Forex History.

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History of Forex

History of Money

Money has been around in one form or another since the time of Pharaohs. The Babylonians are credited with the first use of paper bills and receipts, but Middle Eastern moneychangers were the first currency traders who exchanged coins from one culture to another.

The Barter SystemCenturies ago, the value of goods were expressed in terms of other goods - This sort of economics was based on the barter system between individuals - exchange goods for goods.

Introduction of MoneyMoney has been around in one form or another since the time of Pharaohs. The Babylonians are credited with the first use of paper bills and receipts, but Middle Eastern moneychangers were the first currency traders who exchanged coins from one culture to another. Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today?s modern currencies.These paper bills represented transferable third-party payments of funds, making foreign currency exchange trading much easier for merchants and traders and causing these regional economies to flourish.The Gold StandardBefore the first World war, most Central banks supported their currencies with convertibility to gold. Paper money could always be exchanged for gold. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility.

The Bretton Woods AccordNear the end of WWII, The Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar.

Beginning of Free Floating systemFree Floating system is came into existence after many failed treaties such as Bretton woods, Smithsonian & European Joint float. Governments were now free to peg their currencies, semi-peg or allow them to freely float. In 1978, the free-floating system was officially mandated.

Introduction of EuroThe European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System - however failed to create a common currency for european countries. Europe's love affair with a common currency endured many trials and finally led to the introduction of EURO in 2002.