Roubles and chervontsi

Most people think that the rouble was the currency in the Soviet Union. And it was, although only partly. In The Master and Margarita Bulgakov always uses the word червонец (chernovets) to denote a ten roubles bill. And in chapter 12, when the bank notes began falling from the ceiling into the Variety Theatre, he connects it to the question “if the bills were real or some sort of magic ones”. To understand this satire, one should know the story of the chervontsy.

The Soviet Union did not have a stable currency at the end of the civil war, and the government realized that it could not achieve its ambitious economic development plans of the New Economic Policy (NEP) without first solving this pressing monetary problem. In Bulgakov's diary we can read that, on April 18th, 1922, the rent in Bolshaya Sadovaya was increased to one and a half million. And it was for "a room which is worth nothing, and the neighbours either". A pound of flour was 18 million roubles, a white bread 375 thousand per pound, and butter was 1 million 200 thousand per pound. One year later, on July 11, 1923, the white bread reached 14 million per pound. Three months later, on October 18, 1923, it was at 65 million.

Accordingly, a decree of October 11, 1922, issued by the sovnarkom , the administrative branch of the Soviet government, authorized the Soviet state bank to issue the chervonets bank note as the equivalent of the pre-revolutionary ten roubles gold coin (7.74232 grams of pure gold). This legislation required at least 25 percent of chervontsy (plural) to be backed by precious metals and hard currency.

The first step, the issuing of chervontsy, began at the end of November 1922. Chervontsy were bank notes (sometimes referred to as sovznaki. Furthermore, the ratio of the chervontsy to the old rubles (also referred to as kaznaki and not really backed by gold at all) was to be two to one. Further, no exchange rate was established between the two currencies, so the gold-backed currency would eventually prevail.

And the chervontsy did drive the old paper money away. Whereas at the beginning of 1923 the chervontsy represented only 3 per cent of all money in circulation, the percentage increased to 83.6 per cent in February 1924, on the eve of the final act of currency reform.

Through the 1920s, the chervonets was officially quoted on foreign exchanges. However, this attempt to maintain a "hard" Soviet currency was controversial almost from its inception and quickly ended along with the NEP itself. On June 9, 1926, the government passed a resolution forbidding the export of Soviet currency abroad, and in February 1930 all transactions to sell gold and foreign currency to private individuals for chervonets at a fixed rate were banned, the Soviet currency was withdrawn from foreign exchanges and a quoting commission was set up under the State Bank’s Board to set the exchange rates of foreign currencies.

In 1937 Lenin’s portrait appeared on the chernovets bank notes. But the life of chervonets was not long. The rouble became main currency unit again. The word chervonets existed though untill 1947. To normalise money circulation a confiscatory monetary reform was then conducted, during which old money was exchanged for new roubles at the rate of 10 to 1.

In The Master and Margarita Bulgakov criticizes the use of the chervonets more than once. The money that changes into worthless paper consists of chervontsi, never  roubles. And the taxi-drivers at the Variety Theatre only want to take Vasily Stepanovich Lastochkin if he pays with three-toubles bills. The three-roubles bill was usually called a treshka (small three).