Prior to decimalisation, the pound was divided into 20 shillings or 240 pennies.
Originally, in Saxon times, the pound sterling was the equivalent to a pound-weightof silver.
While the British currency was on the gold standard, the £1 bank-note was equivalent to the pound sterling or sovereign at a value of 123.374 troy grains of fine gold. The gold standard was abandoned in September 1931 since which time the value of the pound has fluctuated both in terms of gold and other currencies.
Before the outbreak of the First World War in 1914, the pound circulated both in the form of gold sovereigns and Bank of England notes exchangeable for gold sovereigns on demand. It also mantained a stable relation with the gold dollar, franc and mark.
On the outbreak of war, the gold currency was withdrawn and banknotes issued by the Treasury with no legal limit. The value of the pound was artificially fixed with that of other Allied currencies at par.
�1 notes were greeted with public outrage when they were first put into widespread use as an emergency measure to replace gold sovereigns.
Borrowing on a huge scale during the war years and other reasons caused a hidden inflation which expressed itself when the "pegging" against other Allied currencies was abolished in 1919. The pound rapidly lost one third of its value against gold, the French franc and Italian lira falling even further. Gold payments and export were suspended by the British government.
A policy of drastic deflation was embarked upon in 1920 and the pound was thus forced up to parity with the US dollar in 1925 when gold payments were resumed but limited to the minimum of a 400-oz. ingot valued at £1,700.
Bank notes and currency notes were amalgamated in 1928 and the sole power of issuing paper money was given to the bank of England with a fiduciary limit of £260-millions. Various other currencies were stabilised at different levels in relation to the gold pound.
Owing to a budgetary deficit and the foreign withdrawal of credits while british credits remained frozen in germany, the gold standard was again abandoned in October 1931. The pound immediate fell to 15s. against gold and settled, after some fluctuation, at 12s 8d.
In November 1933, the found rose to 22s 7�d in New York.
