used to retire 240 million rubles


Senior Member
Gurev's policy aimed at strengthening the paper ruble by reducing the volume of bank notes
in circulation. The proceeds of four domestic loans floated in 1817, 1818, 1820, and 1822 were used to retire 240 million rubles of paper currency. The volume of assignats thus declined from 836 million rubles in 1817 to 596 million in 1823, but the value of the paper ruble in terms of silver was raised by merely 2.5 per cent.
Micheal Florinsky "Russia. History and interpretation"

Could you please explain how the bolded mechanism works? So the government borrowed 240 milllion rubles from the people right? But how does this lead to the proceeds? Thanks a lot.
  • The Newt

    Senior Member
    English - US
    It appears to mean that the holders of 240 million rubles in paper currency were paid their value (in silver?, or perhaps some other form?) in order to remove the currency from circulation and thus increase its value relative to silver. But apparently this had only a minor effect. "To retire" here means something like "to pay off."

    "Domestic loans" implies that the funds weren't borrowed from abroad, although who the actual lenders were isn't clear.


    Senior Member
    Canada; English
    When governments float loans, they often issue bonds to their creditors. They are in fact selling these bonds to their creditors and receive from those creditors the purchase price of the bonds (the "gross proceeds" of the bond issue) in paper rubles. After deducting the costs of issuing the bonds, the imperial government eventually ended up net with 240 million paper rubles that it could take out of circulation ("retire"). In exchange, the government incurred a future obligation to pay interest on these bonds and to redeem the bonds at maturity (presumably in paper rubles). Retiring 240 million paper rubles would be expected to increase the relative value of paper to silver rubles (i.e., strengthen / support the paper currency).

    The process of floating the bonds may have been facilitated by financial intermediaries who may have guaranteed to the government the gross proceeds and handled the administrative details in exchange for receiving a commission (and perhaps other privileges, such as for instance an overallotment of bonds).

    Added comment: From a note in the Wikipedia article concerning Dmitry Guryev, it would appear that the retirement of paper currency effected by Guryev was only partially financed by domestic lenders. The rest was financed by foreign bondholders.
    Dmitry Guryev continued the consistent implementation of the items of the "Plan of Finance" after the end of the War of 1812. So, the Ministry of Finance only in 1817 withdrew from circulation a part of paper notes (236 million out of 836 million rubles in circulation), for which internal loans were concluded for 113 million rubles and external loans for 83 million.[6]
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