Denomination (from the Latin nominatio - "name") - a change in the face value of a monetary unit in a certain ratio. In the course of denomination, the depreciated money is withdrawn and the old currency is replaced in relation to the new one.
Essence of currency denomination
Denomination is one of the methods of state monetary reform, along with nullification, restoration and devaluation. In all these cases, we are talking about changing the monetary unit. Denomination should be distinguished from devaluation. The latter is a change in the exchange rate of the national currency in relation to the foreign one. At the same time, denomination always indicates a currency devaluation, as it is a consequence of the depreciation of money.
The denomination is carried out with the aim of stabilizing the currency and increasing the ease of settlement. All money in circulation is exchanged for new, larger units. If expressed in accessible terms, denomination is a decrease in the number of zeros in a currency. For example, in the old money there were 10,000 rubles, now - 10 rubles. Consequently, the reform was carried out in a ratio of 1: 1000.
Record-breaking currency denominations were carried out in Germany in 1923 and Zimbabwe in 2009 - money was then exchanged in a ratio of 1 trillion. to 1.
The result of the denomination is a decrease in the total money supply in circulation. Thus, handling becomes more convenient. At the same time, as a rule, there is an increase in the cost of goods and services in new units.
In most cases, denomination is accompanied by a severe economic crisis and hyperinflation. Thus, many countries carried out denomination after the Second World War. Among them are France, Greece, Poland. Also, the nominal value of the currency has changed over the post-Soviet period in all post-Soviet countries - Ukraine, Azerbaijan, Belarus, Uzbekistan, etc. Post-crisis denominations were carried out in Brazil (1990), Turkey (2005), Venezuela (2008).
Denomination in Russia
In the history of the Russian Federation, the denomination was carried out once - in 1998. The decree on the denomination was signed six months before the start of the reform - in 1997, its purpose was to facilitate settlements and strengthen the ruble exchange rate. It was carried out with a coefficient of 1000 old rubles to 1 new one. The main reason that created the need for this reform is hyperinflation. It was 1000% per month.
During the 1998 denomination, over 6 billion banknotes were confiscated from the population.
New banknotes and coins appeared in circulation on January 1, 1998. The design of the banknotes did not change compared to the 1995 sample, only three zeros were removed from them. Also, instead of the old 1000 ruble banknote with the image of Vladivostok, a 1 ruble coin was introduced. Also, coins with the image of St. George the Victorious (in denominations of 1, 5, 10, 50 kopecks) and ruble coins (1, 2, 5 rubles) were issued.
The replacement of old money took place gradually, it was possible to exchange old notes for new ones until 2002. By the end of 1998, pre-denominational money accounted for only 1.3% of the total money supply.
