Early Stages Of Development

England has always been known as a commercial power, and more so as a maritime power. In the early stages of English commerce, facilities afforded by English enterprise to the commercial world, in the way of transportation by ocean carriage, attracted a large number of merchants from all nations. This advantage over other trading countries brought great volumes of business to England, and as a result, her merchants became very wealthy.

England Becomes A Financial Center

To meet the demands arising from increased trade and commerce, banking and financial institutions performing every function of finance were from time to time called into being and developed, thus making London a great financial power and virtually a clearing house for international settlements and a place of deposit for bankers and merchants all over the world.

The English banks, further, by the establishment of numerous branches in all parts of the civilized world brought home to the merchant of English nationality abroad a direct means of assistance, and the commerce that this particular country carried on until the outbreak of the war was far in excess of that of any other nation.

The Pound Sterling

With this increasing wealth and by reason of England's financial ability to finance the trade, not only of England and the colonists, but of other nations as well, the pound sterling, which is the English standard of money, was formally established and came to be used in preference to all other forms of currency as a basis for exchange. Thus, a transaction between Brazil and England involving a shipment of coffee, or, a transaction between China and England involving a shipment of tin, or, a transaction between Japan and America involving a shipment of silk, would in the majority of international transactions necessitate the drawing of a bill on London, and for the acceptance of this draft, London bankers would charge a round commission.

The reason for this preferred use by foreign merchants of the pound sterling as a medium of exchange in international trade transactions, was that a bill drawn in the English standard of currency could always be converted into the local currency of any country at a close rate of exchange; whereas, bills drawn in the currency of other countries would have no such good markets.