Military Currency


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Military Currency

 

a special kind of paper money, issued as an obligatory means of payment by the military rule of one government (or coalition of governments) on the territory of another country (or group of countries). The economic nature of military currency (also known as occupation currency) does not differ from regular paper money, although it is a special sort of currency resulting from the changes of wartime; it does not have all the functions of paper money but serves only as a means of circulation and payment. Military currency cannot serve as a standard of value, is not suitable for saving, and cannot function as a world currency. It differs from paper money in its specific and inflationary characteristics, the time limitations on its existence and territorial limitations of circulation, absence of any guarantees, and its enforced value in relation to the local currency. It is issued in order to finance military expenses. Military currency devaluates rapidly as a result of the large amount of currency in circulation, the drain on the economic resources of the country in which military currency is circulated, and the high rate of speed with which military currency is issued.

Military currency may be issued as local currency or as currency of the occupying nation. On the territory where military currency is circulated, there can be two currencies simultaneously: the local money that previously circulated and military currency that is officially issued to pay the armed forces and to settle accounts for supplies and services with the local population. The presence of two circulating currencies leads to the financial chaos of occupied countries and to the increase of inflation.

In World War I (1914-18), most of the countries involved in combat used military currency. Thus, Germany issued military currency in the occupied territories of Belgium, France, Rumania, Italy, Poland, and Russia. During the military intervention against the young Soviet republic, military currencies were imposed by the occupying Japanese, Germans, English, and French. Japan issued military currency (from 1937 to 1945) on the occupied territory of China. Large amounts of military currency were issued during World War II (1939-45) and in the years immediately following the war. Hitler’s Germany issued military currency in Poland, Belgium, the Netherlands, Luxembourg, France, Yugoslavia, Greece, the USSR, and other countries. The USA and Great Britain organized the issue of military currency on a wide scale in the first years after the war on the territory of France, Italy, Belgium, the Netherlands, Germany, and others. The territories in which military currencies were issued at this time had a population of over 1 billion people.

During World War II, military currencies were also issued by the Soviet Union. Therefore, the USSR organized an issuance of “bank notes of the Command of the Red Army” in the territories of enemy and liberated countries. However, the military currency issued by the USSR, in view of the collapse of the antipeople’s regimes, was expected not only to cover military expenses by mobilizing corresponding resources on Soviet-occupied territories but also to stabilize the finances of those countries, where it circulated as a substitute for the sharply devalued local currency. Later on, the military currency was replaced by a stable local currency.

REFERENCE

Alekseev, A. M. Voennye finansy kapitalisticheskikh stran, 2nd ed. Moscow, 1952.

A. G. GOGOBERIDZE

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