Pound sterling

The pound sterling (pound sterling in English, monetary symbol: £) is the currency of the United Kingdom as well as the Crown Dependencies and some British territories overseas. In its other colonial territories, different currencies are used but fixed to sterling: the Gibraltarian pound, the Malvinense pound and the Saint Helena pound. Its currency symbol is £ and comes from the Latin pound, which referred to the unit of mass. A pound is divided into one hundred pence.

The full official name, pound sterling (plural, pounds sterling), is used mostly in formal contexts and also when it is necessary to distinguish the currency used in the United Kingdom from those used in other countries and that they have the same name. The name of the currency—but not the names of its units—is sometimes abbreviated to just "sterling", particularly in the wholesale financial markets; for example "payment accepted in sterling", but not "that costs five sterling". The abbreviations "ster." or "stg." They are used occasionally. The term British pound is commonly used in less formal situations, although it is not an official name for the currency. Sterling is an Old English coin made of sterling silver, an alloy of 92.5% silver and 7.5% copper and/or other metals, and with a mass of 1.555 grams or 1/240 of a troy pound..

The pound was originally the value of the weight of a Pound Tower of sterling silver (hence the name "sterling pound"). The currency symbol is the pound symbol, originally ₤ with two crossed bars, later £ with a single bar was more common. The symbol is derived from the letter "L", from the abbreviation LSD —librae, solidi, denarii— used for the pounds, shillings, and pence of the original duodecimal monetary system. Pound was the basic Roman unit of weight, which was derived from the Latin for "balance". The ISO 4217 code is GBP (in English Great Britain pound, Pound of Great Britain). Occasionally the abbreviation UKP is seen, but this is incorrect. Crown Dependencies use their own codes (not ISO) when they wish to reflect their distinction. Resources are generally exchanged for pence, so traders may refer to the sterling penny, GBX (sometimes BGp), when listing their prices.

After the adoption of the euro by several countries, the pound became the world's oldest currency still in use, and currently has the third largest share of reserve currencies globally, after the US dollar and the euro. The pound sterling is the fourth most traded currency on the international exchange market behind the dollar, the euro and the Japanese yen.

Coins with the same etymological origin

The ancient Italian coin lira has the same etymological origin as the pound. The lira is also the currency of other countries such as Lebanon or Turkey where the currency is the pound or the Lebanese lira (it says in Arabic "lira" and in French "livre").

Subdivisions

The label of the hat of El Sombrerero marks a price 10/6 in the predecimal system (10 shillings plus 6 pence).

Before decimalisation, the pound was divided into 20 shillings (shilling), and the shilling into 12 pence (penny, plural pence >), making a total of 240 pence in a pound. The symbol for the shilling was "s" —not by the first letter of the English word, but by the Latin word solidus. The symbol for the penny was "d", from the French word denier, which originated from the Latin word denary (the Byzantine solid and denarius were ancient roman coins). A mixed sum of shillings and pence such as "two shillings and sixpence" would be written as "2/6" or "2s 6d", and you would say "two and six". Five shillings would be written as "5s" or, more frequently, "5/-". At the time of decimalization, the smallest unit was the penny, although coins of lesser value had been minted in the past.

Since decimalisation in 1971, the pound has been divided into 100 pence. The symbol for the penny is "p"; an amount like 50p (£0.50) is normally pronounced as "fifty pee" instead of "fifty pence" (this to help distinguish between new and old pennies when switching from one system to another).

After Decimal Day (February 15, 1971), the value of the pound remained intact, but it was now divided into 100 new pence instead of 240 old ones. Each decimal penny had the value of 2.4 of the pre-decimal pennies. A few years after decimalization, the decimal penny was commonly called the "new penny." Coins in the ½p, 1p, 2p, 5p, 10p and 50p denominations all bore the inscription "New Penny" until 1982, when the inscription changed to halfpenny, onepenny, twopence, fivepence, and so on. The old one shilling ("1/-") and two shilling ("2/-", guilder) coins were equivalent to the 5p and 10p coins respectively, and continued as valid in the decimal system until the 5p and 10p coins were replaced by smaller versions in 1990 and 1992 respectively, while the old versions were withdrawn from circulation in 1991 and 1993. The old sixpence also remained in circulation., worth 2½ new pence, before being withdrawn from circulation in 1980.

Legal tender and regional expeditions

Legal tender laws in the UK are particularly complex: according to the Royal Mint, legal tender means "a debtor cannot be successfully sued for the suspension of payment if you pay in court with legal tender. This does not mean that any ordinary transaction has to be made with the legal tender or only with the amount denominated by the legislation. Both parties are free to agree on any form of payment, be it legal tender or any other form, according to their wishes. To comply with the strict rules that govern legal tender, it is necessary, for example, to offer the exact amount due because no change can be claimed".^{[citation required]}

In England and Wales, banknotes issued by the Bank of England are legal tender, which means they can be accepted as payment of a debt; they do not have to be accepted, but the debtor would have a good legal defense against a lawsuit for suspension of payment of the debt. In Scotland and Northern Ireland, no banknote is legal tender, and each bank that issues banknotes does so in the form of its own bills of exchange. In the Channel Islands and the Isle of Man, local variations on banknotes are legal tender in their respective jurisdictions.

Scottish, Northern Irish, Channel Island and Manx banknotes are sometimes refused in shops when used in England. British shopkeepers can refuse any form of payment, even if it is legal tender in that jurisdiction, because no debt exists when the offer of payment is made. When paying a restaurant bill or other debt, legal tender laws do apply, but any reasonable method of paying the debt (such as credit card or check) is usually acceptable.

Banknotes are issued by the four major banks in Northern Ireland — the Bank of Ireland, the First Trust Bank, the Northern Bank (North Bank) and the Ulster Bank (Bank of Ulster). The banknotes printed at the Bank of Ireland, although they are in sterling, are confused in England with the old Irish pound and are frequently rejected. The only plastic banknote in the UK is printed by the Northern Bank. It is the £5 commemorative 2000 note, which was printed in Australia.

Scottish banknotes are issued by the Bank of Scotland, the Royal Bank of Scotland and the Clydesdale Bank (Clydesdale Bank), but (as in Northern Ireland) they are not tender legal. Only Royal Mint coins are legal tender in Scotland, and only the one and two pound coins are legal tender for an indefinite amount. This was not always the case, as during World War II Scottish banknotes were made legal tender in 1939; this status was reversed on 1 January 1946. Some Bank of England notes were legal tender in Scotland and Northern Ireland; however, this status only applied to notes under five pounds, so after the Bank of England withdrew the one pound note from circulation in 1985, no notes in circulation are affected by this clause.

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

All circulating British coins are legal tender throughout the UK, in most cases with a usage limit per transaction, such as the £5 commemorative coin and the 25 pence ("crown&) #34;) that are rarely seen in circulation. Many gold coins issued by the Royal Mint remain legal tender, although since they have a much higher metallic value than their assigned value, they are never used in circulation and tend to be kept by collectors.

The British Overseas Territories of Gibraltar, Saint Helena and their associated dependencies, as well as the Falkland Islands, also issue their own currencies, which are pegged to the pound.

Countries that use the pound or these currencies linked to the pound are known as the sterling zone countries. During the late 19th century and into the mid-20th century, a large number of British Dominions and colonies were members of the sterling zone.

British law establishes that legal tender coins minted to circulate in the country must have the portrait of the monarch who is on the throne. Thus, different official portraits of Queen Elizabeth II can be seen on British coins over time. Likewise, after the death of the monarch in 2022, it was necessary for the Royal Mint of the United Kingdom to start working on the new designs with the effigy of the new king, Carlos III. However, this does not mean that the coins with the portrait of the previous queen cease to have legal tender, as they are perfectly circulating. Similarly, many Commonwealth and other states that have the UK monarch as head of state will also have to change the design of their coins and notes. This is the case of countries like Canada, Australia, New Zealand and Belize, among many others.

Polymer banknotes

The £5 polymer note was issued in 2000 by Northern Bank (now Danske Bank) and was the only polymer note in circulation until 2016. The Bank of England began issuing £5 polymer notes 5 in September 2016 and withdrew the £5 paper money notes from circulation on 5 May 2016. The polymer £10 note was issued on 14 September 2017 and the paper money note was withdrawn on March 1, 2018. The £20 note came into circulation in February 2020 and the £50 note in June 2021. The £20 and £50 paper notes will be withdrawn on 1 October 2022.

History

Before the British pound

In Anglo-Saxon times, small silver coins known as sceattas were used in trade: these were derived from Frisian examples, and weighed about 20 grains (1.3 g).

King Offa of Mercia (790) introduced a silver penny of 22.5 grains (1.5 grams). Two hundred and forty of these were made from a measure of silver known as the Tower pound: this apparently weighed 5,400 grains (349.9 g).

In 1526 the standard was changed to the Troy pound of 5,760 grains (373.242 g).

The pound sterling

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

Sterling (with a base unit being the Tealby penny, rather than the pound) was introduced as the English currency by King Henry II in 1158, although the name sterling was not used. used till later. The word sterling is from Old French sterling transformed to stiere in Old English (strong, firm, immovable).

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

The pound sterling, established in 1560-1561 by Elizabeth I and her advisers, chiefly Sir Thomas Gresham, which brought order to the financial chaos of Tudor England that had been caused by the "Great Debasement" of the coin, which in turn caused debilitating inflation during the years 1543 to 1551. By 1551, according to Fernand Braudel, the silver content of a penny had been reduced to one-third of the total. The currencies had become mere fiat currencies (as modern currencies are), and the exchange rate in Antwerp, where English clothing was traded in Europe, had deteriorated. All coin in circulation was taken from it to be re-minted to the highest standard, and paid for at a discount.

The pound sterling held 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, enduring financial crises in 1621, in 1694-1696, when John Locke pamphleteered for the pound sterling as "an invariable fundamental unit" and again in 1774 and 1797. Even the violent disorders of the Civil War did not devalue sterling on the money markets of Europe. Braudel attributes England's easy credit to the restored currency, which was never devalued through the centuries,^{[citation needed]} which gave security of contract and a rise to a financial superiority during the 18th century. The pound sterling has been the currency of the Bank of England since its inception in 1694.

The Gold Standard

The pound moved unofficially from silver to the gold standard thanks to an overvaluation of gold in England that attracted gold from abroad and caused a constant importation of silver coin, despite a 1717 revaluation of gold by Isaac Newton, Master of the Royal Mint. The de facto gold standard continued until its official adoption after the end of the Napoleonic Wars in 1816. This lasted until the United Kingdom, in agreement with many other countries, abandoned the standard after World War I. World War in 1919. During this period, one pound could be exchanged for 4,886 US dollars.

Some discussion took place after the 1865 International Monetary Conference in Paris concerning the possibility of the United Kingdom joining the Latin Monetary Union, and a Royal Commission on International Coinage examined the issue, resulting in the decision against joining the Monetary Union.

Before World War I, the UK had one of the strongest economies in the world, holding 40% of the world's overseas investment. However, at the end of the War, the country owed £850 million, most of it to the United States, with interest costing the country 40% of all government spending.

In an attempt to recover stability, in 1925, the gold exchange standard was introduced, which meant a variation of the gold standard. Under this system, the value of the currency was fixed at the price of gold, at the levels prior to the war, although the population could only exchange their money for gold bullion, instead of coins. This system was abandoned on September 21, 1931, during the Great Depression, and the pound devalued by 25%.

The pound, like all other currencies in the world, is no longer related to gold, silver or any other precious metal. The US dollar was the last currency to abandon gold, in 1971. The pound was made fully convertible in 1946 as a condition of receiving a US$3.75 billion loan after World War II.

The pound sterling was used as the currency of many parts of the British Empire. When the British Commonwealth of Nations was created, the Commonwealth countries introduced their own currencies such as the Australian pound or the Irish pound, this led to the creation of the so-called sterling zone, where these currencies maintained a fixed relationship with the pound sterling.

Following the US Dollar

Since gold was abandoned, there have been several attempts to peg the value of the pound to other currencies, initially the US dollar.

Under continued economic pressure, on September 19, 1949, the government devalued the pound by 40%, from $4 USD to $2.80 USD. The move prompted many other governments to devalue their currencies against the dollar as well, 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 on the money markets, exchange controls were increased by the Wilson government. Among the measures, tourists were prohibited from taking more than 50 pounds out of the country, until the restrictions were lifted in 1970. The pound was finally devalued 14.3% to $2.41 on November 18, 1967.

With the end of the Bretton Woods system—not least because mainly British traders had created a substantial Eurodollar market that made it more difficult for their government to maintain the United States gold standard—the pound was issued in the early from the 1970s and subjected to market appreciation. The sterling zone effectively ended around this time when most of its members decided to go free against the pound and the dollar.

A further crisis followed in 1976, when apparently the International Monetary Fund (IMF) thought the pound should be set at $1.50, and as a result the pound fell to $1.57, and the government decided it had to ask for a £2.3 billion loan to the IMF. In the early 1980s the pound rose to the $2 level as interest rates rose in response to monetarist policy, and the high exchange rate was widely blamed for the deep recession of 1981. At its nadir, the pound The pound settled at just $1.05 in February 1985, before returning to the $2 level in the early 1990s.

Following the Deutsche Mark

In 1988, Margaret Thatcher's British Chancellor of the Exchequer, Nigel Lawson, decided that the pound should overshadow West Germany's deutsche mark, with the unforeseen result of rapidly rising inflation as the economy entered a slump. boom due to inappropriately low interest rates. (For ideological reasons, the Conservative government was inclined to use alternative mechanisms to control the credit explosion. Former Prime Minister Ted Heath referred to Lawson as a 'one-stick golfer.')

Following the European Monetary Unit

In another change of tack, on 8 October 1990 the Thatcher government decided to join the European Exchange Rate Mechanism, with the pound set at 2.95 Deutschmarks. However, the country was forced to withdraw from the system on Black Wednesday (September 16, 1992), as Britain's economic performance made the exchange rate unsustainable.

Black Wednesday saw interest rates jump from 10% to 12%, and finally to 15% in a futile attempt to stop the pound from slipping below the limits of the Mechanism. The exchange rate fell to 2.20 German marks. Proponents of a lower exchange rate between the pound and the mark (later replaced by the euro) were vindicated, as the cheaper pound boosted exports and contributed to the economic prosperity of the 1990s.

The 2000s

Although the pound and the euro are not locked to each other, there are often long periods when the pound and the euro move in sync, although since mid-2006 this correlation has been weakening. Inflation concerns in the UK led the Bank of England to unexpectedly double interest rates in late 2006 and early 2007, causing the pound to rise to its highest rate against the euro since January 2003 Further increases were expected in 2007. This has had a knock-on effect against other major currencies, with the pound hitting its highest price in 26 years against the dollar on April 8, 2007, having moved to the $2 per dollar level. first time since 1992.^{[citation needed]}

The financial crisis of 2008

The pound sterling devalued severely after the 2008 financial crisis, reaching €1.25 in April 2008 and $1.38 in January 2009. December 2009, at €1.0219.

On March 5, 2009, the Bank of England announced that it would inject $75 billion into the British economy, through a process called quantitative easing. Despite this being the first time such a project had been carried out in UK history, then Bank of England Governor Mervyn King suggested that it was not an experiment.

This process led the Bank of England to increase the money supply, printing money, in order to buy assets such as public debt, corporate bonds, bills of exchange or obligations. The initial amount was established at 75,000 million pounds, although the then Chancellor of the Exchequer of the United Kingdom, Alistair Darling, authorized to issue up to 150,000 million if necessary. The process was expected to take 3 months, and with long-term results. In November 2009, more than 175 billion had already been injected through quantitative easing, reducing the effectiveness of the process in the long term. As of July 2012, with the last issue, more than £375 billion had been created, buying exclusively UK government bonds, worth a third of UK sovereign debt.

The referendum on the UK's membership of the European Union in 2016

The result of the referendum on the United Kingdom's permanence in the European Union on June 23, 2016 caused great uncertainty about the future of international relations and British domestic politics, causing a collapse of the pound sterling against the main international currencies. The night before the vote, the pound was trading at €1.30; the next day at €1.23, a devaluation of 5%. Against the dollar, the pound also registered an immediate devaluation, falling from $1.466 to $1.3694 when the referendum result was announced. In October 2016, the pound was trading at $1.2232, recording a 16% drop.