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Why is sterling the highest value currency in the world? Watch

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    I assume that the healthier a country's economic position the more its currency is worth relative to other countries. I assume the high value of the pound is due to the fact that our empire was the most successful of all the European ones back in the day. But why hasn't the dollar superseded the pound? America's been the big dog for over a century.

    And why are the franc, the yen and the deutschemark worth so little in comparison?

    Or is it not this simple? Is it even economically possible for a currency originally valued at a fraction of another to ever reach a 1:1 ratio (or higher)?

    (Obviously you could revalue the currency but that's obviously not the same.)
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    It isnt.

    KWD is.
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    It's not the highest valued.
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    Isn't the number of currency x you get in return for currency y totally arbitrary? So what if you get 150 yen for a pound, salaries in Japan are very roughly 150 times higher, and everything costs very roughly 150 times more. It's just a number. Why does it matter?
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    Oh wow, learn something new every day I guess.

    (Original post by James Gregory)
    Isn't the number of currency x you get in return for currency y totally arbitrary? So what if you get 150 yen for a pound, salaries in Japan are very roughly 150 times higher, and everything costs very roughly 150 times more. It's just a number. Why does it matter?
    I'm wondering if, in an idealised system where currencies were not pegged, gold-standardised, or revalued, the numbers would reflect the relative historic economic clout of the countries on the world stage.

    Like say America, a colony of Britain, starts out pegged to the pound (for argument's sake). Its economy is likely to start out badly so the currency would then drop to much lower than the pound. America is an example of a successful colony; how long would its economic hegemony have to last to catch up or surpass the pound, if it ever (mathematically speaking) could?
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    (Original post by Arekkusu)
    Oh wow, learn something new every day I guess.



    I'm wondering if, in an idealised system where currencies were not pegged, gold-standardised, or revalued, the numbers would reflect the relative historic economic clout of the countries on the world stage.

    Like say America, a colony of Britain, starts out pegged to the pound (for argument's sake). Its economy is likely to start out badly so the currency would then drop to much lower than the pound. America is an example of a successful colony; how long would its economic hegemony have to last to catch up or surpass the pound, if it ever (mathematically speaking) could?
    But over history currencies have constantly been created, abandoned, reformed, merged, etc, and also the subdivisions of currencies often vary. Like for example:

    - The Japanese do not subdivide the yen, so they're more like pence, not pounds
    - Meanwhile we used to subdivide pennies into quarter pennies (farthings), and at that time I imagine a whole pound would have seemed like a large amount of money
    - Your original post mentions francs and deutschmarks, but these currencies no longer exist (that was just an oversight, right? You do know that across the channel they're got this whole Euro thing going on?)
    - Germany had several different currencies in the early 20th century, reforming their currency under a new name repeatedly due to hyper inflation
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    (Original post by James Gregory)
    But over history currencies have constantly been created, abandoned, reformed, merged, etc, and also the subdivisions of currencies often vary. Like for example:

    - The Japanese do not subdivide the yen, so they're more like pence, not pounds
    - Meanwhile we used to subdivide pennies into quarter pennies (farthings), and at that time I imagine a whole pound would have seemed like a large amount of money
    - Your original post mentions francs and deutschmarks, but these currencies no longer exist (that was just an oversight, right? You do know that across the channel they're got this whole Euro thing going on?)
    - Germany had several different currencies in the early 20th century, reforming their currency under a new name repeatedly due to hyper inflation
    Lol yeah, obviously I meant that they have been powerful currencies the past century. The Euro wouldn't be a fair comparison because it's not a country. I would continue to argue that my premise would stand:
    - in an idealised world without artificial revisions
    - where each currency, ultimately, starts at parity with the rest

    so that the strength of the economy would be directly reflected in the value of the currency.

    And technically the Japanese do subdivide the yen but the currency is so tiny no-one bothers with the smaller coins.
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    (Original post by James Gregory)
    Isn't the number of currency x you get in return for currency y totally arbitrary? So what if you get 150 yen for a pound, salaries in Japan are very roughly 150 times higher, and everything costs very roughly 150 times more. It's just a number. Why does it matter?
    It is arbitrary in a way.

    But let's say today you get 150 yen for 1 pound, and salaries/prices are roughly 150 times higher. When the Japanese economy starts improving and the yen becomes a more stable and desirable currency to have, you might only get 100 yen per pound. Salaries and prices haven't varied, they're still 150 times higher. Only the exchange rate has varied. The fact that the pound is worth fewer yen than it was before is a mark of the Japanese economy having improved, or the British economy having deteriorated. Hard currencies are those with good buying power (such as the yen, pound, dollar, euro etc.) whose value is expected to increase with respect to other currencies.

    Ultimately you're right, it is arbitrary in absolute terms. If we wanted, we could have the strongest currency unit in the world just by renaming our denominations. What we currently know as £10, we could rename to £1, and work from there. But the exchange rate only really means anything in relative terms. It would be nice to have the strongest currency, but as a result in the increased value of the pound with respect to other currencies, not simply due to renaming our denominations. That way, the pound would be worth more, but we still have the same number of pounds in our bank accounts too.
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    (Original post by tazarooni89)
    It is arbitrary in a way.

    But let's say today you get 150 yen for 1 pound, and salaries/prices are roughly 150 times higher. When the Japanese economy starts improving and the yen becomes a more stable and desirable currency to have, you might only get 100 yen per pound. Salaries and prices haven't varied, they're still 150 times higher. Only the exchange rate has varied.
    Of course, I understand that exchange rates fluctuate relative to each other and that this is of massive importance to the way international trade takes place.
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    (Original post by James Gregory)
    But over history currencies have constantly been created, abandoned, reformed, merged, etc, and also the subdivisions of currencies often vary. Like for example:

    - The Japanese do not subdivide the yen, so they're more like pence, not pounds
    - Meanwhile we used to subdivide pennies into quarter pennies (farthings), and at that time I imagine a whole pound would have seemed like a large amount of money
    - Your original post mentions francs and deutschmarks, but these currencies no longer exist (that was just an oversight, right? You do know that across the channel they're got this whole Euro thing going on?)
    - Germany had several different currencies in the early 20th century, reforming their currency under a new name repeatedly due to hyper inflation
    This seems very logical, I would support this hypothesis.
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      We suck! :'(
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      Well as users above have already pointed out, it's not the highest value currency in absolute terms.

      As far as the strongest currency goes (which is also a difficult measure), the swiss franc is widely considered to be the strongest. It has retained its purchasing power better than any other currency.
     
     
     
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