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Pound sterling

2007 Schools Wikipedia Selection. Related subjects: Currency

   CAPTION: Pound sterling


   £20 All frequently used coins
   £20 All frequently used coins
   ISO 4217 Code GBP
   User(s)       United Kingdom
   Inflation     2.4% (UK, July 2006), 4.9% (Guernsey 2003) 5.3% (Jersey 2003)
                 3.6% (Isle of Man 2003)
   Source        BBC News, 16 August 2006 and The World Factbook, 2004
   ERM
   Since         8 October 1990
   Withdrawn     16 September 1992 ( Black Wednesday)
   Pegged by     FKP, GIP, SHP
   Subunit
   1/100         penny
   Symbol        £
   penny         p
   Nickname      quid
   Plural
   penny         pence
   Coins
   Freq. used    1p, 2p, 5p, 10p, 20p, 50p, £1, £2
   Rarely used   £5
   Banknotes
   Freq. used    £5, £10, £20
   Rarely used   £1 (Channel Islands, Scot. only), £50, £100 (Scot., N. Ire.
                 only)
   Central bank  Bank of England
   Website       www.bankofengland.co.uk
   Printer       English notes:

                        Bank of England

                 Scottish notes:

                        Bank of Scotland
                        Royal Bank of Scotland
                        Clydesdale Bank

                 Northern Irish notes:

                        Northern Bank
                        First Trust Bank
                        Ulster Bank
                        Bank of Ireland

                 Crown dependencies:

                        States of Guernsey
                        States of Jersey
                        Isle of Man Government

   Website       Bank of England
                 Bank of Scotland
                 Royal Bank of Scotland
                 Clydesdale Bank
                 Northern Bank
                 First Trust Bank
                 Ulster Bank
                 Bank of Ireland
   Mint          Royal Mint
   Website       www.royalmint.com

   The pound (symbol: £; ISO code: GBP), divided into 100 pence, is the
   official currency of the United Kingdom and the Crown Dependencies. The
   slang term "quid" is very common in the UK.

   The official full name pound sterling ( plural: pounds sterling) is
   used mainly in formal contexts and also when it is necessary to
   distinguish the currency used within the United Kingdom from others
   that have the same name. The currency name — but not the names of its
   units — is sometimes abbreviated to just "sterling", particularly in
   the wholesale financial markets; so "payment accepted in sterling", but
   never "that costs five sterling". The abbreviations "ster." or "stg."
   are sometimes used. The term British pound, used particularly by the
   U.S. media, is not an official name of the currency.

   The pound was originally the value of one Troy pound of sterling silver
   (hence "pound sterling"). The currency sign is the pound sign,
   originally ₤ with two cross-bars, then later more commonly £ with a
   single cross-bar. The pound sign derives from the black-letter "L",
   from the abbreviation LSD – librae, solidi, denarii – used for the
   pounds, shillings and pence of the original duodecimal currency system.
   Libra was the basic Roman unit of weight, which in turn derived from
   the Latin word for scales or balance. The ISO 4217 currency code is GBP
   (Great Britain pound). Occasionally the abbreviation UKP is seen, but
   this is incorrect. The Crown Dependencies use their own (non-ISO) codes
   when they wish to reflect their distinctiveness. Stocks are often
   traded in pence, so traders may refer to Pence sterling, GBX (sometimes
   GBp), when listing stock prices.

   Following the adoption of the euro, sterling became the oldest currency
   in use, and is the third most traded currency in the world, after the
   US dollar and the euro.

Subdivisions

   Since decimalisation in 1971, the pound has been divided into 100 pence
   (singular "penny"). The symbol for the penny is "p"; hence an amount
   such as 50p (£0.50) is usually pronounced "fifty pee" rather than
   "fifty pence". (This also helped to distinguish between new and old
   pence amounts during the changeover to the decimal system).

   Prior to decimalisation, the pound was divided into twenty shillings,
   with each shilling equal to twelve pence, making a total of 240 pence
   to the pound. The symbol for the shilling was "s" — not from the first
   letter of the word, but rather from the Latin word solidus. The symbol
   for the penny was "d", from the French word denier, which in turn was
   from the Latin word denarius (the solidus and denarius were Roman
   coins). A mixed sum of shillings and pence such as "two shillings and
   six pence" would be written as "2/6" or "2s 6d" and spoken as "two and
   six". Five shillings would be written as "5s" or, more commonly, "5/-".
   At the time of decimalisation, the smallest unit was the penny,
   although smaller value coins had been minted in years past.

   After Decimal Day, the value of the pound remained unchanged, but it
   was now divided into 100 pence rather than 240 pence. Each decimal
   penny was therefore worth 2.4 pre-decimal pence. For the first few
   years after 1971, the decimal penny was commonly referred to as a "new
   penny". Coins for denominations of ½p, 1p, 2p, 5p, 10p and 50p all bore
   the inscription NEW PENCE (or NEW PENNY) until 1982, when the
   inscription changed to HALF PENNY, ONE PENNY, TWO PENCE, FIVE PENCE and
   so on. The old one shilling ("1/-") and two shillings ("2/-", florin)
   coins were equivalent in value to 5p and 10p respectively, and as such
   remained valid within the decimal system until the 5p and 10p coins
   were replaced by smaller versions in the early 1990s. The old sixpence
   also remained in circulation, with a value of 2½p, until withdrawn in
   1980.

Legal tender and regional issues


                                            Pound coin
                                 Obverse                   Reverse
                        Image:1pound2000front.jpg Image:1pound2000back.jpg
                               One-pound coin ( 2000, Welsh design)

   Laws of legal tender are uniquely complex in the UK. In England and
   Wales, banknotes issued by the Bank of England are legal tender,
   meaning that they should be accepted in payment of a debt. In Scotland
   and Northern Ireland, no banknotes are legal tender, and each bank
   which issues banknotes does so in the form of its own promissory notes.
   In the Channel Islands and Isle of Man the local variations on the
   banknotes are legal tender in their respective jurisdiction.

   Scottish, Northern Irish, Channel Islands and Manx notes are sometimes
   rejected by shops when used in England.

   Notes are issued by the Big Four banks in Northern Ireland — the Bank
   of Ireland, the First Trust Bank, the Northern Bank and the Ulster
   Bank. Notes printed by the Bank of Ireland, although in pounds
   sterling, are mistaken in England for the former Irish pound and so
   often rejected. The only plastic banknote in the United Kingdom is
   printed by the Northern Bank. This is the bank's Year 2000
   commemorative £5 banknote, which was printed in Australia.

   Scottish bank notes are issued by The Bank of Scotland, The Royal Bank
   of Scotland and The Clydesdale Bank.

   The UK one pound coin also has many varied designs on the reverse side,
   which differ from year to year with new designs appearing; however, all
   of these are Royal Mint coins and of equivalent legality. The Channel
   Islands (including Alderney) and the Isle of Man issue their own
   coinage.

   The nature of legal tender is even more restricted in Scotland — only
   Royal Mint coins are legal tender in the UK, and even then the use of
   smaller coins is limited (the five and ten pence coins are only legal
   tender to a value of five pounds, for example). However, one and two
   pound coins are legal tender to an indefinite amount. This was not
   always the case, as during World War II the Scottish banknotes were
   made legal tender by the Currency (Defence) Act 1939; this status was
   withdrawn on January 1, 1946.

   To complicate matters further, some notes of the Bank of England were
   until recently legal tender in Scotland and Northern Ireland. This
   status only applied to notes under a value of five pounds, so following
   the withdrawal of the Bank of England one pound note in 1985, no
   circulating notes were covered by this clause.

   All commonly circulating British coins are legal tender throughout the
   UK, as are the rarely seen five pound and twenty-five pence ("crown")
   coins. Several gold coins issued by the Mint are still legal tender,
   though as they have a bullion value far greater than their face value,
   they are never used in circulation and tend to be kept by collectors.

   The British Overseas Territories of Gibraltar, the island of Saint
   Helena, and the Falkland Islands also issue their own currencies, which
   are fixed to the value of sterling.

   The countries using sterling or these currencies tied to sterling are
   known as sterling zone countries. During the late nineteenth to
   mid-twentieth centuries, a large number of British dominions and
   colonies were members of the sterling zone.

          See : Sterling banknotes, Isle of Man pound, Guernsey pound,
          Jersey pound, Gibraltar pound, Falkland Islands pound, Saint
          Helenian pound

History

Before sterling

     * In Anglo-Saxon times, small silver coins known as sceats were used
       in trade: these were derived from Frisian examples, and weighed
       about 20 grains (c. 1.3 g).
     * King Offa of Mercia c. AD 790 introduced a silver penny of 22.5
       grains (c. 1.5 g). Two hundred and forty of these were made from a
       measure of silver known as the Tower pound: apparently it nominally
       weighed 5400 grains (c. 349.9 g).
     * In 1526 the standard was changed to the Troy pound of 5760 grains
       (373.242 g).
     * See also Saxon pound

Sterling

   As a unit of currency, the term pound originates from the value of a
   troy pound of high purity silver known as sterling silver.

   Sterling (with a basic currency unit of the Tealby penny, rather than
   the pound) was introduced as the English currency by King Henry II in
   1158, though the name sterling wasn't acquired until later. The word
   sterling is from the Old French esterlin transformed in stiere in Old
   English (strong, firm, immovable).

   The sterling was originally a name for a silver penny of 1/240 pound.
   Originally a silver penny had the purchasing power of slightly less
   than a modern pound. In modern times the pound has replaced the penny
   as the basic unit of currency as inflation has steadily eroded the
   value of the currency.

   The pound sterling, established in 1560– 61 by Elizabeth I and her
   advisers, foremost among them Sir Thomas Gresham, brought order to the
   financial chaos of Tudor England that had been occasioned by the "Great
   Debasement" of the coinage, which in turn brought on a debilitating
   inflation during the years 1543– 51. By 1551, according to Fernand
   Braudel (Braudel 1984, pp 356ff), the silver content of a penny had
   dropped to one part in three. The coinage had become mere fiduciary
   currency (as modern coins are), and the exchange rate in Antwerp where
   English cloth was marketed to Europe, had deteriorated. All the coin in
   circulation was called in for reminting at the higher standard, and
   paid for at discounted rates.

   The pound sterling maintained its intrinsic value — "a fetish in public
   opinion" Braudel called it — uniquely among European currencies, even
   after the United Kingdom officially adopted the gold standard, until
   after World War I, weathering financial crises in 1621, in 1694– 96,
   when John Locke pamphleteered for the pound sterling as "an invariable
   fundamental unit" and again in 1774 and 1797. Not even the violent
   disorders of the Civil War devalued the pound sterling in European
   money markets. Braudel attributes to the fixed currency, which was
   never devalued over the centuries, England's easy credit, security of
   contracts and rise to financial superiority during the 18th century.
   The pound sterling has been the money of account of the Bank of England
   from its inception in 1694.

The gold standard

   Sterling unofficially moved to the gold standard from silver thanks to
   an overvaluation of gold in England that drew gold from abroad and
   occasioned a steady export of silver coin, in spite of a re-evaluation
   of gold in 1717 by Sir Isaac Newton, Master of the Royal Mint. The de
   facto gold standard continued until its official adoption following the
   end of the Napoleonic Wars, in 1816 (Braudel, p. 361). This lasted
   until the United Kingdom, in common with many other countries,
   abandoned the standard after World War I in 1919. During this period,
   the pound had a gold value of US$4.87.

   Discussions took place following the 1865 International Monetary
   Conference in Paris concerning the possibility of the UK joining the
   Latin Monetary Union, and a Royal Commission on International Coinage
   examined the issues . Although the UK decided against joining, some of
   the arguments make interesting reading in the context of the current
   debate on the adoption of the euro.

   Prior to World War I, the United Kingdom had one of the world's
   strongest economies, holding 40% of the world's overseas investments.
   However, by the end of the war the country owed £850 million, mostly to
   the United States, with interest costing the country some 40% of all
   government spending.

   In an attempt to resume stability, a variation on the gold standard was
   reintroduced in 1925, under which the currency was pegged to the gold
   price at pre-war levels, although people were only able to exchange
   their currency for gold bullion, rather than for coins. This was
   abandoned on September 21, 1931, during the Great Depression, and
   sterling devalued 20%.

   In common with all other world currencies, there is no longer any link
   to precious metals. The U.S. dollar was the last to leave gold, in
   1971. The pound was made fully convertible in 1946 as a condition for
   receiving a U.S. loan of US$3.75 billion in the aftermath of World War
   II.

   Pound sterling was used as the currency of many parts of the British
   Empire. As this became the Commonwealth of Nations, commonwealth
   countries introduced their own currencies such as the Australian pound
   and Irish pound. This evolved into the Sterling Area where those
   currencies were pegged to sterling.

Following the U.S. dollar

   Since leaving gold, there have been several attempts to peg the value
   of the pound to other currencies, initially the U.S. dollar.

   Under continuing economic pressure, and despite months of denials that
   it would do so, on September 19, 1949, the government devalued the
   pound by 30%, from US$4.03 to US$2.80. The move prompted several other
   governments to devalue against the dollar too, including Australia,
   Denmark, Ireland, Egypt, India, Israel, New Zealand, Norway and South
   Africa.

   In the mid- 1960s the pound came under renewed pressure since the
   exchange rate against the dollar was considered too high. In the summer
   of 1966, with the value of the pound falling in the currency markets,
   exchange controls were tightened by the Wilson government. Among the
   measures, tourists were banned from taking more than £50 out of the
   country, until the restriction was lifted in 1970. The pound was
   eventually devalued by 14.3% to US$2.41 in November 1967.

   With the break down of the Bretton Woods system — not least because
   mainly British currency dealers had created a substantial Eurodollar
   market which made the U.S. dollar's gold standard harder for its
   government to maintain — the pound was floated in the early 1970s and
   so subject to a market valuation. The Sterling Area effectively ended
   at this time when the majority of its members also chose to float
   freely against the pound and the dollar.

   A further crisis followed in 1976, when it was apparently leaked that
   the International Monetary Fund (IMF) thought that the pound should be
   set at US$1.50, and as a result the pound fell to $1.57, and the
   government decided it had to borrow £2.3 billion from the IMF. In the
   early 1980s the pound moved above the $2 level as interest rates rose
   in response to the monetarist policy of targeting money supply and a
   high exchange rate was widely blamed for the deep recession of 1981. At
   its lowest, the pound stood at just US$1.05 in February 1985, before
   returning to US$1.77 during the 1990s. As of August, 2006 it had risen
   back to $1.91 and has risen and fallen with the Euro against the US
   dollar, standing as of October 13, 2006 at $1.85.

Decimalisation

Following the German mark

   In 1988, Margaret Thatcher's Chancellor of the Exchequer Nigel Lawson
   decided that the pound should "shadow" the West German Deutsche Mark,
   with the unintended result of a rapid rise in inflation as the economy
   boomed due to inappropriately low interest rates. (For ideological
   reasons, the Conservative Government declined to use alternative
   mechanisms to control the explosion of credit. Former Prime Minister
   Ted Heath referred to Lawson as a "one club golfer".)

Following the European currency unit

   In another change of tack, in 1990 the post Thatcher government decided
   to join the European Exchange Rate Mechanism (ERM), with the pound set
   at DM2.95. However, the country was forced to withdraw from the system
   on Black Wednesday ( September 16, 1992) as the exchange rate became
   unsustainable. Speculator George Soros famously made approximately US$1
   billion from shorting the pound. Despite the collapse, the country's
   monetary authorities have chosen to continue to strengthen the pound's
   relative price. Evidence of this can be found in the reserves section
   of the Pink Book, the official Balance of Payments.

   Black Wednesday saw interest rates jump from 10%, to 12%, and then
   finally to 15% in a futile attempt to stop the pound from falling below
   the ERM limits. The exchange rate fell to DM2.20. Ultimately proponents
   of a lower GBP/DM exchange rate were vindicated as the cheaper pound
   encouraged exports and contributed to the economic prosperity of the
   1990s.

   Bank Negara Malaysia is reported to have suffered losses of more than
   US$4 billion from the pound devaluation.

Following inflation targets

   In 1997, the newly-elected Labour government made a surprising move
   when Gordon Brown handed over day-to-day control of interest rates to
   the Bank of England (a policy that had initially been proposed by the
   Liberal Democrats). The Bank is now responsible for setting its base
   rate of interest so as to keep inflation at exactly 2%. Should
   inflation be more than 1% above or below the target, the governor of
   the Bank of England is required to write a letter to the Chancellor of
   the Exchequer explaining the reasons for this and the measures which
   will be taken to bring inflation back in line with the 2% target.

The euro

   As a member of the European Union, the United Kingdom has the option of
   adopting the euro as its currency. However, the subject remains
   politically controversial, not least since the United Kingdom was
   forced to withdraw from its precursor, the European Exchange Rate
   Mechanism (see above). The pound did not join the Second European
   Exchange Rate Mechanism (ERM II) after the euro was created.

   Denmark and the UK have a unique opt-out from entry to the euro.
   Technically, every other EU nation must eventually sign up; however,
   this can be delayed indefinitely (as in the case of Sweden) by refusing
   to join ERM II.

   The idea of replacing the pound with the euro has been controversial
   with the British public because of its identity as a symbol of British
   nationalism . In Scotland there is additional concern that the adoption
   of the euro would mean the end of regionally distinctive banknotes.

On the value of British money

   In 2006 the House of Commons Library published a (PDF document) which
   included an index of the value of the pound for each year between 1750
   and 2005, where the value in 1974 was indexed at 100. (This was an
   update earlier documents published in 1998 and 2003.)

   Regarding the period 1750–1914 the document states: "Although there was
   considerable year on year fluctuation in price levels prior to 1914
   (reflecting the quality of the harvest, wars, etc.) there was not the
   long-term steady increase in prices associated with the period since
   1945". It goes on to say that "Since 1945 prices have risen in every
   year with an aggregate rise of over 27 times."

   The value of the index in 1750 was 5.1, increasing to a peak of 16.3 in
   1813 before declining very soon after the end of the Napoleonic Wars to
   around 10.0 and remaining in the range 8.5–10.0 at the end of the
   nineteenth century. The index was 9.8 in 1914 and peaked at 25.3 in
   1920, before declining again to 15.8 in 1933 and 1934 — prices were
   only about three times as high as they had been 180 years earlier.

   Inflation had a dramatic effect during and after the Second World War —
   the index was 20.2 in 1940, 33.0 in 1950, 49.1 in 1960, 73.1 in 1970,
   263.7 in 1980, 497.5 in 1990, 671.8 in 2000 and 757.3 in 2005.

Online currency tools

   There are two tools at the MeasuringWorth website that can give an idea
   of the value of the pound through the ages. One tool uses the Retail
   Price Index covering the years 1264-2005 . Another more extensive tool
   covering the years 1830-2005 is available using five comparative
   methods, Retail Price Index, GDP deflator, Average earnings, Per Capita
   GDP, and GDP .

Value against other currencies

   The pound is now freely bought and sold on the foreign exchange markets
   around the world, and its value relative to other currencies therefore
   fluctuates (rising when traders buy pounds, falling when traders sell
   pounds). It has traditionally been among the highest-valued of all base
   currency units in the world.
     * Historical exchange rates (since 1990) are given in Exchange rates
       section of the Economy of the United Kingdom entry.
     * Current wholesale exchange rates between sterling and other
       currencies can be viewed here.

   Current GBP exchange rates
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   Retrieved from " http://en.wikipedia.org/wiki/Pound_sterling"
   This reference article is mainly selected from the English Wikipedia
   with only minor checks and changes (see www.wikipedia.org for details
   of authors and sources) and is available under the GNU Free
   Documentation License. See also our Disclaimer.
