The UK decimalized its currency around 1970. Before that 240 pence made a pound (I think 20 pence made a shilling, and 12 shilling made a pound). So between 1970 and 1980 they had a "new penny’ where 100 pence made a pound.
OK, I understand the math is easier with 100 pence to a pound. However, decimalization is more or less a notational convenience since here in the United States we’re nominally decimal but we’ve actually got fractional coinage (“Quarter dollars” vs. “25-cent pieces”–and 5 nickels makes a quarter and four quarters make a dollar–not always decimal units (decimal implies 10) )
My question is though, why do we have sub units of currency? Yen doesn’t need them, neither do Turkish lira (or Italian lira, once upon a time). Indian paise are virtually worthless as to make the rupee the only unit of currency in India. But rather than phasing out the pound and keeping the old penny but creating a new unit that equal to 100 pence (and 10/24th of a pound) they went the other way.
Also, when the Euro came out it seemed almost natural that there had to be a sub unit, but why? Why do we so often define a currency with a base unit and an automatic sub unit rather than defining the base unit as the smallest reasonable unit of exchange (i.e. the cent in the case of the euro?)
Because then you’d be dealing with enormous numbers.
If £1 was the lowest unit, then a car that we say costs £40,000 would be£4,000,000 (I hope I have my math right there, somebody current me quick if not!). And a house of around £500,000 would be 50,000,000.
1 Japanese yen = 0.00709253813 British pounds. It’s less than a penny, so it makes sense for that to be the lowest unit.
You’re mistaken about the Lira though, it’s split into Kurus.
Actually the math was far easier and more convenient in the duodecimal system. Units of 12 and 240 were far easier to subdivide than units of 10 and 100, being more conducive to factorization.
There’s two separate issues here; decimalisation and granularity.
Currency is decimalised because, **aldiboronti’s;/b] points notwithstanding, it makes calculations easier. Yes, a shilling can be divided into halves, thirds, quarters, sixths and twelfths and the results expressed in whole pennies, but so what? As long as we use a base-10 number system, addition and subtraction are always going to be much easier with a decimal currency, and we spend rather more time adding and subtracting currency amounts than we do dividing them into thirds.
“Granularity” refers to the size of the basic currency unit. Yes, if your basic unit is small enough, then you don’t need any subdivisions, but there is no particular advantage to having no subdivisions. On the other hand, it’s a pain to write and read strings of zeros. Plus, there is something faintly demoralising about having a currency unit which is worth so little that it won’t buy anything at all, not even a matchstick. I doubt if there is any country that chose to have a small basic currency unit; those who have them got them as a result of intense or sustained periods of inflation.
They did consider going to a ten-shilling pound of ten pennies, but in the end they decided to bypass the shilling altogether. Of course since then inflation has made a nonsense of the monetary values involved, but that’s a different issue (and would have happened anyway).
Inflation means any monetary unit given enough time will cease to have fractional units. And later it will have to be replaced by a larger supra-unit. So in this continuous process it is useful to have units and subunits so that you can use the bigger units to account for larger things and the smaller units for account for the smaller things. It is more convenient if you have a larger unit to calculate the price of big things, like cars, and a smaller unit to account for a stick of gum.
This is very intuitive. But if it were true, then people in such countries would be motivated to introduce a new denomination, so that they would be able to leave out some of those zeros.
I know that in 1986, Israel switched their currency from the sheqel to the “new sheqel”, which was equal to 1000 old sheqels, precisely because of this situation. But I’ve never heard of it happening elsewhere. Not in Japan, Italy, Korea, or any of the other countries mentioned above. Most likely that’s simply because it escaped my notice. Can anyone offer other examples?
Sweden is weird in that the smallest coin is the 50 öre (100 öre make 1 krona) but shops sell things at smaller fractions of that. Looking in my wallet, my most recent receipt for the supermarket has this:
Now, using the coins and notes available in Sweden only three of those items can be bought for the exact cost and the total amount cannot be paid in the exact money.
So what happens?
If paying by credit card you pay the exact cost.
If paying with coins it is rounded to the nearest 50 öre and, yes, they do round down as well as round up.
Apparently we are soon going to lose the 50 öre coin as well, which will mean that the öre exists in practice but there will only be whole krona coins and notes.
The numbers don’t get too insanely high, as you can see from my receipt, as 1 USD is approx 8 SEK and 1 GBP is approx 15 SEK. A factor of ten (ish) isn’t too bad.
In South Africa the smallest coin is now the 5c piece, and when paying cash, most stores will either have all thier prices rounded off to 5c so that the total ends either with a 5 or a 0, or they will round down the grand total for you to the nearest 5c.
You can save a grand total of 4c if you choose your groceries carefully!
Despite the fact that the US still has a 1c piece, MANY cashiers are rounding. This is almost universal in small stores (where the cashier has more independence) and almost nonexistent in large chain stores (where the cashier has no independence).
This is accomplished two ways:
In many cases, either the customer or the cashier will round to the benefit of the other party. For example, if my purchase is $X.98, I’ll say, “Forget the pennies”. Or is the purchase is “$X.92”, the cashier will give me a 10c piece, instead of the exact 8c.
In other cases, there is a small bowl on the counter, with a number of pennies in it, labeled “Take a penny, leave a penny.” With this, if a customer has no pennies, he can take a few and pay the exact amount. Or if he receives some pennies in change, he can leave them there instead of putting them in his pocket. Either way, the cashier always has an exact amount, yet the customer is not burdened with any near-worthless coins in his pocket.
Well, in Italy, the Lira was of course replaced by the Euro. The Turkish Lira, on the other hand, which used to have a rate of exchange even higher than Italian Lira, recently divided by 1,000,000 to eliminate six zeros. So it does happen.
But it’s not fractional, and is completely decimal. Although it’s a quarter of a dollar, it’s still 25 complete cents. Prices aren’t marked in terms of the value of the coin, i.e., newspapers are no longer “two bits” (one quarter, or 25 cents). When one sees a price of $1.75, one doesn’t immediately think, “one and three quarters dollars.” It’s completely decimal.
In many respects, all decimalized currency is like this. It’s just matter of applying different volcabulary. My height is 188 cm, and also is 18800 mm, and also 1.88 m. Granted, it would be silly for me to pay 499 cents for a cheeseburger, but at $4.99 it’s the very same thing.
Having used UK currency all my life, I don’t agree at all. :eek:
We had to learn our 11 and 12 times tables at school, purely to cope with the currency.
When 12 pennies (d) made a shilling (12d) and 20 shillings (s) made a pound you were constantly multiplying by 12, or doing other timewasting calculations:
“It costs 5s 3p. I’ve got 7s 2p, so if I buy it I will have 1s 11p change.”
I have handled a farthing (0.25d), a halfpenny (0.5d), a threepenny bit (3p), a sixpence (6d), a shilling (1s) a half-crown (2.5s) and a guinea (£1 1s).
(I don’t remember florins (2s) or crowns (5s), but there you go.)
I just wanted to add that this is exactly how we handle the penny in Canada too. There’s a private members bill tabled in the House of Commons to eliminate the penny, but beats me if it will ever get passed.
One-cent and two-cent coins were withdrawn from circulation in Australia in 1992, end even though prices are still quoted in cents (e.g., $1.98), if you are paying with cash, the total is rounded to the nearest 5 cents.
(When this started, there was story about a guy who bought one grape at a supermarket. The total was 2 cents, so it was rounded down to 0 cents, i.e., he got the grape free. I suspect that the store didn’t worry about that loss.)
