Sterling Pound Succeeded In War Also Defeated In War

The British pound is considered to be the world's oldest living currency.

The British pound has its origins in continental Europe under the Roman era. Its name derives from the Latin word "poundus", meaning "weight".

The £ symbol comes from an ornate L in Libra.

The pound was a currency unit as early as 775AD in Anglo-Saxon England, equivalent to 1 pound weight of silver. This was a vast fortune in the 8th century.

Athelstan, the first King of England, adopted sterling as the first national currency. He set up mints around the country to supply the growing nation.

One pound could buy you 15 cows.

The war made the pound dominate the world

There's no doubt that raising an army is an expensive business. In an era when troops had to be fed and armed, one reason for changes in the pound has been the need to fund military campaigns abroad. 

The Bank of England was founded by Royal Charter in 1694, following the Glorious Revolution of 1688.  William III of Orange and Queen Mary had ascended to the throne following the revolution. Queen Mary died in 1694, the year of the bank's founding, but her husband's expensive wars left the country's finances in a mess. The public purse was more than stretched and needed to be financed. 

In just 12 days, the full £1.2m subscription was raised, and a half was promised to be used to rebuild the navy and start to reassert Britain's Empire protected by a recovered naval power. Charles Montagu had only become a member of parliament in 1691, and as a new Chancellor, his importance in the success of the initial subscription was significant and impressive in its achievement. Imagine a major bank being founded today on the back of a newly appointed M.P., in less than a fortnight, perhaps not.

Sealing of the Bank of England Royal Charter 1694

Photo: Intriguing History

1717, the United Kingdom defined sterling's value in terms of gold rather than silver for the first time.

Sir Isaac Newton, as Master of the Mint, set the gold price of £4.25 per fine ounce that lasted two hundred years, except during the Napoleonic wars when gold cash payments were suspended.

A short history of the Pound Sterling

Photo: team4 solutions

Pound embarked on a path  with a recession

1914

The United Kingdom suspended the gold standard in 1914 so it could support its war efforts.

The country borrowed heavily and suffered high inflation during World War I. It was forced to devalue the pound considerably towards the end of the war.

£1 = $4.70.

1925

Winston Churchill returned sterling to the gold standard in 1925 at the pre-war rate of £4.86 to the dollar.

£1  =  $4.86.

1931

Sterling came off the gold standard, and the pound promptly dropped considerably.

£1  =  $3.69.

1934

The United States devalued the dollar in 1933, and the pound rose to its highest ever value.

£1  =  $5.

1940

A significant drop in the value of the pound with the outbreak of WWII led the British government to peg the value of the pound to the dollar.

£1  =  $4.03.

1967

On Saturday, 18 November 1967, sterling was devalued by 14% from $2.80 to $2.40. 

Appearing on television the following day, the Prime Minister's assurance, that 'the pound here in Britain, in your pocket or purse or in your bank' was worth no less than before, was seen as a damaging blunder.

£1  =  $2.40.

The devaluation of 1967 is often interpreted as a failure of economic policy, and it has become emblematic of the inability of the Labour Party to cope effectively with the reduction of sterling's international role.

In the end, the British pound became a subsidiary currency of the U.S. dollar in 1967.

The war put an end to the supremacy of the British pound.

Photo: World Economic Forum

How do banknotes become "hard"?

Britain's national power declined as early as the end of the 19th century and the 20th century. Its economic and military strength has fallen behind that of the United States. In the end, the U.S. dollar replaced the British pound as a hegemonic currency.

Indeed, the currency is backed by the power of country's economy.

The British pound and the U.S. dollar have become hegemonic currencies due to their economic, political, military, diplomatic and cultural strength.