History of the Pound

This chapter presents the history of the British Pound, which has the highest parity ratio of all the major currencies. Aside from being one of the most actively traded currency pairs, the British Pound holds a position of being the king of currencies in the international arena. Its stability and status as legal tender globally during the period of the British Empire contribute to its appeal. The pound sterling, established in 1560 by Elizabeth I, brought order to the financial chaos of Tudor England that had been caused by the “Great Debasement” of the coinage. The pound sterling maintained its intrinsic value uniquely among European currencies, even after the United Kingdom officially adopted the gold standard, until after World War I; it weathered financial crises in 1621, in 1694-1696, and again in 1774 and 1797. Not even the violent disorders of the Civil War devalued the pound sterling in European money markets. England's easy credit, security of contracts, and rise to financial superiority during the 18th century all contributed to the fact that the pound was never devalued over the centuries. The pound sterling has been the money of account of the Bank of England from its inception in 1694.