The proceedes were used to retire....
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.
Top answer
A loan is borrowed money. Ivan (the government) borrows 100 rubles from Vladimir (a citizen). Ivan now has the proceeds of that loan in his hand, that is, 100 rubles of paper money.
- A loan is borrowed money.
- Ivan (the government) borrows 100 rubles from Vladimir (a citizen).
- Ivan now has the proceeds of that loan in his hand, that is, 100 rubles of paper money.
- Ivan incinerates the paper money.
- Ivan has to pay Vladimir back, plus interest, but that action has taken paper money worth 100 rubles out of circulation.
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A loan is borrowed money.
Ivan (the government) borrows 100 rubles from Vladimir (a citizen).
Ivan now has the proceeds of that loan in his hand, that is, 100 rubles of paper money. Ivan incinerates the paper money.
Ivan has to pay Vladimir back, plus interest, but that action has taken paper money worth 100 rubles out of circulation.
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