diamond geezer

 Tuesday, January 20, 2004

When will you pay me?

The 'Old Lady' in the photograph is the Bank of England, sited close to the first two churches mentioned in the Oranges and Lemons rhyme. The bank was established in 1694, moving to its current site in Threadneedle Street in 1734. The present building is an austere fortress, as you might expect, with sheer windowless walls at ground level and just a couple of enormous wooden doors leading inside. There are no cashpoints, no big adverts for mortgages, and no long queues of punters standing around waiting and looking miserable every lunchtime. It's not that sort of bank, you see.

The Bank of England prints millions of banknotes each year, just out of town in Essex. Each of these banknotes is, essentially, a worthless scrap of paper, apart from the inscription "I promise to pay the bearer on demand..." which gives the note its value. This promise used to be backed up by gold reserves, so that for every banknote issued there was an equivalent amount of gold in the vaults. Not any more though, not since 1931, and now the Bank merely issues notional money. However, we're all still entitled to pop down and demand that they exchange our notes for the equivalent value in gold bullion, should we so wish. Current rates indicate that a £10 note would be exchanged for just under 1g of gold, £160 for 1cm³ and the average UK house for 20kg. Admittedly it would be difficult to buy our weekly groceries by paying with a gold ingot, but the principle is sound. Just so long as we don't all turn up at the Bank of England at the same time to ask for our money back, because it isn't all there. See you all down there tomorrow at noon then?

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