British Monetary System Essay

1412 words - 6 pages

British Monetary SystemForeign monetary systems are often not unlike our own. Different countries use policies that they decide upon and create institutions that help their government supply money to the economy. Sometimes these money systems are based on commodities like gold or silver, in which paper notes may be presented and then converted for the element on demand. Another money system is a fiat system where the government or a central bank defines the value of the money. No matter what system another country is on, there are influences and obstacles that must be comprehended in order to master a foreign monetary system. The British system is one that is much like ours, yet it has existed a lot longer, and is just as complex. The core focus of this investigation is to learn the history of Britain's monetary system, scrutinize its major components and significant influences, learn about its financial organizations, and reveal incidents that helped form its current system.The history of Britain's monetary system stretches back through the centuries. In the 1640's many people wanted to keep their gold safe, so they entrusted their wealth to goldsmiths. In exchange for the gold, people would receive "promissory notes" which entitled the bearer to the full amount in gold. This was far easier to carry around than heavy bags of coins, and they became very popular and were soon used as currency. When the goldsmiths realized that almost no one was redeeming their notes for gold, they started to issue more notes than the gold they had to back them, thereby creating money. This creation of money went on for a few decades with no one the wiser until it was officially authorized. "In 1694 the practice of creating money was legitimized with the founding of the Bank of England". (Chown, 1997) Not long after this founding, the bank started to issue the, "pound sterling" which is still the official currency today. As the British Empire expanded around the globe, so did the pound sterling. Because the notes were as good as gold, by the 18th and 19th centuries other countries had adopted the gold standard and London had become the world center for gold, money, and financial markets. "The mid-century inception of Britain's becoming the world supplier of capital provided new opportunities for merchant banks, both established houses and newcomers to the city of London. The accumulation of further foreign capital assets also had direct and indirect effects for British overseas and domestic corporate banks". (Cottrell, 2009) World War I had a major effect on the pound sterling because the gold standard was suspended and by the end of the war the country was deeply in debt. It was completely abandoned in 1931, and became part of the Bretton-Woods system in the 40's. When the Bretton-Woods system broke down, the pound floated from the 1970's onwards.Britain's monetary system has five important components. They include; the base of the monetary system, categories of...

Find Another Essay On British Monetary System

The European Monetary System Essay

2077 words - 9 pages towards their permitted floors. This is niether harmful nor embarrassing in itself--but the required responce of policy may be. To defend the franc, Francehas raised its interest rates even though its domestic economy did not seem to warrant such a rise. Sterling is much weaker, so the British government may have to do the same--despite fears that Britain's recovery may cool still further.Bibliography· "European Monetary system

The Economic Systems of Colonial Latin America & British North America

1074 words - 5 pages To what extent was the economic system of Colonial Latin America superior to that of British North America? Introduction To what extent was the economic system of Colonial Latin America superior to that of British North America? This essay will demonstrate how the economic system of Colonial Latin America was slightly superior to that of British North America during the 18th century, due to several factors. In particular, the abundance of

Analysis of British Airways

3299 words - 13 pages TABLE OF CONTENTS PAGE 1. British Airways: Overview 4 2. Key stakeholders 4 3. Mission and objectives 5 4. Market structure 6 5. Managing diverse cultures 7 6. Economic changes, fiscal and monetary policy 8 7. Regulation 11 8. Conclusion and Recommendations 12 9. References 14 Executive Summary British Airways has focused its mission and objectives towards satisfying its key stakeholders that include employees, customers

Establishing EffectiveIncentive and Reward Systems at Barclay Banks PLC

2159 words - 9 pages and Wim, 2011). That is to say, management control is very important. Otherwise, inadequate control may lead to the collapse of companies. 2.2 . functions of Incentive and reward system After discussing the importance of MACS, it is necessary to introduce a major element of management control systems, incentive and reward systems. Designing an appropriate and effective incentive and reward system is very crucial for an organization. According to

Articles of confederation

757 words - 3 pages to enforce them. However, the Articles were ineffective and failed to provide a strong government. During this Critical Period in the history of the United States, regionalism and anarchy were growing because of the following reasons. 1) The Continental Congress controlled public affairs but there was nothing in the Articles that gave Congress the power to enforce laws or unify the States. 2) There was no solid monetary system to ensure that

Mercantilism in Colonial Life

783 words - 3 pages British colonies instituted in the New World, mercantilism proved to be a generally lucrative system in ensuring the regulation of the goods produced within the colonies. Furthermore, mercantilism made sure that the mother country's economic situation would not be compromised, rather it would be enhanced with the notion that by guaranteeing that the nation would be earning more for their exports than their imports . Consequently, nations would be

European Economic Community

1715 words - 7 pages United Kingdom) created instead the European Monetary System (EMS), in order to attain stability in exchange rates and thus growth and stability in their economies. Under this new system, member countries harmonized monetary policies; through the use of an Exchange Rate Mechanism (ERM), the currencies of the eight states were only allowed to fluctuate by a certain amount, within a narrow band of 2.25% above or below the central rate. A new

Why Is It so Difficult to Forecast Exchange Rate Movements?

1240 words - 5 pages these fundamental economic variables? Economists have long taken the view that economic fundamentals determine exchange rates. Nevertheless, in the early 1970s, after the collapse of fixed exchange rate regimes of the Bretton Woods system, excess volatility, nonlinear and disorderly movements in exchange rates became mysteries that traditional exchange rate theory cannot explain. Recent scholar concluded “no definitive evidence that economic

Measures Taken by the Current Labour Government to Enhance the Independence of the Bank of England

3270 words - 13 pages Measures Taken by the Current Labour Government to Enhance the Independence of the Bank of England Throughout 1989 – 1991 New Zealand, Chile and Canada all took the initiative to increase the independence of their central banks and then in 1997 the new Labour Government followed this trend giving the Bank of England independence to set interest rates. With effect from June 1997 the Bank formed a Monetary Policy Committee

The 1970s were disastrous for European Integration. Discuss

1127 words - 5 pages intergovernmentalism, where the states make decisions on the basis of their competing national interests (McCormick 2005: 5).Partly in a desire to relaunch European integration, the Community decided, in the early 1970s, to establish an Economic and Monetary Union (EMU). However, the collapse of the international monetary system and the 1973 energy crisis led to exchange rate instability and economic recession, which seriously damaged the Community's solidarity

Key Currencies in The World

896 words - 4 pages attempted to allow a return to gold despite there was too little precious metal to support world’s currencies. The British exports were too high compared to other countries and trading partners leading to fewer exports. With this entire taking place, the international trading patterns were disrupted with the war. The British pound and the American dollar remained the key currencies. Federal Reserve System temporarily reduced their interest rates and the

Similar Essays

Black Wednesday Essay

1077 words - 5 pages In Britain, Black Wednesday refers to September 16, 1992, which is known as the day that a combination of monetary policy makers and speculators “broke the pound”. They didn't actually break it, but they forced the British government to pull it from the European Exchange Rate Mechanism (ERM), successfully removing itself from the collective “Eurozone” economy. The Mechanism The European Exchange Rate Mechanism was an act that was created by

What Advice Would You Give To Mark Carney, The New Governor Of The Bank Of England

2293 words - 10 pages currency deposits in UK banks is much higher than in other countries. British banking system owns the worldwide network of foreign affiliates. Bank of England is the main financial institution of the United Kingdom. It was founded in 1694 to finance the war with France (Francis J, 2012) Central Bank of England controls the whole of the United Kingdom monetary policy. Bank of England manages a large number of directors (Bagehot W, 2013) Governing

Exchange Rate Policy And The Central Bank

1069 words - 5 pages , which could cause serious problems in the economy and government spending. If a country’s banking system isn’t stable, a central bank may be forced to relax monetary policy to avoid a financial crisis. Lastly a speculative attack can also happen at any time, whether the economy is stable or not. An example of a speculative attack is what occurred with the British pound. George Soros saw that the British government was under pressure with the

“The Vicious Circle”: The Creation Of The Economic Development Regime In A Realist Context

1618 words - 6 pages discourse, including Armand van Dormael's Bretton Woods: Birth of a Monetary System (1978)⁠ and George Schild's Bretton Woods and Dumbarton Oaks: American Economic and Political Postwar Planning (1995), especially concerning the respective political hurdles in the British and American legislatures. Former IMF chief historian James M. Boughton, in his working paper “Why White, Not Keynes? Inventing the Postwar International Monetary System” (2002