Will the pound sterling collapse after Brexit?
To understand what the pound means for Britain's soul has to go back a long way. Then it becomes clear why the British never wanted the euro and why they want to get out of the EU now. The roots of the pound go back 1200 years. In the eighth century, the Anglo-Saxon kings introduced a silver penny to the island. 240 pfennigs were knocked out of a pound of silver. The pound was thus a unit of weight and currency. The name "pound sterling" first appeared in 1078. It is unclear where exactly it comes from, but Adam Smith, the father of economics, suspected that it meant a certain quality of silver.
In its early days, the pound was far from solid, and like most other currencies, it was prone to fraud. In 1121, Henry I castrated a total of 92 workers from the royal mint because they allegedly had struck bad coins. The English silver pennies remained important throughout the Middle Ages. The real rise of the pound sterling to the world currency began in 1688 with the "Glorious Revolution", when absolutism ended in England and the way to the modern constitutional state began. King Wilhelm III. of Orange, which the revolution had brought to the throne, gave the license to found the Bank of England in 1694, which from then on was to watch over the pound. It issued pound notes that were no longer backed by silver but by gold.
The saying "as safe as the Bank of England" no longer applies
For over 200 years the bank has remained the epitome of solidity. To this day it is said: something is "as safe as the Bank of England". So London could become the first financial center in the world, attracting money people from all over the world like Nathan Rothschild and many others. The legal certainty of London was the background to the strength of the pound. Like other currencies, the pound was pegged to gold at a fixed rate. The gold standard created a solid foundation for world trade, in which the United Kingdom and the Commonwealth have long played a crucial role.
The first blow to the pound came with World War I. The United Kingdom was one of the winners, but it was hard hit economically. However, significant parts of the elite in London did not realize that times had fundamentally changed with the war. Chancellor of the Exchequer Winston Churchill pushed through in 1925 that the pound returned to the gold standard, which had collapsed in 1914 - against the urgent advice of economist John Maynard Keynes. It was an historic mistake that cost the UK its competitiveness for years.
The rapprochement with Europe began with the pound crisis
When an Allied conference in Bretton Woods, USA, drafted the post-war currency regime in 1944, it was clear that the pound would give up its leadership role to the dollar. The pound did not really get into the crisis until after the collapse of the Bretton Woods system in 1971. It was then that London's hesitant and contradicting rapprochement with Europe began. In April 1972 the pound joined the "European currency snake", an association of European currencies under the leadership of the D-Mark, the rates of which were fixed. However, the entry rate for the pound was too high, which is why London had to deregister the pound in June 1972. In 1976 the great sterling crisis broke out. It was so difficult that London had to enlist the help of the International Monetary Fund (IMF) - an unprecedented, humiliating act for a former world power.
In 1990 came the closest rapprochement with Europe: the British government joined the European Monetary System (EMS), the forerunner of monetary union. But again the entry price was too high. The financial markets understood that immediately. The major investor George Soros put down his masterpiece: He bet so aggressively against the pound that the Bank of England capitulated and the government had to give way: On September 16, 1992, London left the EMS again, what was known as "Black Wednesday" in the History should go down.
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