page_title: Hyperinflation in early Soviet Russia
section_title: War Communism (Summer 1918 to Spring 1921)
hierarchical_section_title: Hyperinflation in early Soviet Russia / History / War Communism (Summer 1918 to Spring 1921)
caption_attribution_description: Русский: Продажа студентами-рабфаковцами лотерейных билетов в помощь инвалидам на праздновании 25 Октября. Петроград
context_page_description: Hyperinflation in early Soviet Russia connotes a seven-year period of uncontrollable spiraling inflation in the early Soviet Union, running from the earliest days of the Bolshevik Revolution in November 1917 to the reestablishment of the gold standard with the introduction of the chervonets as part of the New Economic Policy. The inflationary crisis effectively ended in March 1924 with the introduction of the so-called "gold ruble" as the country's standard currency.
  The early Soviet hyperinflationary period was marked by three successive redenominations of its currency, in which "new rubles" replaced old at the rates of 10,000-to-1, 100-to-1, and 50,000-to-1, respectively.
context_section_description: With the eruption of civil war on a large scale in the Summer of 1918, the already grim economic situation in Soviet Russia deteriorated further. Full effort was placed upon military production and factories across the country fell silent for lack of raw materials. According to one estimate, that of P. Popov of the Central Statistical Bureau of Soviet Russia, by 1920 the total production of Russian industry had fallen from a pre-war level of 6.059 billion gold rubles to the equivalent of just 836 million — a decline of more than 85%.
  Nationalization of industry proceeded at a frenetic rate, with an industrial survey of August 1920 indicating that some 37,000 firms had been expropriated by the state — including more than 5,000 which employed only one person. The Supreme Council of National Economy (Vesenkha), chief economic control agency of Soviet Russia in this period, cited a far lower figure of 4,420 nationalized enterprises in November 1920, while a third source indicated a total of 4,547 firms under state ownership. That authoritative sources disagree so wildly is indicative of the ad hoc nature of the nationalization process.
  As the War Communism period progressed manufactured consumer goods came to be in such short supply that they were virtually unobtainable. Peasants refused to sell their surplus products for money which could effectively buy nothing. Facing starvation in the cities and the death of industry as peasant-workers returned to their villages, the Soviet state resorted to the use of force to obtain necessary grain to maintain its urban economy. This resort to forced requisitioning had the effect of further decimating agricultural production, already seriously weakened by the loss of millions of able-bodied peasant men to the front. Wherever requisitioning was applied, the area of land dedicated to cultivation contracted.
  In the words of one economic historian, "The only industry which thrived was that concerned with the production of paper money." The amount of currency in circulation from the beginning to the end of 1920, rose from about 225 billion rubles to 1.17 trillion. This represented a 25-fold increase over the amount of paper money in circulation in 1917.
  With the virtual collapse of money economy in favor of requisition, rationing, and barter, came a virtual abolition of banking in Soviet Russia. With productive industry almost completely state-owned, the People's Bank (successor to the pre-revolutionary State Bank) had no credit function; rather, it acted as a clearinghouse for transmission of assets to industry, with funds primarily obtained through currency emission.
  The People's Bank was abolished altogether in January 1920, with the issuance of currency transferred to the People's Commissariat of Finance (Narkomfin). The decree shutting down the People's Bank made provision for continued use of the offices of Narkomfin for private finance on a limited and seemingly temporary basis:
  
  "The nationalization of industry has concentrated in the hands of the government all the most important branches of production and supply...thereby excluding any necessity for the further utilization of the People's Bank as an institution of state credit in the accepted sense of the term. The system of banking credit still remains in force for small private industrial enterprise and the needs of individual citizens who place their money in state savings institutions. Nevertheless, as these transactions are gradually losing their importance in the economic life of the country, the existence of separate banking institutions is no longer necessary. Such transactions are now of secondary importance, and may be successfully carried out by the central and local institutions of the Commissariat of Finance..."
  It was neither arcane Marxist theory that was causing disintegration of the money economy nor the replacement of currency transactions by moneyless credits between state-owned firms, but rather hyperinflation. The ruble had collapsed as a store of value and a medium of exchange, but nothing had been created to
caption: Lottery ads in Petrograd in 1921. The main price is 20 billion rubles
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