Why was demonetization in the Soviet Union disastrous?

        Many countries in the world have faced the process of demonetization at different periods. Some succeeded and others ended up in failure. One such failed attempt happened in the erstwhile Soviet Union in 1991.

        Under the leadership of Mikhail Gorbachev, a sudden monetary reform was initiated on January 22nd. At around 9 pm, televisions announced the President’s withdrawal of the 50 and 100 ruble banknotes from circulation. The move was to control black money and counterfeit. However, it created a stir in the public. Some were able to make exchanges for the currencies with them but most of the people couldn’t, because the exchange had many limitations. There were only three days given for exchange, and only 1000 rubles were to be given to a person.

        Although the bid to control malpractices succeeded to an extent, demonetization had a huge negative effect. Within months, consumer prices increased, and people started losing jobs. Within eight months, Gorbachev faced a coup.

        The monetary reform of 1991, as it is popularly called, later led to a redenomination of the ruble in 1998.