Early history

from 5th century AD to the reign of King Æthelstan

So how did the Pound emerge? Pound Sterling is the oldest currency in the world still in use. Despite being nothing like its first implementations, it has managed to become one of the essential currencies to international trade which remains well known to this day. It has a long history and it remains the core part of English culture as well. We shall start from the point in history which would have never suggested its position nowadays. Our dive into history begins with the origins of Anglo-Saxon coinage, starting from the end of Roman rule in Britain in the 5th century.

When the Roman Empire collapsed in 476 AD, people in Britain continued to use Roman coins for some time, including the gold aureus, the silver denarius, and the bronze sestertius.

The arrival of the Anglo-Saxons brought new currencies to the British Isles. Coins such as the gold thrymsa, silver sceat, and silver penny were introduced. These coins were often minted by local rulers and had regional variations in terms of design and weight. That approach made trade very complicated because the diversity of currencies makes it hard to conduct commerce effectively.

During the Viking Age, the minting of Viking and Danish pennies by the invaders in the territories they controlled in Britain added another layer of complexity to the already intricate trade dynamics. These coins, though imitations of the Anglo-Saxon coins, bore unique markings that distinguished them. Such a decentralized and fragmented coinage system further hindered economic stability, as the lack of a standardized monetary unit led to confusion and difficulty in assessing the value of different currencies. It created challenges for both local merchants and those traveling from afar, diminishing the ease of commerce and impeding the growth of a unified market.

Overall, in medieval England, the absence of a standardized monetary system added complexity to trade and impacted economic stability. However, in the year 924 AD, Æthelstan came to power and became the first King of England. During Æthelstan's reign, the English economy was primarily based on a silver coinage system. The penny was the main unit of currency, and it was minted in various regions throughout the kingdom. Æthelstan took steps to standardize the currency and establish a uniform weight and design for the coins.

It is important to note that Æthelstan did indeed establish a uniform weight and design for coins, but he was not the first one to do so. Earlier kings, like Offa of Mercia (r. 757-796 AD), had also attempted to standardize the currency during their reigns. However, Æthelstan's efforts laid the foundation for the later development of the pound sterling.

Tudor Period

1485 - 1603

The House of Tudor ruled England from 1485 to 1603 made significant changes in the economy and currency of England. During this time, the English pound was not yet established as the primary unit of currency, but instead, various forms of silver coins were used. These coins included the groat, which was worth four pence, and the angel, which was worth two shillings and sixpence. In addition, there were also gold coins such as the sovereign, which was introduced by Henry VII in 1489.

During the reign of Henry VIII (1509-1547), the value of these coins began to fluctuate due to inflation caused by the king's expensive wars with France and Scotland. To address this issue, Henry VIII introduced the "great debasement" of 1526, where he reduced the amount of precious metal in his coins and increased their quantity to raise more revenue for his military campaigns. This led to a devaluation of the currency and an increase in prices.

Under Edward VI (1547-1553) and Mary I (1553-1558), the currency continued to experience instability due to political and economic factors. However, during Elizabeth I's reign (1558-1603), the English economy experienced a period of stability and growth, and also exploration and colonization efforts of England have ruled out the cause and as the result Pound Sterling truly has become an international currency. By the end of her reign, the pound was considered one of the strongest currencies in Europe and was widely accepted as a medium of exchange. Overall, the Tudor period saw the establishment of the English pound as a stable and reliable currency that would continue to evolve over the centuries to come.

Restoration and the gold standard

17th-19th centuries

After the English Civil War, the Pound Sterling was restored to its pre-war value, and a gold standard was established in 1816. This meant that the Pound was fixed to the value of gold, ensuring stability and confidence in the currency.

During the Restoration period in England (1660-1714), the country experienced significant economic growth, driven by trade and commerce. As a result, there was a growing need for a stable currency that could facilitate transactions across different regions and countries. Prior to this time, various forms of bartering and local currencies were used, but these were not reliable or widely accepted. To address this issue, the government began to explore the idea of establishing a national currency tied to gold, which would become known as the gold standard.

In 1694, the Bank of England was established with the purpose of managing the nation's finances and issuing a new currency based on gold. This marked the beginning of the gold standard system in England, where the value of the pound sterling was fixed at a specific amount of gold. The use of gold as a medium of exchange helped to stabilize prices and promote economic growth, as it provided a consistent measure of value that could be trusted throughout the economy. Over time, other countries began to adopt similar systems, leading to the widespread adoption of the gold standard in many parts of the world during the 18th and 19th centuries.

The period of restoration also saw significant changes in the financial sector, including the development of stock markets and the emergence of joint-stock companies. These innovations allowed investors to pool their resources together and invest in large-scale projects, such as infrastructure and industry. This led to rapid industrialization and economic growth, further solidifying the position of the Pound Sterling as a global reserve currency at the time. Gold standard continues to shape modern economics all over the world.

Decimalization

1849

In 1849, the Pound Sterling underwent decimalization, which simplified the currency system by replacing the traditional system of pounds, shillings, and pence with a system based on pounds and pence. This change eliminated the need for fractional units like shillings and pence, making transactions easier and more intuitive for the public.

Prior to decimalization, the British currency system was complex and confusing, especially for foreigners who had difficulty understanding the relationship between pounds, shillings, and pence. With the introduction of decimalization, the currency system became much simpler and more straightforward, as all amounts were expressed in pounds and pence. This made transactions easier and less prone to errors. Additionally, decimalization helped to reduce inflation, as it eliminated the need for artificially high denominations like the guinea, which had previously been used to ease the burden of high prices. Overall, the decimalization of the Pound Sterling in 1848 was a significant step towards simplifying the currency system and promoting financial stability in Britain.

Modern state

20th century to present day

At the dawn of the 20th century, the Pound Sterling found itself confronted with a series of escalating geopolitical challenges. Despite the turbulent circumstances, the determination to implement reforms remained unwavering. Throughout the 20th century the British government implemented many notable reforms, that adjusted the currency to stay efficient at home and abroad:

These reforms, among others, played significant roles in shaping the trajectory of the Pound Sterling all the way up to the 21th century.

Nowadays, the Pound Sterling continues to play a strong role in global trade and finance, fostering economic growth and stability for the United Kingdom and its international partners. By existing non-stop for hundreds of years the Pound still commits to the culture worldwide. Moreover, the Pound Sterling underwent a digital transformation to adapt to the evolving financial landscape. The introduction of blockchain technology and cryptocurrencies revolutionized the way transactions were conducted, making them more secure, efficient, and accessible. This modernization further positioned the Pound as a forward-thinking and innovative currency.

That note wraps our rendition of the story. Across centuries Pound Sterling was among the symbols tied to Britain. We will continue to publish articles about the culture of Great Britain!

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That’s the end!

In the end I would like to share a list of some references that tell the complex history of the pound with images:

Decimalisation – Metrication UK

The Royal Mint Museum

Decimal Day: Most Up-to-Date Encyclopedia, News & Reviews (academic-accelerator.com)

British pound - world’s oldest currency still in use (thenews.com.pk)

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Trivia