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PASTOR GENERAL'S REPORT, JANUARY 25, 1985
PAGE 9
But unlike past sterling crises, the plunge this time neither is
being caused by grave financial problems nor is causing them ••••
Indeed, apart from a 13% unemployment rate, much of the recent
economic news has been relatively good. Inflation remains modest
at about 5%, Britain's balance of payments is in the black, its
foreign debt is low, and exports, especially to the U.s., are
climbing••••
All currencies have been dropping against the almighty dollar, of
course, but the pound has fallen most•••• But the pound has even
fallen 8% against the mark and 8.7% against the franc in the past
year. And in yet another indignity, it has sunk below� l-to-1
exchange rate against the Russian ruble. On Tuesday, the Soviet
state bank set the official exchange rate at 99.38 kopeks to the
pound, down from 1.13 rubles a year ago.
Explaining the pound's special weakness, currency experts advance
two main reasons: uncertainty about the price of oil, on which
the British economy has become heavily dependent, and concern
that British industry, despite its recent progress, remains a
poor competitor in international markets. In addition, the 10-
month-old strike by British coal miners has slowed the U.K. eco
nomic recovery••••
Sterling long ago ceded its role as the dominant world currency
to the dollar. But the decline of the pound--whose history as an
official currency dates back to William the Conqueror--has been
nonetheless painful: It symbolizes Britain's decline�� world
power. "It's unpleasant to be told you're not what you used to
be," notes Charles P. Kindleberger, an American economist and au
thor of "Manias, Panics and Crashes," a history of financial cri
ses.
In its feature in-depth article entitled "The Pound: Pride Goeth Before a
Fall," the January 17 LOS ANGELES TIMES also stressed the symbolic impor
tance of the pound's fall. The article also traced the interesting history
of what had once been the world's most sought-after currency.
The British pound was �-
as strong � national symbol� the
queen or the Royal Navy. For generations, the pound, backed by
gold and silver bullion in the vaults of the Bank of England, was
a benchmark against which other currencies were measured.
In the outposts of empire--Shepheards's Hotel in Cairo, the Raf
fles in Singapore--the pound reigned supreme. It was the reserve
currency for dozens of countries, not only in the empire and the
Commonwealth but in many others whose currencies were linked to
the pound.
On the eve of World War II, the pound was equivalent to $4.68, and
people who remember that find it difficult sometimes to get used
to the new pound, a pound that is now valued at only $1.12. Al
ready, some New York hotels are giving only a dollar for the
pound.
For many, this is yet another reminder that Great Britain is not
� "Great" .!2 it used to be. It is no longer the powerhouse of