The Bipolar International Monetary System and the British Pound

Abstract

When the euro was introduced early in 1999, the overwhelming majority of politicians and theoreticians were convinced of its success. This view reflected not only their view that the introduction of the euro was inevitable, but of greater importance was the previous year’s strong position of the Deutschmark (DM) - the key currency of the European Monetary System (EMS) prior to the introduction of the euro - relative to the dollar. It was also seen that the low interest rate of the DM indicated a smooth transition from 11 European currencies to one joint currency.