As someone who lives in the UK why is Sterling generally stronger than many other, more widley used currencies like the Euro or Dollar?
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It’s not stronger, it’s just a different unit. The Euro & Dollar are generally much more stable and better backed, which is usually what we mean by “stronger”. The Euro & Dollar are both attached to considerably larger economies than the Pound Sterling.
The original discrepancy in value of the units comes from their definition…they were tied to different quantities of silver. Both have drifted plenty over time since they’re not tied to metal anymore.
It’s not stronger, it’s just a different unit. The Euro & Dollar are generally much more stable and better backed, which is usually what we mean by “stronger”. The Euro & Dollar are both attached to considerably larger economies than the Pound Sterling.
The original discrepancy in value of the units comes from their definition…they were tied to different quantities of silver. Both have drifted plenty over time since they’re not tied to metal anymore.
It’s not stronger, it’s just a different unit. The Euro & Dollar are generally much more stable and better backed, which is usually what we mean by “stronger”. The Euro & Dollar are both attached to considerably larger economies than the Pound Sterling.
The original discrepancy in value of the units comes from their definition…they were tied to different quantities of silver. Both have drifted plenty over time since they’re not tied to metal anymore.
When people talk about currencies being strong or weak, they mean relative to other time periods. If 1 glorg is worth roughly 10 flobs for many years, but then we go through a period in which 1 glorg is only worth 5 flobs, then the glorg might be described as weak or the flob as strong.
This is assuming that prices of goods have stayed roughly the same in each currency. Occasionally, a country will revalue their currency: Flobland might introduce a new flob, worth 10 old flobs. This will change all the exchange rates by a factor of 10, but it will also change prices and salaries in Flobland by a factor of 10, so it won’t make any difference overall.
When people talk about currencies being strong or weak, they mean relative to other time periods. If 1 glorg is worth roughly 10 flobs for many years, but then we go through a period in which 1 glorg is only worth 5 flobs, then the glorg might be described as weak or the flob as strong.
This is assuming that prices of goods have stayed roughly the same in each currency. Occasionally, a country will revalue their currency: Flobland might introduce a new flob, worth 10 old flobs. This will change all the exchange rates by a factor of 10, but it will also change prices and salaries in Flobland by a factor of 10, so it won’t make any difference overall.
When people talk about currencies being strong or weak, they mean relative to other time periods. If 1 glorg is worth roughly 10 flobs for many years, but then we go through a period in which 1 glorg is only worth 5 flobs, then the glorg might be described as weak or the flob as strong.
This is assuming that prices of goods have stayed roughly the same in each currency. Occasionally, a country will revalue their currency: Flobland might introduce a new flob, worth 10 old flobs. This will change all the exchange rates by a factor of 10, but it will also change prices and salaries in Flobland by a factor of 10, so it won’t make any difference overall.
It’s not stronger, they just cut up their economy into fewer slices.
Imagine two large pizzas… one cut into 8 slices, one cut into 6 slices. Each slice of the pizza cut into 6 slices is bigger, but that’s not an indication of it being from a larger pizza.
Same thing with currency. Each Pound represents a fraction of the UK economy, and they could double the number of Pounds in circulation and cut the value in half, but that wouldn’t affect the strength of the economy because the total value is the same, just more “slices.”
It’s not stronger, they just cut up their economy into fewer slices.
Imagine two large pizzas… one cut into 8 slices, one cut into 6 slices. Each slice of the pizza cut into 6 slices is bigger, but that’s not an indication of it being from a larger pizza.
Same thing with currency. Each Pound represents a fraction of the UK economy, and they could double the number of Pounds in circulation and cut the value in half, but that wouldn’t affect the strength of the economy because the total value is the same, just more “slices.”
It’s not stronger, they just cut up their economy into fewer slices.
Imagine two large pizzas… one cut into 8 slices, one cut into 6 slices. Each slice of the pizza cut into 6 slices is bigger, but that’s not an indication of it being from a larger pizza.
Same thing with currency. Each Pound represents a fraction of the UK economy, and they could double the number of Pounds in circulation and cut the value in half, but that wouldn’t affect the strength of the economy because the total value is the same, just more “slices.”
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