Why is the British pound more valuble than the American doller? Or most other currency?
by 
honeybee
ANSWERS: 5
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It is just a function of the amount in circulation per capita, rate of inflation and the strength of our economy in general....bottom line=we are the best lol
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I think that the British pound started out as an actual pound, of sterling silver, and the shillings were ounces. There have been various changes in its definition over the centuries, but the whole idea was to create a large unit of currency for large expenditures. Other countries have done the same thing; the Persian talent, or mina, was about 62-1/2 pounds, either of silver or gold. It was about as much weight as man could lift and (in silver) was about as much money as a man could earn in twenty years. (Week's wage back then was an ounce of silver, a coin the size of a silver dollar but not alloyed.)
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Currency values are determined by market demand for the goods that a country produces. The exchange rate values are a market reflection of that demand. What this simply means is that if Britain exports more than it imports it's currency will be in more demand since in order to buy anything from Britain you need to pay in British pounds. To do this you purchase pounds on the free market. Like anything else, the higher the demand is for those pounds the higher the price will be since sellers want the most they can get. The more productive a country is in producing and selling goods, the higher it's currency exchage value will be relative to other countries.
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When individual countries started to use money, rather than barter, they did so in isolation so when they started trading with each other they discovered that one unit of one country's currency had a different purchasing power from the currency in a different country. The situation with the US dollar and pound Sterling is a strange one because, prior to independence, the pound Sterling must have been the currency, so one would have expected the new currency to approximate to the old. Perhaps the reason for the difference was just a desire to be seen as different. The relative values of different currencies fluctuates as different financial considerations change. 50 years ago the pound was worth $2.60.
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Historical chance, more or less. Most long-lived currency units were, at some time in their past, tied to some physical item of value, such as gold or silver. However, there are a number of ways in which this attachment breaks - mainly because expansion of the economy requires more currency than that is gold or silver to back. Once this has happened, inflation (i.e. the falling of the real value of the currency) can occur for many reasons. The absolute value of the currency unit today is a reflection of how much inflation there has been at various times in the past. But, in real terms, it matters not in the slightest; if you have a smaller currency unit, you earn more of them. The Japanese, with a tiny currency unit, get lots more, so it is very easy to become a yen millionaire (less than 9000 dollars, so a car could easily cost a several million yen).
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