This year on March 22, will mark 94 years since Latvia passed a law for the introduction of the national currency - Latvian ruble . Latvian ruble was the basis on which the future was built in Latvian gold standard , which played an important role in the development of the Latvian economy . It should also be the historical context of the time - March 22, 1919 were difficult times: political instability, the new Latvian national struggle for survival on multiple fronts with the Bolsheviks and German troops, the economic life of complete paralysis .
At the time there was simultaneous movement not only in the Russian Tsar time money, money Duma , the German occupation authorities issued Ostmark and ostroubles , the German mark , but also in different regions - local bonds , stamps Estonian , Polish and money Throughout the lack of uniformity in the currency , of course, did not have to think about sustainable economic development and equipment development. On too many external factors were dependent of the new government .
The new law of March 22, the rate of self- proclaimed state of financial development and laid the basis for the gold standard, which is implemented in a few years . That is precisely captured by the exchange rate reform ensured the future of the Latvian economy growth by allowing the execution of discretionary fiscal policy .
True, the new currency promulgation and implementation was difficult . Residents still did not trust in the currency and often state representatives with the power was forced to accept the currency of sale . Even the new government's Ministry of Finance, which was in charge of taxation and currency exchange exchange foreign currency originally adopted in any other currency that was in circulation Latvian territory , but not for the Latvian ruble introduced .
A year later , 1920 - March 18 , the Latvian ruble was designated as the sole means of payment in Latvian . A few days later - on March 20 , the Citizens' Initiative was founded Gold Fund , which the government called on citizens to donate valuables to serve as collateral and rezrves new national currency.
Gold fund founder and originator , writer Ivande Seagull , newspapers '' Latvian guard '' in 1919. On the fifth November issue , call, '' Latvju women ! '' wrote: '' Take it state its gold and gems and silver , the shamefaced hiding from the public. Take it all off balance ! If there Latvia , its you as equal citizens , will return everything back with interest in their sunny days , and if it does not exist - then it will be destroyed , and then you and other people's slaves , varesat present their heads with ashes and bask in the quiet mourn . And for having then you no gold, for whom the ancient glory . Rashly give all your gold to Latvia can be proud of your own female gold fund .''
The Fund operates under the auspices of the Government in full , although not formally associated with it . Country was engaged in guarding the precious donations . Soon as the gold base to become a credit union 's office premises on Nevsky Street 17, nowadays R. Blaumana and Mary Street corner . Bullion evaluation took goldsmith R. Valdmanis . Judging by the current -to-read newspapers , people have brought silver vases and cups , gold chains, eyeglass frames, earrings , rings , awards, medals, badges . The most commonly donated gold wedding rings .
Once in 1922. On the first Latvian Bank was established in November , and people donated treasure it took over your property, which belonged to the 99 boxes of donations , six suitcases , three baskets and one bag. This fund was allocated to the Ministry of Finance to buy gold . Melted gold bars , noted fineness and weight and charge Latvian Bank, which forwarded it to the store on the Bank of England. It was created in the first Latvian gold reserves .
However, the Latvian ruble value over the years continued to decline . For example, in January 1920 the English pound was 230 rubles . , But 1921 December 1010 rubles .
To avoid the Latvian ruble depreciation , the Latvian government decided to peg it to a fictitious currency - gold franc , or 0.2903226 gr.zelta . This was the gold content in Swiss gold francs , which served as a base of gold coins in the base Latin Union member states - France, Switzerland , Italy and Belgium. Latvia also had decided to become a member of this union .
All loans made ??by the state , orders , contracts were converted into gold francs . The collection of taxes was calculated in gold francs . This process led to the national financial sector stabilization of the Latvian ruble gold - franc exchange rate of 97-100 rubles to 50 rubles for gold francs.
Latvian ruble period ended August 3, 1922 , when a new monetary reform was introduced in the lats , which attracted a gold base and gave one lat value equal to 0.2903226 gr.zelta , ie , the gold franc . Rules provided that the lats Latvian ruble value ratio determined 50 : 1. Such a relationship was formed , when quoting the Latvian ruble against the Swiss gold francs. The government has just approved the actual situation of the domestic money market. At the same time , it was the signal for the international recognition of the Latvian currency .
Society was much debate as to name the new currency . There were different views of frank - up to the oak , acorn Latvians, dedicating the sun , the League and the dragon . Centimes offered also be termed as simtainiem . Thus , we so accustomed cents lats and not so obvious choice at that time was, and we might use today francs , divided into simtainos .
Latvian government plans were also forging gold LVL 10 and LVL 20 denominations . 10 lats coin weight had planned to 3.225805 grams , and 20 lat - 6.45161 grams of the gold fineness 900/1000 . However, these plans were not realized - apparently , the government decided that it could to ensure a smooth flow of money in the absence of those gold coins.
Thus , in fact the only bullion coins were released into circulation Latvian , silver was U.S. $ 1 , U.S. $ 2 and U.S. $ 5 coins. 5 lats coin, was particularly popular payment and store of value . When you first appeared in circulation in 1929, 5 lats coin, some of them over the border peoples daughters head with the word "God " (from the words God Bless Latvia ) . This coin was popularly named as " happiness " and coins were accumulated . In later releases such uzraksa location was no longer a rarity , so by the time the reason for the cash- there was no key .
It should be noted that silver lat notes has always been a favorite store of Latvian citizens. First Latvian Republic during the term of the consideration for the silver lat notes trusted more. Later - war and exile as well as the Latvian occupation regime had additional emotional meaning, which was associated with the former national independence and prosperity .
Latvian Bank had the right to release notes , which were secured with gold - all the notes had to be backed by gold between 30-50% , while emissions of more than 100 mln - with 50-75 % gold . All the Latvian bank banknotes were printed clause. For example, for 10 lats notes : " Against the Latvian banknote issued by the Bank of 2.903226 gram of gold ."
The obligation to exchange banknotes for gold has been canceled on October 8, 1931 , but the Act of September 28, 1936 declined to the gold standard . Since then, Lat has been likened to the English sterling at the rate of 1 LVL = 0.0396187 pounds.
From 1938 to lats banknotes were no longer in print clause for money in exchange for gold. Even more - at the beginning of World War II in 1939 , when the British pound started to fall , the government passed a law which stated that the Latvian bank itself will determine the exchange rate of and be associated with the British pound , it will drop more than 50 % compared the U.S. dollar and Swedish krona. At the same time , reduce the purchasing power la , blocked the retail deposit account with a bank , allowing every month to remove only a certain portion of the amount . Was prohibited, including without limitation certain valuables ( watches and jewelery ) and purchasing the needed special permission .
Thus, the 14 -year period , Latvian ended the gold standard time . True, lat remained attached to the English pound , which at the same time was pegged to gold via the U.S. dollar. Therefore, it can be assumed that the lats remained attached to the gold standard until Soviet occupation in 1940 . But it was just a real - mediated attraction tool of influence and the ability to control public finances , the government had already been released from his hands .
Here it is recalled that the United Kingdom during the First World War officially counted as attached to the gold standard, but the real banknotes for gold until the outbreak of war , did not change anymore . Pound actually turned into a " floating " currency war but the government had to fix the relatively high 5% interest on the loan rates.
After the first world war Britain sought to return to the gold standard , but the government maintained a high wartime tax rates that are twice as large as the pre-war rate . The result was deflation , which , along with high tax rates , all of them 20 - year- Britain prevented full restoration of the gold standard.
Completely different situation was at that time in France. War, the franc fell by 80 %, the French needed a pretty long time before 1926 franc was pegged to gold . French Government policies focused on low tax rates and the resulting 20 -to late French economy grew no worse for the U.S. economy.
There is a presumption that the first republic , the Latvian economy is rapidly and successfully developed . Increased exports , mainly agricultural output . The internal state of living rose and was provided to them during a high standard of living . These processes play a major role was introduced Latvian gold standard.
It should be remembered that the total increase in wealth came from virtually none - the 1.Pasaules war and fight for freedom, the ruins of the destroyed economy . Since there was no over - all production and industry were eliminated , equipment exported to Russia. In addition, the Latvian 1914th was 2.6 million, while in 1920. June - only 1.6 million inhabitants . Immediately after the freedom struggle in the country there was a long and sharply rising inflation . Access to credit was essentially paralyzed since the 1920s. and in 1921. even in the largest Latvian credit on their loans took up 62 % per annum interest rate including cash loss of purchasing power due to inflation risk and credit recovery .
However, this did not prevent a relatively short period of time to recover and the economy back on the right track . At the same time, a similar situation was also in Germany, the Weimar Republic during the post-war conditions experienced hyperinflation and a sharp fall in the value of money . Only after the introduction of the gold standard in Germany managed to stabilize the economy .
German hyperinflation of 20 -ies has become a textbook example of economic books . In 1918, the German mark against dollar was 8 stamps in 1921, has 184 brands in 1922 - 7350 mark, but in November 1923 the 4.2 - trlj.marku ! The hyperinflation and the masses distrust brand managed to stop only in 1924 , when Germany introduced the gold standard.
Acted similarly to other European countries that are plagued by hyperinflation : Austria a gold standard in 1923 , Poland - 1924 - 1925, Hungary . 1926 to the end of the gold standard had already been in 39 countries .
Seemed to be the gold standard for compelling returns to global finance. However, in many places it is enriched very difficult and painful , why support was given to other economic theories and offers . Perhaps the reason for removal of the gold standard , however, to seek common economic - political breezes in the world that have succumbed to the Latvian government. In 1934 , after the impact of the Great Depression in the U.S. devalued the dollar of 20.67 dollars per ounce to 35 dollars per ounce (By the way , a result of the devaluation of the U.S. budget revenue was mlrd.dolaru 2.8 -magnitude comparable to that of tax revenues ) appeared Totale devaluation threat - as now say global devaluation probability .
Britain and France had wondered whether the unfinished gold standard system around the U.S. dollar. In 1936 , these countries signed the tripartite agreement for the creation, which is to stabilize exchange rates . Following this agreement , the United Kingdom and France recorded its currency against the U.S. dollar , but the dollar in turn was pegged to gold at a price of 35 dollars per ounce. In this way arose a sort of gold standard , which was closed in 1944, the predecessor of the Bretton Woods Agreement . Due to this , the United Kingdom and the United States were able to finance their war expenses during the 2nd World War, at a rate of around 2.5%. ( compared to the 5% rate to be paid 1.Pasaules Great War ) .
The 30 - year Great Depression had an impact on the Latvian economy - increased unemployment, decreased income. However, the effects of the country went relatively peacefully , although this did not pass the test of public finances . Obviously, the impact of the Great Depression , however, the gold standard was abolished and the government chose the easy way out of economic problems. The supporting reasons to say that Latvia was not the one who chose the development in isolation from the gold standard . Subsequent processes continued in this world vrziena and ended with U.S. President R.Niksona August 15, 1971 decision that ended the existence of the gold standard in the world.
Interesting to observe the Latvian Republic of statistical data on the 20 - 30s period ( those found in the data of the website) . Food prices in the period from 1925 to 1940 have declined. For example, the price of 1 kg of pork in 1925 was U.S. $ 1.71 , but 1.49 Ls in 1940 , the price of butter - U.S. $ 24.03 and U.S. $ 2.67 respectively, the price of sugar - 0.77Ls and U.S. $ 0.69 respectively. However, like white bread price remained almost unchanged in 1925 - when it paid 0.35 Ls / kg , then since 1935 to 1940 remained stable at 0.20 Ls / kg.
In general, a trend that food and industrial goods prices are falling early thirties and is the lowest level to the mid- thirties , when they start to grow again . This is apparently due to the impact of the crisis of the thirties , when the purchasing power fell and was seen deflation . Even today , in the current crisis , which began in 2008, observed price decline and then recovery .
However, the end of the gold standard did not mean the disappearance of gold . How much was the gold Latvian Bank ? According to the Latvian Bank's website of the information , 1940th At the end of the Latvian gold total amount deposited in foreign banks was 10 607.2 kg , while in Riga - 1 604.3 kg of gold , ie , a total of 12 211.50 kg. World gold were placed in the Bank of France , Bank of England , the U.S. central bank ( Federal Reserve ) and the Bank for International Settlements in Switzerland.
Today, the official statistics , Latvia owns 7.7 tons of gold .