We have come a long way from the previously practiced barter system to the modern-day system of trading currency. Following is a brief summary of the evolution of currency and how it gave rise to Forex Trading.
Here are the main stages that are illustrated on the chart:
1️⃣The Ancient system of Trading - Trading with Gold As early as 6th century BC, the first gold coins were produced, and they acted as a currency because they had critical characteristics like portability, durability, divisibility, uniformity, limited supply and acceptability.
2️⃣Bank Notes Originated - Deposited Gold in banks in exchange for banknotes
3️⃣Role of Geography - Various banks of different regions printed different currencies
Gold Standard - Currency pegged to gold In the 1800s countries adopted the gold standard. The gold standard guaranteed that the government would redeem any amount of paper money for its value in gold. This worked fine until World War I where European countries had to suspend the gold standard to print more money to pay for the war.
4️⃣Bretton Woods System - Currency pegged to USD The first major transformation of the foreign exchange market, the Bretton Woods System, occurred toward the end of World War II. The Bretton Woods Accord was established to create a stable environment by which global economies could restore themselves. It attempted this by creating an adjustable pegged foreign exchange market. An adjustable pegged exchange rate is an exchange rate policy whereby a currency is fixed to another currency. In this case, foreign countries would 'fix' their exchange rate to the US Dollar.
5️⃣Birth of Floating Currency - Currency that is not pegged to any assets or other currencies is known as a 'floating currency'.
And what will be next? Very hard to say but blockchain technologies will make the system change again.
❤️Please, support this educational post with a like and lovely comment❤️
Thank you for your valuable contribution to the TradingView community and keep up the good work!
24hrfxgirl
⋅
Very helpful
isaiah87
⋅
Amazingly, or pathetically, or sadly, or whatever, most people have no clue what the definition of one single dollar is, much less do people know what the definition of one single dollar is supposed to be.
Here’s the gross oversimplification: One dollar is a very specific weight and purity of silver. There are many inconsistencies here, mostly the fact that for most of America's history precious silver was used as money not paper rubbish. Now, the definition of one single dollar was established by the Coinage Act of 1792, and this has been our US Dollar for more of US history than not. Specifically, one single dollar was defined as 371 and 4/16th grains of pure silver, or 416 grains of standard silver. The important concept is that the weight and purity are something that is fixed.
Thank you for your valuable contribution to the TradingView community and keep up the good work!