Business, Investing, Making Money

The History of The Forex Foreign Currency Market

FOREX EXCHANGE BLACK & GRAY GRAPHIC

Back during the days when kings thought they had a divine right to rule, they often wanted more money than their parliaments granted them. But most parliamentary bodies didn’t consist of fools. They knew better than to leave the powerful tool of taxation solely in the king’s hands.

Without being able to tax to his heart’s content, the king’s other financial weapon was to devalue his country’s currency, recall all gold and silver coinage, melt it down, then reissue it in a lighter weight or with base metals mixed in, pumping up the royal treasury with the extra. Because the currency was backed more by the citizens’ confidence in the stability of their country than with anything else, many people never even noticed, and the king got his way in the end.

That said, sometimes people did notice, and sometimes they weren’t all that confident of the stability of their country, say, if a powerful enemy was threatening to invade. When that happened, often merchants refused to accept the devalued coinage in trade, demanding real gold or silver instead and rendering the king’s currency valueless. Such undermining of the currency could lead to a rapid collapse of the king’s government.

In the eighteenth and nineteenth centuries, the increasingly republican governments of the western world began basing their currencies, not on confidence in the government, but on gold. This prevented their rulers from devaluing the currency, but it had its own problems.

The gold standard lead to a cycle of boom and bust. A financially strong nation would import the goods its citizens wanted, leading to an outflow of capital until the money supplies shrank too far, in turn leading to higher interest rates and lower prices because nobody had enough money to buy anything. Then other countries would see the low prices and start importing the first nation’s goods, leading to an outflow of production but an inflow of money, pushing down interest rates and raising the standard of living again.

This boom bust pattern continued in many western countries until World War I interfered with trade and stopped the flow of money across borders. The pattern resumed after the war and throughout the Roaring Twenties, until the 1929 stock market crash devalued the U.S. dollar and caused a worldwide depression. It was only relieved in the U.S. by the economic boom of World War II, when the production of war materials and the drafting of men into the military forces cured the problems of unemployment and high prices.

Although the Second World War eased economic woes in the U.S., it caused them to happen in other countries that had to purchase the war materials they couldn’t manufacture themselves. This led to an agreement known as the Bretton Woods Accord, signed in New Hampshire, in 1944, and designed to create a stable post-war economy where the nations of the world could recover financially.

The Bretton Woods Accord pegged the value of the major world currencies to the U.S. dollar, making it the benchmark that measured all other currencies. It also pegged the U.S. dollar to the price of gold, at $35 an ounce, and it created the International Monetary Fund (IMF), a group of 185 nations around the world, dedicated to fostering economic stability.

For decades, the Bretton Woods Accord worked well, but in the early 1970s, international trade grew to such an extent that currency rates could no longer be contained. In 1973, President Richard Nixon allowed the U.S. dollar to be taken off of the gold standard, and the complex arrangement of currency values was abandoned.

The major currencies of the world have come full circle, just like in the old days of kings, the currencies are controlled by the market forces of supply and demand, without being pegged to any other currency or to any precious metal.

Some of the smaller nations of the world prefer to peg their currency to that of their major trading partner, like some Caribbean nations with the United States. This created the Forex market, where one currency can be traded against another, with the expectation of earning profit from changes in their relative values.

At first only major commercial and central banks traded the Forex, but as it became more well known, hedge funds, mutual funds, large international corporations, and some wealthy individuals discovered it. By the 1980s, about $70 billion per day was changing hands on the Forex.

The explosion of the Internet and the rise in computer security systems brought Forex trading online. With trades able to be placed independently of banks, there was no longer any need to wait for business hours, and traders began dealing across time zones and around the globe.

In 2000, the United States Congress passed the Commodity Futures Modernization Act, which opened the Forex market to the average investor. Retail brokerages sprang up across the Internet. Today about $5 trillion dollars is traded each and every day on the Forex and growing!

“Dreams can be had. Goals can be achieved. Questions can be answered. Be open to opportunities!” Michael “MJ The Terrible” Johnson – Founder & Owner – Masters of Money, LLC.

Forex Dummy Accounts: Learn Forex Trading Without Losing Money – https://www.mastersofmoney.com/forexdummyaccountslearnforextradingwithoutlosingmoney/

Risk disclosure: *All investments involve risk. Before making any financial or investment decisions, we highly advise that you seek the advice of a properly licensed and trained investment professional.

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About Michael "MJ The Terrible" Johnson

Masters of Money, LLC., was founded by Michael "MJ The Terrible" Johnson, to create and sell how to information, to people looking for ways to make and save money. The goal of Masters of Money: Provide the tools, resources, and strategies, to help anyone who wants to be more successful, create the life of their dreams. Masters of Money's products and services list: Opt in email marketing - Online advertising - Social media marketing - Content creation - Content marketing - Internet marketing - Public relations campaigns - Web design - Direct response marketing - Copywriting - Company and / or product branding campaigns - Fundraising - Lead generation - Company and / or product launches - Business consulting - Partnering for profits campaigns - Blogging - Content library development - Content library maximization marketing - Multi-channel marketing creation and consultation - Ghostwriting - Ebook creation - Company continuity programs - Ezine creation - Ezine marketing - Digital newsletter creation - Digital newsletter marketing - Content trading - Information brokering - Company and / or product endorsements - Guest blogging - Business opportunity offers - Create and sell making and saving money strategies and information Company contact information: Foreign Corporation (LTD) AG. d/b/a Masters of Money, LLC. 3839 McKinney Avenue Suite 155-2281 Dallas, TX 75204 Phone #: (214) 744-3581 Fax #: (214) 599-9192 Email: info@mastersofmoney.com Website: www.mastersofmoney.com Blog: www.mjtheterrible.com
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