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At the middle of the XIX century, Moldavia and Wallachia were ruled by monetary anarchy and coin speculation, which hindered the normal development of economic activities. There was no national currency; over 80 types of foreign currencies were in use on the romanian market, having different values and exchange rates and creating great computation difficulties.
The romanian leu, an imaginary computation unit, was divided into 40 parale/pennies and one penny [named in Romanian language para (pl. parale)] into 3 bani; the subdivisions were represented by turkish coins with close values.
On 22.04.1867, the romanian "Law on establishment of a currency system and the issuance of the national currency" was passed. This law established for the first time the national romanian currency; it was officially named leu, it comprised 100 ban(i) and it was based on a two-metals-system, namely coins were made of silver or gold; its value was represented by 5 grams of silver title 850/1000 or 0,3226 grams of gold title 900/1000. Thus, the new romanian currency was very valuable: 1 kg of gold represented 3100 lei and 1 kg of silver represented 200 lei.
In the beginning, only copper coins were minted, with values of 1 ban, 2 bani, 5 bani, and 10 bani.
The romanian silver and gold coins had the same shape, weight and dimensions like those used in western european countries, which in 1865 formed the Latin Monetary Union; thus, according to the quantity of metal used, the Romanian Leu had the same value like the French Frank, the Swiss Frank, the Belgian Frank, the Italian Lira, etc.
Once the romanian State Mint came into being on 3.03.1870, the anniversary gold coin of 20 lei and the silver coin of 1 leu were displayed publicly. Those were the first coins to bear the name Leu.
The outbreak of the romanian Independence War [in 1877] triggered a cash crisis that was overcome by issuing mortgage bonds, which represented the first romanian banknotes. After 1880, the National Bank of Romania printed also banknotes in value of 20 lei, 100 lei and 1000 lei, assuring the free convertibility. Foreign currencies became currencies with special regime.
Through the new monetary system Romania was connected to the modern european systems and during the four decades [up to 1916] this was the most powerful and stable currency in the Romania's entire economic history of all times and the Leu was one of the most powerful currencies on the european continent.
Like the French Frank and the Swiss Frank, the Romanian Leu had the following exchange rates: 1 US$ = 5,18 Lei; 1 DEM = 1,24 Lei; 1 GB Pound = 25,25 Lei.
Beginning with the outbreak of the WWI [August 1914] and especially after Romania's involvement [August 1916], the romanian currency entered a new evolution stage. It was the beginning of the first great inflation of the modern Leu, out of the three periods (1916-1926, 1936-1947 and 1990-2000), which came in turn up to the end of the XX century.
The inflation between 1916-1926 was the result of high war expenses, important material and humane loss, Romania's external debts, financial obligations imposed to our country by the war winning powers, as well as of the conversion of foreign currencies in provinces joining our country in 1918. Thus, in comparison to year 1913, in 1918 the Leu value was 3,6 times lower and in 1926 it reached the lowest level, namely a depreciation of 42 times. The inflation "ate" the gold value of Leu (1913 - 97,6%), in 1926 representing only 2,4% of the pre-war value.
The monetary reform from 1929 represented the official devaluation of Leu against the pre-war gold Leu. Therefore, the Romanian state contracted a large loan from the foreign banking markets. The official Leu represented only 0,010 grams of gold in comparison to the pre-WWI Leu, which represented 0,3226 grams of gold; one kg monetary gold was established at 111111,11 Lei; this represented a decrease of the Leu value with 32,26 times in comparison to its value in 1913. The period's romanian economic literature called the pre-war Leu as gold Leu and the after-war Leu as paper Leu.
By decrease of its official value, the romanian currency becomes one of the weakest currencies on the continent during the inter-war period. This results also out of the Leu exchange rates against other currencies, established at the reform from 1929 as following: 1 GB Pound = 813,6 Lei; 1 US Dollar = 167,2 Lei; 1 Swiss Frank = 32,26 Lei; 1 DEM = 39,8 lei; 1 Hungarian Pengo = 29,2 Lei.
The monetary reform in 1929 did not change the romanian monetary signs, banknotes and coins. In comparison to those existing up to 1918, the National Bank of Romania also issued banknotes of 500 lei, 1000 lei and 5000 lei.
In the next period, after the global economic crisis between 1929-1933, the reformed Leu begins to slip slowly into another inflationist period, confirmed in 1936 by the official depreciation of 38%; in 1940, after the outbreak of the WWII, the Leu devaluates with 108% in comparison to the reform value from 1929. During the war the inflation increased 4-6 times. But, the most spectacular monetary depreciation -8532 times in comparison to 1938- took place between August 1944 and August 1947. Therefore, the bank issued banknotes of 10000 lei, 100000 lei, 1000000 lei and in July 1947, the highest banknote of 5000000 lei. The inflation also resulted in increase of the exchange rate of USD from 966 lei in November 1941 up to 4830 lei in December 1944, 179676 lei in December 1946, and 6055854 Lei for 1 US$ on 14.08.1947.
Under these conditions, the state started the monetary reform on 15.08.1947; Leu remained the romanian national currency with 100 subdivisions [Bani]; 1 Leu valued 594 mg of fine gold; 1 kg of gold valued 168350 Lei. The currency was still non-convertible and the gold content of Leu has formal character. The change of monetary signs took place at the ratio of 20000 "old" Lei for 1 "new" Leu, and only limited amounts have been accepted. The reform in August 1947 practically reduced -with 40000 times- the used quantity of currency.
The new banknotes had small values: 100 lei, 500 lei and 1000 lei and the coins had values of 5 lei, 2 lei, 1 leu and 50 bani.
An official exchange rate for foreign currencies has been established, according to their official gold quantity, as following: 1 US$ = 150 Lei, 1 GB Pound = 605 Lei, 1 Swiss Frank = 35 Lei, 1 Hungarian Florin = 12,90 Lei, etc.
The last monetary reform of the XX century took place in January 1952; prices and incomes decreased 20 times; the bank issued new banknotes and coins with values 20 times smaller then the previous ones; all the presented amounts changed, but with different ratios, between 50 and 400 "old" Lei for 1 "new" Leu; bank deposits had an advantage; the gold content of Leu increased [from 5,94 mg to 79,35 mg; in 1954 it increased again up to 148,11 mg] and the official exchange rates of foreign currencies changes as well, etc.
The new monetary signs were represented by divisional metallic coins: 1 ban, 3 Bani, 5 Bani, 10 Bani and 25 Bani, and banknotes of 1 Lei, 3 Lei, 5 Lei, 10 Lei, 25 Lei and 100 Lei. Due to the monetary and economic stability these signs kept their value for almost half a century [1952-1990]. During the entire period, the exchange rate for 1 US$ varied between 12-18 Lei.
For more info check also Octavian Iliescu's book [English version!]
"THE HISTORY OF COINS IN ROMANIA (cca.1500 BC - 2000 AD)", ed. Enciclopedica, Bucuresti, 2002.
As of 1.07.2005, Romania's currency has been redenominated so that 10000 old lei are exchanged for 1 new leu. The old lei shall be legal tender until 31.12.2006.
For more info check Redenomination of domestic currency
Note: in this comment is not used the american usage for denominating fractions as 0.9 [for 9/10] but the normal 0,9 [for 9/10].