On January 1, 1961, a 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.
People learned about the upcoming changeover in advance, in May 1960, after the government resolution concerning “the change of the price scale” was issued. Many people rushed to the stores to buy expensive jewelry and fur – that May, monthly profit of the jewelry stores tripled. The demand for necessities grew as well, as people stockpiled “for a rainy day”.
On January 2, 1961, 28,500 currency exchange points opened for Soviet citizens. In densely populated regions, one could also get rid of the old money at mobile exchange offices. The old money continued in circulation until April 1961.
The media assessed the reform as “humane”; but in reality it did have a downside. 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.
The reduction of the gold and dollar parity affected the economy of the Soviet Union. During the reform, the prices in private trade were recalculated, but they decreased also only by 4.44 points. Whereas all kinds of merchandize in the state-owned shops were cheap, the black market prices skyrocketed. 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.
Kolkhozniks – collective farmers – started to sell agricultural goods at the so-called farmer’s markets instead of selling them to the state. When, in 1962, the government, unable to handle the situation, raised prices in public trading, it caused a price surge in the private sector and resulted in waves of social unrest – the prices turned out very high compared to the average salary. One of the highest points of this was a real riot that took place on June 2, 1962 in the city of Novocherkassk, in which 24 people were killed by the army. The government hid the information about the event from the citizens.
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. Before the reform, the output price was quite low – about 11.5 rubles, or $2.88, per barrel, with the base cost being 9.6 rubles per barrel, thus making the export unprofitable. After the reform, oil workers began to earn almost the same amount of money in dollars – 2.89 per barrel; in rubles, however, they began to earn much more – 26 rubles in old money or 2.60 in new. Soon after, the oil export started to dominate the Soviet economy.