When I lived as a student in London 1991-92, one day I decided to visit the Bank of England to see what they would do if I presented a 5-pound note for redemption of the promise to pay the bearer “five pounds” on demand. The tale was told in a guest reflection in Liberty in 1994.
The guest reflection:
Funny money — There’s some funny language on the money in England. The five-pound note contains the statement, “Bank of England: I promise to pay the bearer on demand the sum of five pounds.” Five pounds of what? If you ask anybody on the street, the note is five pounds, and they obviously aren’t talking about units of weight—so what could that statement possibly mean? I decided to visit the Bank of England in downtown London to make them make good their promise. What would they do—hand me back another five-pound note in exchange for the one I offered?
I was stopped at the door by a security guard. I explained that my note said that the Bank would give me five pounds upon demand for it, and that I was hereby demanding they fulfill their obligation. He explained I couldn’t get past the front desk without wearing a three-piece suit and having “official business.” The man behind the front desk had little patience, telling me that perhaps I’d find some information if I went to the Bank of England Museum around the corner.
So I left and went to the museum, which is quite nice, actually. I explained to a curator what had happened, and that I was interested in finding out what exactly the language could mean. It obviously didn’t function as a promise to pay me five pounds—the bank wouldn’t even let me through the door! She disappeared into a back room and, finally, dug up an old photocopy from God-alone-knows-where, which attempts to explain the meaning and evolution of the “I promise to pay the bearer” language. I took the pages home and tried to understand them [note: these pages are included in the attached PDF file]. Apparently, the Bank is now contending that the language only means, and only ever meant, that it has an obligation to replace old, out-of-circulation pound notes with new, in-circulation ones.
Right. That’s what “I promise to pay the bearer on demand the sum of five pounds” means.
—guest reflection by N. Stephan Kinsella
I just received (Jan 24, 2015) an interesting bit of correspondence about this:
Dear Mr Kinsella,
I was just reading an excellent Economist article  that pointed me to your own article :
change/2015/01/switzerlands- monetary-policy — 21Jan15, by Simon Cox
/2010/03/the-bank-of-england- and-me — 21Mar10, by you
In Sep10, I wrote to Andrew Bailey, (BoE Chief Cashier at the time), along the same lines:
“… On every banknote, you make a promise to “pay the bearer on demand the sum of… pounds”. Which begs the question: how could I take you up on this promise??
If I walked into the Bank of England (well I don’t suppose I would get through security, but let’s ignore that practical detail for a moment) with a tenner say, and asked to call in that particular promise, the what would you do? Hand me another tenner in exchange for mine I suppose?”
Remarkably, Mr Bailey took the time and trouble to reply. In case you are interested, I have appended our correspondence below.
Yours sincerely, [A.]
——– 27 Sep 10 ——–
Subject: How could I take you up on your promise??
Mon, 27 Sep 2010 14:40 From: [A.] To: Andrew Bailey
Dear Mr Bailey,
I just enjoyed your short interview “The man who signs your banknotes” on BBC News (http://news.bbc.co.uk/1/hi/bu
siness/7883393.stm). I am very glad to hear you would like to see more fivers in circulation:-)
Anyway, there is a conundrum that probably has no sensible answer, but if anyone has one it surely must be you… On every banknote, you make a promise to “pay the bearer on demand the sum of… pounds”. Which begs the question: how could I take you up on this promise??
If I walked into the Bank of England (well I don’t suppose I would get through security, but let’s ignore that practical detail for a moment) with a tenner say, and asked to call in that particular promise, the what would you do? Hand me another tenner in exchange for mine I suppose? It all seems rather circular and pointless.
Yes I know a little about the gold standard.
It just tickles me that the most(?) widely published promise is, actually, meaningless (unless I am missing something).
——– 30 Sep 10 ——–
Thu, 30 Sep 2010 07:34 From: Andrew Bailey
Thanks for getting in touch. There is a point to the “Promise to Pay” but it isn’t quite the purpose that my forebears had in mind. You are correct that in the past, the Promise was a commitment to convert into gold. Convertibility came to an end around eighty years ago, and hence the Promise is today a commitment to exchange one banknote for another.
There is however one area where the Promise has real meaning. A Bank of England note can always be exchanged at the Bank’s counter. From time to time we withdraw a note design from circulation and issue a new more secure design. After a period of co-circulation while the changeover takes place, we withdraw legal tender status from the old design. A fairly small proportion of the old notes are not returned before legal tender status is withdrawn. However, all Bank of England notes, however old, will always be honoured and exchanged by the Bank. In this sense the Promise is a commitment to exchange at all times for a current note.
I hope this helps
11:47 From: [A.]
Thank you very much for taking the time to reply, which I read with much interest.
It certainly does help, and I must say I am very happy to hear that it isn’t actually meaningless!
Further comments from the same correspondent:
They probably get asked a few times. After all, when you print something a billion times, that’s somewhat meaningless, it isn’t really surprising. And there’s no really good answer to the question: fiat money is based on trust, belief and credibility. Hence the imposing (physical) architecture of the BoE’s premises.
And another from one of his cc’s:
About a dozen years ago, I remember reading about a student art project called the “monetary inquiry association” by Simon Goldin. The student asked the BoE to make good on its promise of ten pounds. The results were amusing. He also wrote to a bunch of experts asking them to define money. Most provided boring textbook answers. One economist however explained that money was memory. Anthony Horsley of LSE also gave a thoughtful reply if I recall correctly.
You’ve just prompted me to look it up on the interweb. It’s still there. Here’s the link:
Update: See art project: what is money?:
Shedding some light on the darkness surrounding money is (or apparently was) the aim of the Monetary Inquiry Association (MIA), founded by British artist Simon Goldin. The MIA claims to have endeavored to become a leading authority on the questioning of money.
As a first activity, Simon Goldin sent a 10-pound note to the Bank of England and asked the bank to give him the ten pounds, as promised on the note to the holder in such a case. This was to implicitly question what those ten pounds are all about. A letter of the same name was also sent to 45 experts from the London School of Economics and to the heads of the nine largest banks in Great Britain asking them to provide their definition of money.
Goldin’s request to the Bank of England led to a curious exchange of letters, which you can see below.
More detailed information, including answers from the experts, was previously available on the MIA’s apparently discontinued website at www.monetaryinquiryassociation.org. The report (pdf) is still available: MIA_Progress_Report.pdf .
I also found the following blog entry from 2010 on www.stephankinsella.com: The Bank of England and Me .