Monday 15 December 2008

insufficient funds....

There is, it seems, some debate about the origin of the term "Pound" as used to describe the currency used by Great Britain. Some people think that it dates back to Anglo-Saxon times, when a silver coin called a sterling was produced by King Offa of Mercia, and 240 of these coins weighed exactly one pound. Other people reckon that it's a Norman term dating to around 1300 and used to refer to a small silver penny. What seems to be undisputed is the fact that the Pound Sterling is the world's oldest currency still in use today, and this fact appears to be the source of great pride for many Britons. Well, you can understand it, can't you? Your currency is an extension of your nationality; it represents you. When the pound is strong, we feel a sense of great pride. We may have an industrial base the size of a small vole, and 85% of all manufactured goods in this country are probably made elsewhere, but one unit of our currency is likely worth about ten of yours. Ha! Take that Johnny Foreigner. One-Nil to us. We like to go abroad and to feel that we're getting a good deal because the Pound is strong. In November this year, the Pound hit a 26 year high at a little over $2.11 to the £. We rejoiced. We marvelled at how much more bang we would have for our buck. We care not a jot that this same exchange rate makes Britain an unfeasibly expensive destination for many tourists and that our industry is seriously disadvantaged by these prices. Why should we care? We get cheaper jeans and cameras and stuff.

Of course, now the economy has collapsed, the boot is on the other foot: the Pound is now worth something like 1.1 Euros - which means that the exchange rate being offered to travellers (after commission and so on) saw a British Pound as actually being worth less than a Euro. Cue national despair. Oh, what is to become of us? Our currency is baseless and our sense of national self-worth is disappearing down the toilet. There's even been some crazy talk that we may find ourselves forced to actually join the Euro zone, which would mean throwing away thousands and thousands of years of our history and cultural heritage. Worse still: it would mean throwing our lot in with the French.

Is it just me, or does anyone else not actually give a damn what our national currency is? I don't derive any great sense of inner wellbeing from our coinage, and I certainly don't feel that my self-worth is bound up in having a picture of the Queen's head on my banknotes. I don't have strong feelings either way about how the Pound is performing against other national currencies. These things tend to fluctuate, and although it may notionally be more expensive now to buy a drink in New York than it was in November, it also costs me more to have a drink in London than it does in Nottingham, and we use the same tender.

What's the big deal?

As a historian, I can sort of understand the attraction of the heritage behind the Pound.... but then, that's really only a name, isn't it? Surely there's no one who seriously believes that the Pound we use now has any more than a notional link with the one used in Anglo-Saxon times? The name has remained with us, but over the years, the currency has been systematically debased, changed many times (including the move away from coins that actually contained precious metals and into paper promissory notes), locked into the gold standard, tied to a fixed exchange rate with the dollar, released from the gold standard, decimalised, tracked the deutsche mark, locked into the ERM, kicked out of the ERM and now floating freely against other currencies in the world. Would it really make all that much difference if we gave it all up and went with the Euro? Would the world really be that much worse a place if we woke up to find the Pound gone? Would our morale as a nation plummet?

No, it wouldn't. Of course it wouldn't. As soon as the Euro became legal tender in this country, you can bet that there would be a rush to get hold of it, and the Pound would become a thing of the past even before it was formally phased out. That's what happened here with decimalisation in 1971, and that's what happened in the other countries in the Euro Zone, so why would we think we would be any different now? Would we object to the throwing away of thousands of years of history and make a principled stand? No. Why would you bother?

So why make such a fuss about it now? The Pound Sterling is a symbol of the British currency. The value of the Pound is determined by the perceived strength or weakness of our economy relative to others. That is all. It is weak now because our economy is relatively weak. It does not say anything much else about us as a nation. Worry about the state of the economy, if you like, but the state of the currency? Nah. You may be valued by it, and your net worth may be measured in it, but why would you want to derive your sense of self-worth from the symbol of a currency?

That said, I'm not an economist, so perhaps I'm missing something?


  1. it's also about our ability to set our own interest rates which we couldnt do independently if we were in the Eurozone.

    Spain (for example) are struggling badly at the moment and they have one hand tied behind their back as they cant use some of the necessary macroeconomic policy tools available to us as they have to do what the ECB decides on behalf of all the Euro countries.

    I would say that's a more important an issue than what the money's called....

  2. ...ah, I was hoping someone qualified would chip in.

    I don't claim to know much about money, never mind the workings of the economy, but I'm genuinely interested in why the average 'man in the street' is apparently so attached to the pound and so hostile to the idea of the Euro. There may be lots of valid economic reasons for keeping a separate currency, but for the majority of people, their attachment to the currency has not very much to do with any of them. It seems to be about national identity and so on. We celebrate a strong pound even though the same strong pound makes things tough for our exporters.
    The irony for me being that we've changed our currency around so much anyway, it seems a daft thing to get excited about.

  3. yeah, arguments like LB's I can respect, but that knee-jerk "national identity" bollocks, I'm right with you ST. It's not the same friggin currency as even in the 60's anyway is it? I mean, it was decimalised and totally changed its value, just kept the same name... surely? supposing we adopted the euro but minted our own notes with the word "pound" on them somewhere lol that'd keep the Daily Mail readers happy :D