The term “denomination” can often be heard in a news release or newspaper. His mention is associated with the economic and political activities of the state. Not everyone knows exactly what this means. Someone has only a distant concept of this abstruse word. Let's see in practice: what does the word "denomination" mean?
Economic meaning
Denomination is literally translated as renaming. This is the process of changing the nominal value of banknotes in the prescribed ratio. At the same time, the national currency itself does not change: the country's cash reserve neither decreases nor increases. Only its characteristic in material terms changes. This phenomenon is called "denomination." What are these simple words?
Judging even by the semantic coloring of the concept, this is a change in face value. This process is necessary for the state economy in order to increase cash flow - reforms are carried out in order to stabilize the financial system and improve the situation in the country. And often the process is preceded by hyperinflation.
Suppose a denomination has occurred. What is it in simple words for an ordinary resident? From the foregoing, it is clear that this is a change in the nominal value of funds, and as a result, expression through the monetary equivalent of all material values around.
Denomination can be carried out gradually over several years, when old banknotes turn around at the same time as new ones, and then are gradually withdrawn. This is the smoothest transition for both the country and the population. The process can become fast, so that not everyone has time to exchange the old for the new.
Denomination in the history of Russia
In the post-war period, the card system was canceled. Treasury bills were exchanged for new banknotes. The ratio of old to new banknotes was established 10: 1. The deadlines for withdrawing funds from the turnover were 2 weeks. Coins were not exchanged, and their value increased 10 times, there was a denomination.
What are these simple words for the inhabitants of that time? This means that all bills have lost one zero. A citizen handed over a banknote of 10 rubles, and in return received 1 ruble. At the same time, he did not lose his savings, because at the same time the sizes of wages, social benefits, and prices of goods were recounted.
In 1961, banknotes again changed in the ratio of 10: 1, the same events occurred as when the card system was canceled. The coins remained intact again. The following changes in the country occurred only after 37 years, in 1998. Then all the money was handed over to the bank and exchanged 1: 1000. Citizens were given time to carry out the process until 2003.
The last ruble denomination has occurred to date. What are these simple words for citizens of the turn of the 21st century? Now, on the contrary, three zeros have added to the values of notes. Everyone who handed over 1 ruble received a whole 1000.
Which countries except Russia have already survived the denomination?
In the course of the historical development of states, changes in the economy certainly occurred. Many countries of the world, like Russia, survived the process of denomination of funds. After World War II, the process affected Poland, France and Greece. A little later, changes overtook Brazil, Turkey, Venezuela. Germany handed over a trillion monetary units to one in 1923, which entered the history of the largest denominations. This was repeated only in 2009 in Zimbabwe.
After the collapse of the USSR, almost every country carried out monetary reforms.This year, one can personally observe the process of denomination in Belarus. The country is undergoing changes for the third time after leaving the Soviet space.
Belarusian denomination, what is it in simple words? Starting July 1, 2016, ten thousand Belarusian rubles will be equal to one. The smallest denomination - 100 rubles - will turn into 1 penny.
Conditions
Denomination cannot be carried out on the personal initiative of the government without confirmation of its necessity. Changes should be made in cases where the money supply has increased so much that it is completely uncomfortable to dispose of.
The state is not interested in issuing a lot of money, which has to be constantly updated. This usually happens after an economic crisis, accompanied, as we have already mentioned, by hyperinflation. However, denomination should be carried out only when the situation in the country stabilizes. The estimated inflation rate for the onset of action is 12%.
Failure to comply with these conditions will lead to a deterioration in the economic situation of the state. There will be a risk of rising inflation and a repeated depreciation of money. A timely completed process, on the contrary, helps to strengthen the national currency and stability.
The negative sides of denomination
As you can see, denomination in simple words is a decrease or increase in the face value of money, accompanied by the withdrawal of banknotes and the issuance of new ones. But most often it is precisely the reduction in the value of one bill, that is, the "cutting off of zeros." In the people, denomination is perceived as bad news. After all, it brings with it a convenient opportunity to raise market prices. Is this really so? Yes, but this feature is mainly characteristic of imported goods.
Foreign currency as a whole becomes more expensive, which means that everything that is measured in it increases its value in national money. For example, with a denomination, the obligations of each citizen on a loan in a bank in foreign currency and the price of food brought from abroad will increase.
We must not forget about the inconvenience that the population experiences when introducing new denominations. The difficulties of exchange and storage, the possible loss of a certain amount of savings negatively affect the lives of ordinary people.
Should we expect a denomination in Russia in 2016?
At the end of 2014, the country was seized by the economic crisis, the national currency began to depreciate sharply. Tracing the connection between the concepts of “crisis” and “denomination,” many spoke about this possible event.
According to experts, expectations are in vain. For the current situation in the Russian economy, this is not the best option for trying to stabilize the situation. In addition, according to experts' forecasts, inflation is expected to fall almost twice. The circulation of funds does not in any way complicate their circulation, which also indicates the absence of reasons to denominate the Russian ruble.
Denomination is an inevitable and twofold process. On the one hand, in skilled hands, cutting off zeros will help strengthen the state’s national currency. On the other hand, it can finish off an already shaken economic situation. Having learned the term “denomination” —that, in simple words, reducing the face value of money — each resident of his country can analyze the situation and assess the likelihood of this process.
