The history of forex trading dates back centuries ago. Since the Babylonians, people exchange different currencies. The credit of using receipts of transactions and currency notes goes to Babylonians.
The barter system was in use at that time. Moreover, Goods were exchanged for goods. But there were many limitations to this system. People could not buy their desired things using this. This established the need for developing a more general system for the exchange of things. In different ages, the Base value used different items like teeth, stones, feathers salt, and various other things. In due time, valuable things like various metals including silver, gold or sometimes diamond replaced these things. this system helped to carry trade mostly in Asia, Africa, and North America.
Initially, the coins were made of the most valuable metal and the name, picture or some credentials of the ruling government were imprinted on them. People accepted the paper form of currency during the middle ages. The paper currency that we use today was introduced by force, not by persuasion.
How Forex Trading Overcame the Limitations?
Most Central Banks used to support their currencies with the help of gold before World War I. But this standard based on the exchange of gold had its own limitations and weaknesses. As the economy of a country improved, it imported more and more gold within the country. In this way, the gold reserves of the country ran down and the supply of money decreased. This resulted in very high-interest rates and the economy of the country weakened to the verge of complete shutdown. Finally, the prices of commodities in that country dropped appearing beneficial to other countries, who would buy until the value of money in that country increased back to normal. This situation doesn’t occur normally but it’s a situation that cannot be ignored.
However, this possibility made the economic planners think a verse situation called “Run on banks” in which the banks have to restore the mass supply of gold. The supply of large amounts of paper money in combination with the diminished sources of gold leads to severe inflation and political instability. The gold standard, removed from the Forex market in 1931 lead to a great lull in the Forex market. A lot of changes took place in the Forex market from 1931 to 1973. These changes affected the global economies to a great extent. Forex exchange controls protect the national interests of different governments.
Know Your Forex History Better
Near the end of World War II, the USA made the Bretton Woods agreement in 1944. The price of USD was decided as 35.00. This was for one ounce of gold. And other main currencies were set according to it.
Different national economics moved differently in the 1960s. It created a lot of pressure for the incoming Bretton Woods system. A large no.
realignments kept this system alive but finally, the system broke in the 1970s. It was because of the suspension of gold convertibility by President Nixon. The dollar was under severe pressure created by the trade defects and the budget of the US government. The world realized that the dollar alone cannot be an international currency.
Our Take on Forex Trading
In the previous few decades, the Forex market has developed into the largest trading market in the world. It is so large as compared to other global markets that other markets seem to be dwarfs in front of it. Forex market is certainly the largest financial market in the world. It trades almost 1.9 trillion dollars daily. Forex trading has emerged as a wonderful opportunity for investors in the modern world.