Abandoning Sterling for Rum
During the early years of the New South Wales colony, rum became a prevalent currency due to shortages in coinage. Out of necessity, this informal monetary system lasted for several years; though numerous infrastructure projects were completed in this time, including the rum hospital. Maybe this would help us finally finish HS2? Eventually the governor brought the system under control due to the gross political corruption in distribution and the fact that an alcoholic wage is not conducive to productive labour, apparently.
Fundamentally, a stable currency ensures stable incentives for work as the ability to be compensated for labour underpins the economy. The creation of economic certainty in Britain has foundations in the stability of the pound; a strong currency ensures investment into the nation as people feel secure in their futures. As a result, unemployment rates drop as the economy grows; ultimately, a strong currency has a multiplier effect in a nation as purchasing power increases and improves living standards for the people. The dwindling power of the pound has led to issues such as strike action which is currently paralysing the London Underground and is only depressing the economy further.
Not only does a stable pound improve the prospects of individuals in Britain through economic boom, but it also helps to strengthen the nation internationally. The predictability of the prices of British goods and services makes them more favourable for foreign buyers. Indeed, the ability for British firms to trade without the impact of price volatility creates an image of safety. Generally, the stability of the sterling determines foreign investment as the weakening of currency produces risks of exchange losses and signifies pervasive issues within the economic and political spheres of Britain.
Though Australian monetary problems were due to currency shortages, a devaluing currency seems to be proving equally problematic for the British people. The depreciation of the British pound is both a cause and a consequence of the general economic weakness of the nation. The decline of the currency came about due to numerous reasons; from the residual effects of 2008 to the lack of faith in government competency. The increasing budget deficit in Britain undermines international confidence in the economy, scaring off investors and driving up borrowing costs. Due to this, it becomes more and more difficult for our economy to escape its downward trajectory. Moreover, the shift to fiat currency gave the government autonomy and ended the dependency on the price of gold; value instead became tied to the strength of the country; whilst this is clearly useful in many circumstances, the pound is currently experiencing the impact of both an unstable government and economy.
In order to stabilise the economy the depreciation of the pound must be slowed. From increasing productivity to improving trust in government, (maybe starting with limiting tax avoidance from inside the cabinet) the currency must be strengthened in order to effectively participate in international trade, lower borrowing costs, and improve Britons’ living standards, or we might as well go back to trading in rum. At least it would take the edge off!
Anna Casey