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In the first half of this decade, the world experienced a period of low short and long-term interest rates. Shortterm rates have risen from these low levels, first in Canada and the United Kingdom, then in the United States and finally in the Euro Area. Long-term rates, by contrast, remained low, suggesting that holders of longterm
debt expected the rise in short-term rates to be only temporary. Only in the past few months has the apparently anomalous pricing of long-term debt started to disappear. But with interest rates on long-term debt similar to short-term market rates internationally, the market does not yet show that the traditional upwardsloping yield curve and, on this basis, long rates remain depressed. They are also markedly below the levels of two to three years ago.

Discussion around the time of the budget focuses on the state of the Government's finances, both in terms of the balance of income and expenditure, and also on their implications for the government balance sheet. Despite the wide-ranging nature of some of the budget commentary, the issue of the national balance sheet received no discussion there and attracts little attention generally.

The article begins with an account of the way in which the value of the pound has changed over the last 1300 years or so. This is indicated in terms of silver and, for the last 7–800 years, also in terms of gold, wheat and Phelps-Brown's general cost of living basket. It is shown, for example, that the whole of the increase in the price of silver since 1000 has occurred in the last 60 years. These prices are used to indicate how the real wage of a building labourer has changed since the 13th century. The article then proceeds to an account of the evolution of the currency itself, from its beginning as a pound of silver cut into 240 pennies (following continential practice) to the move to a gold currency and the introduction of paper money. It concludes with a discussion of whether the whole concept of currency will eventually become obsolete.