Penny Pinching: Things you didn’t know about the British Pound
With 1,200 years of history, the pound is the oldest currency still in use today. The new polymer British Pound is but one of the recent innovations that make the banknotes sturdier. While the currency’s exchange rate isn’t high due to the market jitters about a possible Brexit, the pound itself is one of the world’s stalwart currencies. It may surprise you to see how enduring many of our money’s associations actually are and also how recently institutions like The Bank of England have arisen in the UK’s currency history.
The Pound: A Roman Relic?
The symbol £, an elegant script letter L, is a clue pointing to the pound’s origins in the Latin word Libra. The word, associated with scales, means weight. The pound came from the Latin Libra Pondo which meant a pound weight when it was used in continental Europe around the year 755. The word Libra was discarded as Pondo morphed into Pound but the L is still echoed in the symbol £.
Influenced by the ancient Roman currency system that featured libra, solidus and denarius, the pound was divided into 20 shillings and 240 silver pennies. Another indicator that the roots of the English penny go back to Roman times was seen until 1971, when the UK adopted decimalization - the abbreviation for a penny was d, harkening back to the Roman denarius. Also, £sd was the popular name for the pre-decimal currencies pounds, shillings and pence. The Anglo-Saxon coins that had been in use before the penny was adopted were called sceat; an old English word that meant money. Modern weight units and currency measures both evolved from the combination of Anglo-Saxon and Roman systems of measurement.
Midlands King Introduced Currency
Frankish King Pepin the Short (a man of average height, his hair was trimmed short) circulated high quality silver deniers in 755. In 760 the pound was introduced to Britain by King Offa of Mercia. Spreading rapidly throughout the Anglo-Saxon kingdoms the pound became the standard currency for the country even before it was united as a land called England. King Offa also issued a gold dinar which featured Arabic script, a copy from a Caliph al Mansur’s Arabic dinar. King Offa’s wife Cynethryth was the only Anglo-Saxon queen depicted on a coin; her stately image can still be seen on the rare historic pounds.
From 760 to 1158, pennies were cast from nearly pure silver and didn’t last long in circulation. To make change they would be cut into pieces. They varied in weight and 240 of them seldom added up to a pound. In 980, during the reign of King Aethelraed the Unready, 15 head of cattle could be purchased for a pound.
There were dire consequences for moneyers who produced inferior quality coins under medieval King Henry I. They were castrated when their coins fell short of the quality demanded. Half of all moneyers in 1124 were punished by mutilation for producing poor quality or counterfeit silver coins. The term “penny pinching” refers to the centuries-old practice of trimming the edges of the coins before passing them on for their original value. Clipping the coins was eradicated in the 1660s when mechanised minting introduced lettering on the edges of coins, but the expression endures.
The Pound Sterling
In 1158 King Henry II introduced a sturdier 92.5% silver pound coin, which gradually became known as the sterling pound. To ensure that the percentage of silver in the coins didn’t fluctuate, in 1282 King Edward I enacted the courtly testing of English coins that continues today as the “Trial of the Pyx”. Despite the fact that the UK’s currency is now uniform, the annual event still puts newly minted coins through judicial trials.
Henry VIII reduced the amount of silver in the Great Debasement. To raise over £1m, from 1542 until 1551 he had the coins minted with 25% silver. In the last years of his reign the copper coins had only a veneer of silver, leading to Henry VIII’s nickname “Old Copper Nose” as the silver wore off his featured image.
Bank of England
The ubiquitous paper pound we know today has its origins as a receipt. In 1640 nobles and merchants who had secured their gold bullion in the Tower of London were the victims of a theft. King Charles I seized the gold to finance the 2nd Bishop’s War with Scotland. The gold was returned but when the Civil War between the King and Parliament broke out in 1642, many opted to safeguard their gold with London goldsmiths. They issued promissory notes as receipts for their depositors; the paper proved more convenient than carrying weighty gold.
They initially issued handwritten “running notes” that carried the name of the depositor with the promise to return his gold on demand. The banknote was born when they added the words “or bearer” which allowed a circulation of the currency.
Cloth merchant Thomas Smith opened the UK’s first bank in 1650; the oldest bank still in use is Bancha Monte dei Pascha di Siena, which began by making asset-backed loans for the poor in 1472.
The Bank of England was established in 1694 to raise money for King William III’s war against France. Cashiers hand wrote the notes which proved complex as the number of pounds, shillings and pence were recorded. This led to the bank not issuing any banknotes for less than £50. Because average incomes were under £20 a year, few ever saw banknotes.
Gold and Currency Exchange
The UK dealt with a silver shortage in the 1790s by issuing “token” silver coins and, in a massive re-coinage campaign, it created standard gold sovereigns as well as crowns. In 1833 Bank of England notes became the legal tender and ten years later the banknotes were backed by gold marking the start of the gold standard for British money.
As other countries adopted the gold standard, it became easy to determine currency exchange rates. This revolutionised trading and the international economy, leading to the modern exchange markets we know today. Sterling is the fourth most often traded currency in the foreign exchange market after the US dollar, the euro and the Japanese yen.
The GBP is the trusted currency of the United Kingdom of Great Britain, Northern Ireland, The Isle of Man, the States of Jersey, the States of Guernsey, the British Antarctic Territory and the world’s most remote inhabited archipelago, Tristan da Cunha.