FX 102: Forex Timeline
The concept of Foreign Exchange was brought to reality in the early 70's. However, its trading medium - money already existed even before the Egyptian civilization. Have you heard of the Babylonians? They were the first people who used paper bills and receipts. But, it was the Arabs who became first foreign exchange marketers when they swapped their coins from one place to another.
During the medieval, foreign exchange had become more evident, people at that time revived paper bills. Although it is hard to decipher whether, which medieval nations had any previous relationship with the Babylonians.
The Medieval paper bills were used as a means of payment for any form of goods and/or rendered services. This paved the way for merchants, traders and guilds thus resulting in flourishing regional economies especially when the so-called Age of Exploration began.
From its humble beginnings: Middle Ages up to the First World War, Foreign Exchange Markets were comparatively constant and "without much speculation. Speculation in FOREX terms refers to buying, holding, selling of goods and /or other commodities. However, during the war, Foreign Exchange Market started to become unpredictable and speculative activity increased ten times.
There were presumptions that Foreign Exchange Market was believed to be unfavorable at large by governments and private individuals because there appeared to some form control and dependence.
For example, during the British Occupation in Indian, local products were paid less (of their original and world market value) by the colonial government. Furthermore, native Indians could not find any other buyer because the ruling class had a monopoly of their products.
This impression was further aggregated by the Great Depression during the 20's and of the Gold Standard Crisis the following decade. Moreover, this induced further decline activities in the forex arena.
From the 1930's to 1970's the Forex market struggled as the world engaged in another global war sometime between the 40's.
Below are the significant dates in forex history:
1944 - Post World War II, Bretton Woods Accord was set up to normalize global economy.
1971, Establishment of the Smithsonian Agreement that permit for easy flow of currencies.
1972, The creation of the European Joint Float represented its independence from the U.S. dollar.
1973, The free floating system was introduced as the Smithsonian Agreement and European Joint Float appeared to be unsuccessful.
1978, The International Monetary Fund or the IMF recognized and imposed the free-floating system.
1993, the Europe Monetary System experienced problems thus reinforcing a free-floating system internationally.
Now, the U.S. dollar and other major currencies usually from the First World countries become independent from the rest.