Pounds for pound, dollar for dollar.
July 4, 2010 12:17 PM Subscribe
Pounds Sterling to Dollars: Historical Conversion of Currency Click here to read an explanation of the calculations.
Am I missing the main idea here? I put in £100 in 1970 and it said that would be worth $1,700ish in 2009. That apples to oranges, right? What's this assuming? An interest rate? A currency speculation? Like I should have moved my dollars into pounds in 1970? Wouldn't there have been a conversion difference then as well?
So lost.
posted by cjorgensen at 12:42 PM on July 4, 2010
So lost.
posted by cjorgensen at 12:42 PM on July 4, 2010
Ah very nice idea - thanks for posting. I'll have to go through his methodology in detail, but it is pretty neat as is.
You know for me when looking at Dollar / Sterling (aka "cable") one of the more interesting points is exactly how the United States conspired to knock England off the throne as the worlds reserve currency.
That's right, once upon a time Pound Sterling was the world's reserve currency. It had this role for the entire 18th and good chunk of the 19th centuries. And even then as global reserve currency - unlike present day America mind you - Sterling was exchangeable into gold.
The Bank Charter Act 1844 required Sterling to be backed by Gold. It also set the conversion price of £3.88 for one ounce of gold and specified an issuance of some £14 million pounds. From there its pretty easy to calculate just how much gold England possessed, but you didn't have to bother. The Act also required BOE to report weekly just how much gold England owned, and the amount of currency in circulation.
Things were fine (aside from the usual manias, panics, recessions / depressions) until 1914 when England suspend Sterling / Gold conversion, ostensibly to fund the war effort. But this was really done at the behest of the US Government who would no longer sell England American weapons for paper (Pound Sterling). The Americans, you see, wanted gold. England's gold. And they got it.
Of course it took until WWII was resolved for the US Dollar to assume centrestage as The World's reserve currency. At that point The Americans had a large share of the planet's gold, in addition to one of the few remaining, intact, manufacturing infrastructures.
Another tidbit I always find fascinating: The BOE, like many Central Banks, started out as a privately owned enterprise that provided essential services to two broad classes of customers: The Banking System as well as The Government.
But it started out as a private bank serving private customer and slowly grew into its role as a Central Bank. Why is this interesting? Well, when England nationalised The BOE in 1946 a small number of private customers were allowed to keep their accounts!.
Yep, that's right. Some folks here in England maintain private accounts at The Bank of England. Whether these are term or current accounts, I have no idea. I'm just fascinated with the idea that some folks have a private account relationship with England's Central Bank. 'Cause that's pretty unusual in developed countries. Sometimes you'll hear of it in a developing nation but in such places the private banking system is untrustworthy or unstable or both.
I keep meaning to file a Freedom of Information Act request, start poking around to find out just what services these folks get. Like a debit card emblazoned "Bank of England". Wow.
In any case, when The Dollar is replaced as The World's Reserve Currency it won't take 30 odd years for the transition; I gave a presentation just last week where I pointed out which currency I thought might replace the greenback (hint: Merkel has 80B Euro in cuts on the table, is running a 150B (or so) trade surplus and wants to "improve competitiveness") , reviewed the Sterling / Dollar transition and opined that this time around it might happen in a matter of weeks. Another wow.
posted by Mutant at 12:54 PM on July 4, 2010 [11 favorites]
You know for me when looking at Dollar / Sterling (aka "cable") one of the more interesting points is exactly how the United States conspired to knock England off the throne as the worlds reserve currency.
That's right, once upon a time Pound Sterling was the world's reserve currency. It had this role for the entire 18th and good chunk of the 19th centuries. And even then as global reserve currency - unlike present day America mind you - Sterling was exchangeable into gold.
The Bank Charter Act 1844 required Sterling to be backed by Gold. It also set the conversion price of £3.88 for one ounce of gold and specified an issuance of some £14 million pounds. From there its pretty easy to calculate just how much gold England possessed, but you didn't have to bother. The Act also required BOE to report weekly just how much gold England owned, and the amount of currency in circulation.
Things were fine (aside from the usual manias, panics, recessions / depressions) until 1914 when England suspend Sterling / Gold conversion, ostensibly to fund the war effort. But this was really done at the behest of the US Government who would no longer sell England American weapons for paper (Pound Sterling). The Americans, you see, wanted gold. England's gold. And they got it.
Of course it took until WWII was resolved for the US Dollar to assume centrestage as The World's reserve currency. At that point The Americans had a large share of the planet's gold, in addition to one of the few remaining, intact, manufacturing infrastructures.
Another tidbit I always find fascinating: The BOE, like many Central Banks, started out as a privately owned enterprise that provided essential services to two broad classes of customers: The Banking System as well as The Government.
But it started out as a private bank serving private customer and slowly grew into its role as a Central Bank. Why is this interesting? Well, when England nationalised The BOE in 1946 a small number of private customers were allowed to keep their accounts!.
Yep, that's right. Some folks here in England maintain private accounts at The Bank of England. Whether these are term or current accounts, I have no idea. I'm just fascinated with the idea that some folks have a private account relationship with England's Central Bank. 'Cause that's pretty unusual in developed countries. Sometimes you'll hear of it in a developing nation but in such places the private banking system is untrustworthy or unstable or both.
I keep meaning to file a Freedom of Information Act request, start poking around to find out just what services these folks get. Like a debit card emblazoned "Bank of England". Wow.
In any case, when The Dollar is replaced as The World's Reserve Currency it won't take 30 odd years for the transition; I gave a presentation just last week where I pointed out which currency I thought might replace the greenback (hint: Merkel has 80B Euro in cuts on the table, is running a 150B (or so) trade surplus and wants to "improve competitiveness") , reviewed the Sterling / Dollar transition and opined that this time around it might happen in a matter of weeks. Another wow.
posted by Mutant at 12:54 PM on July 4, 2010 [11 favorites]
You're saying the Euro will become the World Reserve Currency? Surely no chance, not while Greece, Portugal, Spain (add name here) continue to suck funds from the ECB?
posted by A189Nut at 1:07 PM on July 4, 2010
posted by A189Nut at 1:07 PM on July 4, 2010
cjorgensen: Read the explanation.
They do two conversions:
1. Convert Sterling in that year to Dollars in that year
2. Convert Dollars Then to Dollars Now.
So, in your example, they calculate that £100 in 1970 was about $370.
Then they use the Consumer Price Index to calculate that $370 in 1970 would buy what $1700 would buy now.
That is, this whole calculator is about purchasing power and has very little to do with Sterling/Dollar anything except for the fact that the creator wanted Americans to be able to use this tool. That is, a Brit would be happy to convert Sterling in that year to Sterling now.
In order to go back before there were formal currency exchange rates, they are relying on a consumables index which tracks purchasing power. Using this, you could actually translate this exercise into any currency since you are defining currency by how much you can buy of something at a certain point in time.
posted by vacapinta at 1:52 PM on July 4, 2010
They do two conversions:
1. Convert Sterling in that year to Dollars in that year
2. Convert Dollars Then to Dollars Now.
So, in your example, they calculate that £100 in 1970 was about $370.
Then they use the Consumer Price Index to calculate that $370 in 1970 would buy what $1700 would buy now.
That is, this whole calculator is about purchasing power and has very little to do with Sterling/Dollar anything except for the fact that the creator wanted Americans to be able to use this tool. That is, a Brit would be happy to convert Sterling in that year to Sterling now.
In order to go back before there were formal currency exchange rates, they are relying on a consumables index which tracks purchasing power. Using this, you could actually translate this exercise into any currency since you are defining currency by how much you can buy of something at a certain point in time.
posted by vacapinta at 1:52 PM on July 4, 2010
This is interesting, to be sure.
I was just re-reading some of Wodehouse's Jeeves short stories, and (assuming 1930 as an arbitrary "between wars" setting for the stories) when Wooster hands out a five-pound note as a bonus to Jeeves he's really giving him almost $500. And when one of Bertie's friends approaches him on the street asking to "borrow" a ten pound note, the friend is actually asking to be given $1,000.
posted by maxwelton at 2:04 PM on July 4, 2010
I was just re-reading some of Wodehouse's Jeeves short stories, and (assuming 1930 as an arbitrary "between wars" setting for the stories) when Wooster hands out a five-pound note as a bonus to Jeeves he's really giving him almost $500. And when one of Bertie's friends approaches him on the street asking to "borrow" a ten pound note, the friend is actually asking to be given $1,000.
posted by maxwelton at 2:04 PM on July 4, 2010
That apples to oranges, right?
Yeah, these "X dollars in 1772 are the same as Y dollars today" tables and sites are misleading and worse. You will rarely find a historian making a statement like that, there are too many variables. If we want to contextualize some amount of historical currency we usually do it by comparing it to period costs: "The $80 that Stephen Burroughs stole in 1792 was equivalent to two months wages for a laborer and would have been enough to buy 100 acres of Ohio farmland."
posted by LarryC at 2:28 PM on July 4, 2010
Yeah, these "X dollars in 1772 are the same as Y dollars today" tables and sites are misleading and worse. You will rarely find a historian making a statement like that, there are too many variables. If we want to contextualize some amount of historical currency we usually do it by comparing it to period costs: "The $80 that Stephen Burroughs stole in 1792 was equivalent to two months wages for a laborer and would have been enough to buy 100 acres of Ohio farmland."
posted by LarryC at 2:28 PM on July 4, 2010
Psh we all know that the Dollar will be replaced with the Amero when NAFTA gives all our jobs to Canadians and our trucks are driven by Mexicans.
DEY TERK URR JERBS!
posted by msbutah at 3:33 PM on July 4, 2010
DEY TERK URR JERBS!
posted by msbutah at 3:33 PM on July 4, 2010
It's all very well to do calculations but what's the worth of the amount?
posted by unliteral at 5:55 PM on July 4, 2010
posted by unliteral at 5:55 PM on July 4, 2010
Cool. But in the explanation of pounds, shillings and pence (at the foot of the explanations page) he missed out a few units which were current in the UK right up to decimalisation in 1971:
The half a crown (2 shillings and 6 pence, or 2/6), on the other hand, was in normal, everyday use up to decimalisation (and usually known - at least where I grew up - as "half a dollar").
(The crown - 5 shillings - was minted up to 1965, but was largely a collector's item and not used as daily currency.)
The florin (2 shillings, or 2/-) was minted up to 1967.
The farthing, a quarter of a penny, was minted up to 1956, when its value had dropped so far that it had become useless.
The half penny (also written ha'penny) was, of course, worth two farthings.
All of this without getting bogged down in the colloquialisms. "Tuppence ha'penny" (pron. "hayp-ni") was 2½d. or a quarter of a shilling, a tanner was 6p. or half a shilling, so half a crown was two and a tanner (still with me?). Or getting into weird coins like the three-penny bit (pron. "thrupp-ni"), the twelve-sided, heavy brass coin. Or even older units you might come across in earlier texts like the groat (worth four pence or 4d.).
All in all, I was relieved when decimalisation was introduced. So were millions of schoolkids who no longer needed to calculate compound interest at 5% annually on £4.16s.5d.
posted by aqsakal at 12:41 AM on July 5, 2010 [2 favorites]
The half a crown (2 shillings and 6 pence, or 2/6), on the other hand, was in normal, everyday use up to decimalisation (and usually known - at least where I grew up - as "half a dollar").
(The crown - 5 shillings - was minted up to 1965, but was largely a collector's item and not used as daily currency.)
The florin (2 shillings, or 2/-) was minted up to 1967.
The farthing, a quarter of a penny, was minted up to 1956, when its value had dropped so far that it had become useless.
The half penny (also written ha'penny) was, of course, worth two farthings.
All of this without getting bogged down in the colloquialisms. "Tuppence ha'penny" (pron. "hayp-ni") was 2½d. or a quarter of a shilling, a tanner was 6p. or half a shilling, so half a crown was two and a tanner (still with me?). Or getting into weird coins like the three-penny bit (pron. "thrupp-ni"), the twelve-sided, heavy brass coin. Or even older units you might come across in earlier texts like the groat (worth four pence or 4d.).
All in all, I was relieved when decimalisation was introduced. So were millions of schoolkids who no longer needed to calculate compound interest at 5% annually on £4.16s.5d.
posted by aqsakal at 12:41 AM on July 5, 2010 [2 favorites]
Yeah, they mentioned the guinea (using the example of the cost of the Jane Austen book) on the explanations page. Has to be one of the funniest of all units, because it stayed in use as a unit of payment long after the coin itself was no longer minted, for another century and a half.
posted by aqsakal at 11:55 PM on July 5, 2010
posted by aqsakal at 11:55 PM on July 5, 2010
How about a nice chart that shows this. Rather than having to retrieve the data points manually.
posted by Maztec at 4:07 PM on July 10, 2010
posted by Maztec at 4:07 PM on July 10, 2010
aqsakal, that is a terrific breakdown, and very reminiscent of the archaic systems of measurements that the U.S. still clings to so inexplicably.
posted by Sys Rq at 4:20 PM on July 10, 2010
posted by Sys Rq at 4:20 PM on July 10, 2010
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