Origins and evolution of the currency market only

Origins and evolution of the currency market

Introduction in the currency market

Standard gold (Gold Standard) and cover the monetary gold 

(the period from 1876 to 1933)

Currency is a broker of exchange used by people to buy their needs, and when they arise was initially in the form of pieces of metal (gold or silver), and then evolved over time to become Banknotes reflect a certain amount of metal (so equal currency certain value of gold), and knew the system the gold standard.

In the beginning, the individuals can replace paper currency with gold at any time they choose, to that central banks have abolished the possibility of converting the money into gold before the First World War, and without the possibility of conversion there is no longer a need for a golden cash cover for each paper currency, central banks took in printing money without the presence of an equivalent of gold.

As a corollary there was an increase in the quantity supplied of money, which led to a major inflation and rise in prices of goods and services; and began States that have signed into the trap of inflation, imports large quantities of gold to offset the money supply with the equivalent of gold, but the World War that stopped ways Trade between countries and thus stopped the import of gold operations, and the deterioration of the global economy between the two world wars and the world began to seek a quick resolve to save the global economy.Bretton Woods (Bretton Woods Agreement) - (from 1944 to 1970)

In 1944, after the economic downturn caused by the two world wars, a conference was held in the "Bretton Woods" state "New Hampshire" in the United States in order to put an end to the deterioration in the global economy, and because the United States was less superpowers affected by World War has been agreed Install currency exchange rates against the US dollar, and it can be installed on the dollar against gold, the equivalent of $ 35 per ounce of gold.

It was not allowed to change currency to be worth more than 1% of the fixed value, and if the increased rise or fall interfere with the state (represented by the central bank) to return to the original value.

The collapse of the Bretton Woods agreement and floating exchange rates (1971)

In 1970, the US President "Johnson" funded the Vietnam War, which led to the US current account deficit and led to economic disaster in the value of the dollar, and in 1971 the president, "Richard Nixon" the newly elected wearer, preventing convertibility of the dollar into gold, and canceled the installation of exchange rate in front of the gold.

And hit all the major countries economically, and began to search for an alternative restore economic stability of the world system, so By the year 1973 has been floating currency exchange rates and allowing the value of the currency that according to supply and demand change.

Became bought and sold currencies commodities, and there was an independent trade based on the advantage of buying and selling of currencies due to changes in prices, and here the back of the currency market, featured investment companies that trade in it in order to make a profit, and appeared brokers retailers who buy the currency in large amounts to do the dividing them to their customers, and entered the small Currency market investors.

Advent of the euro

In the first of January 2002 the euro became the official currency of twelve European countries agreed to replace the previous currencies, to be replaced by the euro, these countries are (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain).

The euro managed to become a significant weight of a global currency, and is now the second most traded currencies in the currency market after the US dollar.

Lesson Summary:

Currency is a broker of exchange used by people to buy their needs, and was initially in the form of metal parts.

Gold standard system is the use of the gold standard as a value for money.

Central banks have abolished the possibility of converting the money into gold and began printing money without a monetary cap and thus greatly inflated happened.

Countries tried to tackle inflation, import large quantities of gold, but stopped import of the First World War operations.

Economy between the two world wars degradation, states began trying to revive the economy was "Bretton Woods" agreement.

In the "Bretton Woods" agreement was reached on the installation of the US dollar exchange rate against gold and install currency exchange rates against the dollar.

After the Vietnam War, the deterioration of the US economy is the president, "Nixon" and unzip the gold peg to the dollar and thus collapsed Agreement "Bretton Woods".

With the collapse of the Convention "Bretton Woods" has been floating currency exchange rates and exchange rates became determined based on supply and demand, and this is the beginning of the emergence of the currency market.

In early 2002, the euro became the official currency of 12 European countries, to become one of the strongest currently the world's currencies and the second largest volume of trading in the currency market