Foreign Relations of the United States, 1947, Eastern Europe; The Soviet Union, Volume IV

861.5151/12–1447: Telegram

The Chargé in the Soviet Union (Durbrow) to the Secretary of State

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Moscow, December 14, 1947—9 p. m.

3367. At 6 tonight complicated new money price changes derationing decree announced by radio.¹ Text not yet available: preliminary highlights follow:

(1) Money reform: Cash in personal possession will be exchanged 10 old [rubles] for 1 new.

Bank savings 1 for 1 up to 3,000 rubles; 3 to 2 on next 7,000 and remainder 2 old for 1 new.

All state loans being consolidated into one new conversion loan at rate of 3 old to 1 new except 1938 at 5 to 1 and 1947 not subject conversion.²

Old money must be changed within week beginning December 16 except in remote places where two weeks allowed, after which old money loses all value. Present money good this period but at only one-tenth face value.

(2) Derationing: (a) Ration cards abolished. (b) Single price on rail products except peasant markets and certain cooperative goods.

(3) New prices:

(a) except for bread, macaroni, flour and grits all prices remain at ration price level or higher. Bread and flour down 12 percent, macaroni and grits down 10 percent from ration price (will be recalled ration price black bread raised September 1946 from 90 to 340 kopeks, an increase of 275 percent).

(b) Meat, vegetables, sugar, fats, cakes and fish remain at current ration prices which are also considerably higher than year ago (average increase of about 200 percent).

(c) Milk, eggs, tea and fruit will be somewhere between present ration and commercial prices.

(d) Cloth, clothing, footwear, knitted goods and certain other consumers goods to be fixed at prices about one-third of present commercial prices, presumably higher than present ration prices.

(1) Comments:

Soviet propaganda line already claiming that in contrast capitalist countries where prices rising and wages being held clown, new decree proves recovery from war and strength of Soviet economy. However, true nature of change later revealed by reference to measures as “last sacrifice” to be demanded of Russian people, geater part of which is allegedly assumed by state.

In view this propaganda line emphasis should be placed on fact that: (1) food ration prices last year were raised an average of 180 percent against insignificant wage rises in lower brackets. Thus present measure in general freezes ration increases of last year and even raises some food prices.

(2) Government expropriates two-thirds (and in one case four-fifths) of investment of government bond holders.

(3) Expropriates 90 percent of all cash holdings. This will undoubtedly hit peasants hardest, as well as speculators. However, since as compared to US comparatively few people have bank accounts, cash savings of appreciable number of urban population will also be hit. Detailed analysis follows.

Department pass London as 383 for Ambassador Smith.

Durbrow

1. The Council of Ministers of the Soviet Union and the Central Committee of the All Union Communist Party (Bolsheviks) issued decree No. 4004 on December 14 regarding the carrying out of a monetary reform and abolition of ration cards for foodstuffs and consumers’ goods. The Embassy sent to the Department a translation of decree No. 4005 by the Council of Ministers of the Soviet Union of December 14 which prescribed in detail the procedures for the performance of the provisions of decree No. 4004 in telegram 3374 of December 15, and in despatch 1957 of December 22, neither printed.
2. The Embassy calculated in airgram A–1370 from Moscow on December 18, that about 50 billion rubles of these 2% Conversion Loan bonds would be required to be issued to take care of the conversions.