Friday, August 31, 2012

Blog #1 Soviet Bonds

In 1982 Leonid Brezhnev instituted a national Soviet bond lottery program, in which, citizens were encouraged to purchase 25, 50, and 100 ruble 20-year bonds. The incentive was the chance to win a new Volga sedan, and a pay out of as much as 10,000 rubles ( $309.80 in the current exchange market). $25 trillion in securities were sold in one year of the bond distribution, estimated to be $785 billion in U.S. dollars.

This entire program was established to fund a Soviet shadow economy to compete with the U.S. in times of war and economic expansion, but with the fall of the Soviet Union in 1991 these bonds were forgotten. Recently Russian citizens have taken the Russian Federation to The European Court of Human Rights in Strasbourg, France to collect their due funds. The Court ruled that the Russian government would have to honor the bonds to the current Russian state, but voided the bonds in satellite states of the former Soviet Union. Despite this fact, the $25 trillion rubles owed to Russian citizens is half of the Federations yearly fiscal output puts the economy in the red. Vladimir Putin, who is serving his third term as President, has earmarked $50 billion rubles a year to slowly begin paying out the bond dues; the majority of bond holders lived through the Second World War and are on the back end of their lives. The Russian Government is hoping that, with this generation dying out quickly, only the $6,000 ruble funeral fee will have to be paid.

With word of the bonds being valid, a recent trade and sale of these bonds has increased. Online traders, Ebay, and independent sellers are attempting to move the bonds at fractions of the face value. The Russian Government has issued a statement that without the appropriate bond certificate authorization these bonds to do not have to be paid out.


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