Many people remember the 90s and banknotes that were in circulation. Salaries of middle-class Russians were then measured in hundreds of thousands of rubles. Here are just people who were turning into millionaires without exception, there was little joy from this - they were rapidly impoverished. The 1998 denomination allowed to slow down this process a little. Let's talk about why it was carried out and what were the consequences of a difficult reform for Russia.
What is denomination
To begin with, it will be useful to figure out what constitutes a denomination. It's simple: economists call this term a change in the value of banknotes. Most often, denomination is carried out due to galloping inflation, in which money depreciates at a rate of 100-200% per year. In the entire history of the existence of paper money, a similar situation has developed several times.
Usually, banknotes in circulation in the state are replaced by an analog of a lower denomination. The conversion factor can vary significantly depending on the current state of the economy.
Why was it held in 1998?
The beginning and mid-90s in Russia, and throughout the post-Soviet space, was very difficult. From the connivance of the government, within a few months, some people made billions of dollars of money (moreover, it’s not about rubles) by selling military equipment and weapons, privatizing huge factories and selling modern machines at the price of scrap metal - the country was plundered before our eyes. Others quickly fell into poverty. The most vulnerable were artists, engineers, scientists and those who were not associated with production.
Even the average worker then received hundreds of thousands of rubles a month, but a package of milk cost from 6000 rubles, a bus ride from 1000 to 2000 rubles (depending on the city), the cheapest chewing gum - 200-300 rubles, and a loaf of bread - about 3000 rubles.
Of course, life in such conditions, especially after the stability of the USSR, where food prices did not rise for decades, seemed hellish. However, it was such for almost all the inhabitants of a huge country.
Accountants were especially hard. Filling out reports with thousands of salaries, summing up millions and billions of billions - this required exceptional care.
There was no stability, prices rose rapidly. In order not to change the price tags in stores every week, sellers indicated prices in dollars, but it was banned relatively quickly.
Impunity and weak control gave rise to a wave of counterfeiting. Millions of notes were in circulation: both made masterly, with the best equipment, and quite poorly. According to some reports, in 1997 the money supply in Russia consisted of fakes by 40%.
To slow inflation, a denomination was held in Russia in 1998.
What has changed in the design of notes
The design itself has essentially not changed at all. The only difference between the new notes and the old ones was the number of zeros. So, a banknote of 100,000 rubles turned into a familiar hundred today, and 500 thousand, having lost three zeros, became the usual five hundredth. Instead of banknotes in denominations of one, two and five thousand rubles, coins were introduced.
Smaller bills were simply obsolete. However, no one noticed this - banknotes in denominations of 100-500 rubles by this time were completely insignificant and were perceived approximately the same as today coins of 1-5 rubles.
How did the reform go?
The 1998 denomination gave rise to serious anxiety and unrest, which is natural: frightened by the events of recent years, the people did not believe anyone and nothing.
Everything was done to prevent speculation and any financial fraud during the denomination. So, it was forbidden to unjustifiably raise prices in stores - a special committee was specially created, which monitored the order and dealt with each detected case of violation of the law.
The procedure was very simple: in any branch of the state bank, a citizen could easily exchange old-style money for banknotes and new coins.
By the way, it was at this time that pennies were revived - coins appeared in denominations of 1, 5, 10 and 50 kopecks. By 1997, such small monetary units were simply forgotten. If a loaf of bread cost several thousand rubles, then it’s hard to imagine that you could pay cheap coins for it.
How long did it take to replace the money
One of the few sensible decisions of that government was that the 1998 denomination in Russia was carried out extremely gradually. There were no strict time frames leading to the fact that people still have significant savings that they do not have time to exchange for new money.
The exchange began in 1998. Since January 1, 1998, stores began to accept new banknotes and coins along with the old ones. This went on until the end of the year. As a result, a rather unusual picture could be seen - for the convenience of buyers and sellers, two prices were indicated on the price tags: before and after the denomination.
The only exceptions were non-denominated coins in denominations of 1 to 100 rubles - they were no longer accepted even in stores. However, it cannot be said that this painfully hit the well-being of the Russian people. Most of them did not even remember when they were holding a coin in denominations of 1-5 rubles. Well, coins in denominations of 100 rubles were used in almost the same way as today pennies: for example, to give change in a store. It is not surprising, because you could get 100 rubles only a third of the chewing gum.
Stores stopped accepting old money from January 1, 1999, but they could be exchanged at banks until the end of 2002. Thanks to this, even the most sluggish people and residents of provincial towns and villages got the opportunity to completely exchange their savings for new money, without shaking the already not very stable family budget.
Consequences of the Reform
The denomination of the ruble in 1998 really had important consequences, and mostly positive for both the state and ordinary citizens.
To begin with, financial transactions have been simplified. A huge amount of depreciated money was promptly withdrawn from circulation.
Shocked by recent prices, people gradually began to come to their senses - it was much more convenient to pay for purchases in the store by tens and hundreds of rubles than by tens and hundreds of thousands.
The psychological effect also played a role. Before the reform, some people, considering themselves millionaires, simply thoughtlessly spent money, completely losing the opportunity to plan a family budget.
Pennies familiar to everyone since childhood have also returned. True, they quickly got out of circulation - inflation was not at all tamed, it was only possible to slow down its pace a little.
Conclusion
This concludes the article. Now you know why the denomination of 1998 was carried out, how the reform was carried out, what were its main goals, advantages and results.