861.515/12–147: Telegram
The Chargé in the Soviet Union (Durbrow) to the Secretary of State
3305. Embtel 3293, November 28.1 Recurrent widespread rumors that present currency will be replaced by new currency have brought about phenomenal buyers’ spree. That these reports are believed by large proportion population Moscow is made manifest by continuing wholesale run on shops selling durable goods. Two days ago long lines formed at commission, dry goods, jewelry, rare book, fur shops, et cetera, all of which besieged by large crowds buying any durable goods regardless of need or intrinsic value. Travelers from other areas report similar scenes other cities. Run attained such proportions that [Page 627] yesterday Mostorg, main department store, posted sign “store closed for repairs”. All its smaller branches also closed, as well as most jewelry shops and other luxury goods stores. Many shops posted sign “closed for inventory”. Shops remaining open had many bare shelves by last evening although still besieged by customers. Scores peasant women and poorly dressed workers seen carrying large packages crockery, Chinese vases and other durable goods. One report states peasant woman with bundle of rubles apparently dug up from ground purchased two caracul coats after having difficulty with cashier who at first refused to accept money because its filth and smell permeated shop. All luxury restaurants and cafes crowded with persons having “last” fling on excess rubles. Suburban trains overflowing with peasants returning with large bundles muttering against govt.
Understand correspondents unable pass buyer panic story.
Of plethora of rumors most creditable seem indicate issuance new currency will become effective about December 5 with permission to exchange old ruble notes for new up to amount of two months’ salary. While savings banks accounts may be exchanged in toto some reports have it that part of account may be blocked. Due panic unlimited savings bank withdrawals now canceled and each individual only permitted obtain rubles 200 a day. Latest rumor indicates derationing may take place December 15 with single price system considerably higher than ration prices.
If rumors true it seems clear that ration price rises of September 1946 have not absorbed enough rubles to obviate run on food and other stocks if and when derationing takes place therefore govt deems it necessary take extraordinary measure of changing currency in order cut circulation, break speculators and rob peasants who through high priced open market sales have accumulated large supply of rubles during and since war. Action if taken by govt would point up full meaning of recent propaganda tirade against “remnants of capitalism”. While not all classes would be hit by currency change, rumors have clearly exposed latent apprehension and sense of economic insecurity of Soviet people, powerless to influence or protect themselves against arbitrary govt action.
Incredible as it may seem to a western mind, no suspicion of all this has appeared in Soviet press.
Since correspondents probably cannot send true or full picture these developments and since if govt announces changes will probably wrap them up in high sounding verbiage explaining action necessary to “increase strength and stability of ruble” and liquidate “small number of speculators and capitalist remnants”, suggest preliminary plans be made to use Voice of America to countries other than Soviet Union to [Page 628] explain plight of individual under Soviet totalitarian regime (Embtel 3222 Nov 15) stressing plight of peasants who deprived good part their hard won earnings. Will send further details as become available. Suggest story be prepared and held for use in connection with whatever official announcement or denial is made. If rumors prove be untrue story of panic can be used good effect to show lack of faith in financial structure of country. If confirmed by announcement of currency change and derationing with increased prices, tie in buyers panic with résumé of basic Soviet price increases (inflation) beginning with Sept 1946 (see Embassy report 18 Jan 47 and supplement to Embassy’s internal report, despatch 1711 Oct 9 for background2). In the meantime suggest:
- 1.
- VOUSA in Russian and other European languages immediately deadpan without reference to buyers panic piece describing stability of and faith in dollar, giving figures on huge insured private savings accounts US and available facts to show dollar used as unit of value for large majority international transactions including Soviet trade agreements.
- 2.
- If Dept deems advisable might also at present time include “report from recent travelers in Moscow” describing buyers spree as being brought about by rumored price increases and currency changes.
London pass Ambassador Smith.3