INGOT Brokers Limited
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A look at the financial industry How was the forex market born? We know he’s here in our present, but what has been his story?
SYDNEY, NEW SOUTH WALES, AUSTRALIA, July 8, 2020 / EINPresswire.com / – A look at the financial industry
How was the foreign exchange market born? We know he’s here in our present, but what has been his story? Today we are going to talk about the main historical events that mainly shaped this large, lucrative market. So what led to the formation of our modern forex market? Read on.
1) There is no history of forex without the history of money
So what exactly is money? Put simply: money is what you have always used to complete an exchange or transaction, that is, it is most often a medium of exchange. Many economists believe that money also functions as a measure of value and a store of value. However, this is a subject on which there have been many views. Unlike the money we use today, money in the past has taken many forms. People used things like gold, copper, silver, rice, dates, and even cigarettes to exchange goods and services.
Some believe that silver first appeared around 3000 BC. It is believed to have been used by the Chinese and the Egyptians. Although money has taken different forms, most of its history has been dominated by coins, especially gold and silver. Gold for hundreds of years was the hardest silver, and if there was any in paper form, the paper would only be representative of the value of the gold written on it. A person would just go to a bank, hand over the note and get gold!
Gold coins differed in quality and quantity depending on the jurisdiction under which they circulated. It is said that the earliest forms of having something similar to an exchange where interest and exchange rates were
determined took place in Florence in the thirteenth century.
2) The birth of financial markets
Financial markets would have appeared around the 16th century. These markets were very small and simple. These were places where trade balances between countries were settled, but they were also places where traders could make money by trading between different currencies.
Over the years, the use of banknotes and different types of securities spread around the world but did not have a dominant currency. But that all changed in 1866 when the first cable connecting Europe and the United States was completed. This year is considered a turning point in the history of financial markets. For this reason, many bankers and businessmen in Europe decided to settle in the city of London.
Despite being a strong currency, the pound was still lagging behind good ol ‘Mr. Gold. Mr. Gold dominated what was called the Gold Standard, which meant that silver (i.e. currencies) at the time was convertible into gold. If you were to go to a bank and give it a currency, such currency would be converted into gold. The gold standard has enjoyed a good degree of exchange rate stability over the years.
3) The death of the gold standard
The end of the gold standard is linked to the tragedies of war. During World War I, governments had money to spend, which forced them to print huge amounts of money in circulation (money that was not backed by gold). This caused very high inflation levels and the banknotes were no longer convertible into gold.
After the end of World War I, there were attempts to restore the gold standard. However, such attempts failed, especially after the Great Depression.
4) Forex as we know it today
In the past, the forex market was dominated by big players, such as banks and governments. However, and thanks to globalization, technological advancements and the creation of the internet, anyone can now access and profit from the forex market.
Today, all it takes is a computer or just a cell phone to access one of the world’s largest markets.
Ahmed Talaat Rizk Abdelaziz Ibrahim
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