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What Does It Mean When A Banknote Says, Bring It In And Exchange It ?

 
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Valued Member
Australia
56 Posts
 Posted 03/31/2020  09:17 am Show Profile   Bookmark this topic Add crok to your friends list Get a Link to this Message
many banknotes say this banknote is eligible to be redeemed for something else ; like 20 pounds sterling or whatever ?

I am not talking about silver or gold certificates that in the past were swappable for physical metals as " hard " money.

i am talking about modern banknotes. if I have a modern banknote that says ' I promise to pay the bearer ten pounds ' but as what ?

This is a british ten pound banknote , so when I swap it what do I get ? a different ten pound banknote ?

or is this just some legalese jargon to give worth much less paper / plastic money some sort of face value and like a politicians promise is simply noncollectable ?

can anyone explain this to our members . . . please ?

*** Moved by Staff to a more appropriate forum. ***
Edited by crok
03/31/2020 09:20 am
Pillar of the Community
Canada
3430 Posts
 Posted 03/31/2020  11:20 am  Show Profile   Bookmark this reply Add oriole to your friends list Get a Link to this Reply
I have often wondered about that phrase. I think that it is an historical relic. As you say, all they can do is give you another banknote.

In Canada our notes say nothing at all about that or even that they are legal tender. There is probably some law somewhere.
New Member
Canada
9 Posts
 Posted 03/31/2020  12:14 pm  Show Profile   Bookmark this reply Add 10cents to your friends list Get a Link to this Reply
Since leaving the gold standard it basically only means that you can trade in a bill that is out of circulation for some reason for another bill that is.

"The words 'I promise to pay the bearer on demand the sum of five [ten/twenty/fifty] pounds' appears on all of our banknotes. This phrase dates from long ago when our banknotes represented deposits of gold. At that time, a member of the public could exchange one of our banknotes for gold of the same value. For example, a 5 note could be exchanged for five gold coins, called sovereigns.

However, the value of the pound has not been linked to gold for many years, so the meaning of the promise to pay has changed. You can no longer exchange banknotes for gold. Bank of England banknotes can only be exchanged for other Bank of England banknotes of the same face value.

We now maintain public trust in the pound through operating monetary policy."

https://www.bankofengland.co.uk/faq
Moderator
Learn More...
Australia
13324 Posts
 Posted 03/31/2020  6:30 pm  Show Profile   Bookmark this reply Add Sap to your friends list Get a Link to this Reply
The "promise to pay" is in coins. No longer precious metal coins, but coins nonetheless. They are promising to give you 10 pounds worth of legal tender coins in exchange for that note. Because it is the coins, not banknotes, that remain the theoretical fundamental basis of currency of a country, as coins are issued directly by governments and not by banknote-issuing authorities.

Yes, it is an anachronism, a relic of the days when the coins being promised were actual pieces of gold, which the bank was obligated to keep in storage in case you did desire to claim the promise made on the note.

They would probably get around to removing the promise if a whole bunch of people decided to try to make the claim all at once, since there's no way the Bank of England is storing vast amounts of coinage against that eventuality. They'd run out of coins, and their "promises" would become worthless.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis
Pillar of the Community
United Kingdom
2478 Posts
 Posted 03/31/2020  6:39 pm  Show Profile   Bookmark this reply Add DavidUK to your friends list Get a Link to this Reply
In England since the Bank of England is the sole issuer of notes they are legal tender (unlike in Scotland which has multiple issuers and the coins are the only legal tender even though the notes are treated as such)

I agree with the earlier points about promising to pay in gold, and now in coins.

Earlier in the life of the Bank of England there was a run on the banks where everyone came to exchange the noted for gold. At this stage there were far more notes issued than gold available so the bank got its own employees to pretend to be customers and withdraw large sums of gold which they would exit with and then deposit at the rear of the building. The appearance of the bank giving out large amounts of gold and acting as if there was no issue reassured everybody and averted the disaster that a run on a bank can cause.
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