INFLATED AND PUNCTURED

In the records of nearly all the great revolutions and intra-national struggles emphasized in Political History, from even before the time of the French Revolution to the Russian upheaval of the present day, the issuing of paper flat money and its subsequent redemption occupy an outstanding position. The solution of such financial difficulties as are occasioned by the too extensive issuing of inconvertible paper money has generally been found either in complete abrogation of its value or in reduction at a premium from a paper currency to a specie basis. Such was the case with the French assignats of the 1790's and the Continental currency issued during the American Revolution. But although confidence in modern Russian currency has dwindled so that it takes a million rubles to buy a dozen eggs, the present Russian government shows no signs of adopting either method. Embarrassed by lack of specie and yet desirous of maintaining itself in power, it has recourse to the unique procedure of merely reducing the size of its bills.

The Soviet Government issues, for example a certificate for 1,000,000 rubles, but labels it 100 rubles; and all official documents, including the weekly accounts of the national bank, are based upon the latter figure. Unfortunately the people still refer to the new bills as worth 1,000,000 rubles because they rate on a par with old bills of that denomination. But the authorities hope that when the old bills are called in, the populace will adopt the face value as the current rating. By this ingenious expedient the internal debt will be reduced ten thousand-fold.

But will the Russian proletariat accept the new bills? They must, think the authorities, if the old bills can be called in. And as an inducement to this end, the Soviet Government has launched a "bread loan", by which it offers flour for sale at two-thirds the market price,--payment to be made this month and delivery at the end of the year. The Government is, in fact, gambling that heavy harvests this fall will reduce the price of flour to less than two-thirds of the present market price; but the peasants and laborers do not realize this, or else are gambling against the State.

At all events, according to a recent article published in the New York Times, the odds seem rather in favor of the Government. Encouraged by state propaganda and the prospect of exchanging paper of somewhat uncertain value for flour at a good bargain, the Russian certificate-holders bid fair to turn into the bread loan something like a half of the enormous number of paper rubles now in circulation. Just what the Soviet Government intends to do further if this process of deflation is successful remains somewhat obscure. Probably the treasury officials will start all over again the wholesale printing of irredeemable currency. After that they can reduce the 100-ruble note to one.