The History of Money: Georgia

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From the Archives : Originally published February 03rd, 2009
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Category : History of Gold

24hGold - The History of Money...The present-day nation of Georgia, situated in the south-eastern corner of Europe, covers an area of 69,700 sq km - a similar size to the Republic of Ireland.

The country has a population of 4.7 million (July 2006 est.) comprised of 83.8% Georgian, 6.5% Azeri, 5.7% Armenian and 1.5% Russian. Orthodox Christianity makes up 84% of the population. Another ten percent of the people follow the Muslim faith.

Georgia's economy has traditionally revolved around Black Sea tourism. The country's mineral resources; coal, copper and manganese have provided the base for a small mining sector. There is also some machinery production and other light industry and the cultivation of citrus fruits, hazel nuts, tea and grapes.

Although it possesses sizeable hydropower capacity, Georgia nearly imports all of its supplies of natural gas and oil products.

The Baku-Tbilisi-Ceylon ("BTC") pipeline bringing oil from the Azeri-Chirag-Guneshli oil field in the Caspian Sea to the Mediterranean Sea flows through Georgia. It is the second largest pipeline in the world after the Druzhba pipeline.


Georgia developed from the ancient kingdoms of Iberia and Colchis (the destination of Jason and the Argonauts for the legendary golden fleece).1 The region fell under control of numerous empires including the Romans, Byzantines, Persians, Arabs, Seljuk Turks, Mongols and Timurids.

The western Georgian Kingdom of Iberia became one of the first states in the world to adopt Christianity as a state religion under King Mirian II in the early 4th century A.D. Before this, Mithraism and Zoroastrianism were commonly practiced.

The height of Georgian power and influence began in the early 12th century and held until the Mongol invasions of the early 13th century.2 By the middle of the 15th century, most of Georgia's former neighbouring states had disappeared. The fall of Constantinople to the Ottoman Turks in 1453 sealed the Black Sea and greatly restricted communications with much of Europe.

From the 16th century on, the lands of Georgia remained in flux between the neighbouring empires of Persia and the Ottomans. In 1801, Russia absorbed the Georgian lands and through numerous wars from 1803 to 1878 against both the Ottomans and Persians, annexed several areas including Batumi, Akhaltsikhe, Poti, and Abkhazia.

After the Russian Empire collapsed into civil war, Armenia, Georgia and Azerbaijan united to form the Transcaucasian Commisariat on November 14, 1917 and later the Transcaucasian Federal Republic in April 22, 1918.

The new Republic issued paper money, the Transcaucasian ruble, equivalent to the Russian ruble at par. Denominations were 1, 3, 5, 10, 50, 100 and 250 rubles. The notes bore Russian text on the obverse, with Armenian, Azerbaijani and Georgian texts on the reverses.

The republic was short-lived as internal tensions and external pressure from the German and Ottoman empires led to the Democratic Republic of Georgia declaring its independence on May 26, 1918. Georgia placed itself under German protection and ceded several territories to the Ottoman empire.3

Declaration of independence by the Georgian parliament in 1918.

Georgia issued its first paper banknotes, the maneti which were initially at par with the Transcaucasian ruble.4 This currency continued in circulation until 1923 when they were replaced with the second issue of Soviet Transcaucasian rubles.

Georgia Under Soviet Rule

Soviets troops moved into the region in 1921 and Georgia was made part of the Transcaucasian Socialist Federative Soviet Republic (TSFSR) along with neighbouring Armenia and Azerbaijan. The Bolsheviks, having control of the Russian Central bank, created one of the worst hyperinflations in history.

In 1923 and 1924, the Transcaucasian Soviet Federal Socialist Republic (part of the USSR) issued notes of denominations of up to 10 billion rubles.

The 250 million Transcaucasian ruble banknote of 1924.

In 1924, it took five billion rubles to buy what one 1914 ruble would have bought. In 1922, the Soviets introduced the Soviet Chervonetz which was equal to 50 million pre-Soviet Russian rubles. Amidst the social unrest of economic turmoil of a collapsing currency, approximately 50,000 Georgians were executed between 1921-1924.

Harsh Soviet rule continued under Georgian-born Ioseb Jughashvili, (better known by his nom de guerre Josef Stalin) who eventually became the authoritarian ruler of the USSR after Lenin's death in 1924. An estimated 150,000 people were persecution as part of Stalin's Great Purge during the late 1930's. Many more were deported to Gulag labour camps in Siberia along with millions of Poles, Ukrainians and other ethnic minorities.

In 1936, the TFSSR was dissolved and Georgia became the Georgian Soviet Socialist Republic. Georgia became one of the more affluent republics of the USSR.

Georgian Independence

The country once again declared its independence as a republic on April 6, 1991 during the breakup of the USSR. Like several other former Soviet States, Georgia experienced hyperinflation.

The Georgian kupon (GEK) was introduced in April 1993 and initially circulated at par with the Russian ruble. The initial amount of kupons in circulation (M0) was 31.7 billion. Following the July 1993 demonetization of pre-1993 rubles in Russia, the Georgian authorities declared the kupon to be the sole legal tender of the country in August 1993.

By the end of September, a mere six months later, the currency in circulation had exploded 153-fold to 4.85 trillion kupons. The unofficial exchange rate for the kupon peaked at five million to one U.S. dollar in late September 1994.

The One Million Georgian Kupon banknote from 1994 was the largest denominated banknote for the newly formed nation of Georgia.

The following chart using data from The Georgian Hyperinflation and Stabilization working paper (Wang, 1999) details the months of official hyperinflation.5


CPI Change (%)

M0 (Billions GEK)

M0 Change (%)





















































Avg CPI Change


Introduction of the Georgian Lari

The new Georgian currency, the lari (GEL) was introduced on September 25, 1995 at an exchange rate of one million kupon to one lari. The lari became the sole legal tender effective October 2, 1995.

As of November 2008, the official Currency in Circulation figure released by the National Bank of Georgia rests at 1.25 billion lari representing a 13-fold increase over the 95 million lari which replaced the kupon in 1995.

Thus far, in foreign exchange markets, the Georgian lari has fared much better than the currency it replaced. Today, it trades at a similar exchange rate, albeit 25 percent lower, to the 1.25 lari to the US dollar rate it was introduced at over thirteen years ago.


1 Some have hypothesized that the legend of the Golden Fleece was based on a local practice of placing a lamb's fleece at the bottom of a stream to entrap gold dust being washed down from upstream. This practice was still in use in recent times, particularly in the Svaneti region of Georgia.

2 During the reign of Queen Tamara, nearly the whole of Transcaucasia was under Georgian rule.

3 Armed clashes with neighbouring Armenia over disputed territories erupted on December 5, 1918. Both countries agreed to a British-brokered ceasefire on December 31, 1918.

4 Both Armenia and Azerbaijan also issued their own currencies - the Armenian ruble and Azerbaijani manat. These currencies were also introduced at par with the Russian ruble.

5 Cagan's classic definition for hyperinflation published in The Monetary Dynamics of Hyperinflation (1956) states that hyperinflation begins in the first month where price inflation exceeds 50 percent and ends in the month in which price inflation last exceeds 50 percent and is followed by at least twelve months of less than 50 percent price inflation.


Cagan, P. (1956), "The Monetary Dynamics of Hyperinflation", in Studies in the Quantity Theory of Money, edited by Milton Friedman, (Chicago: University of Chicago Press)

Wang, J-Y (1999) "The Georgian Hyperinflation and Stabilization", IMF Working Paper WP/99/65 May

Mike Hewitt


Mike Hewitt is the editor of, a website pertaining to commentary on the instability of the global fiat monetary system and investment strategies on mining companies.

Disclaimer: The opinions expressed above are not intended to be taken as investment advice. It is to be taken as opinion only and I encourage you to complete your own due diligence when making an investment decision.

© 2007 DollarDaze


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