and to support the development of industry in the framework of the NEP.

Its fate was sealed. 26 July 1936 Sokolnikov was arrested in the case of "Parallel anti-Soviet Trotskyite centre", expelled from the party on 30 January 1937 sentenced to 10 years in prison and according to the official version may 21, 1939 murdered prisoners in verhneural'skom they. Other sources indicate that on the day he was shot by the NKVD in the Tobolsk prison. June 12, 1988 Grigory Yakovlevich Sokolnikov-Brilliant was posthumously rehabilitated by the Plenum of the Supreme court of the USSR, and on December 16 of that year, restored in the CPSU.

Gold chervonets in 1923 the design was re-released in 1975 and was minted up to 1982 (just released 3 350 000 coins). Now sokolnikova gold coin is legal tender on the territory of Russia, one of the main investment coins of the Bank of Russia. Its price at the beginning of December 2014 is about 22 thousand rubles. This is the best proof that the reform of 1922-1924 years was a faithful, though very tough decision to make.


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