The History of Forex

The Foreign Exchange market, ("FX or Forex") as we know it today, originated in 1973. However, money has been around in one form or another since the time of Pharaoh. The Babylonians are credited with the first use of paper bills, and receipts. Middle eastern moneychangers were the first currency traders exchanging coins of one culture for another. During the middle ages, the need for another form of currency besides coins emerged as the method of choice. These paper bills represented transferable third party payments of funds; this made foreign exchange much easier for merchants and traders and caused the regional economies to flourish.

From the infantile stages of Forex during the Middle Ages to WWI, the Forex markets were relatively stable and without much speculative activity. After WWI the Forex Markets became very volatile and speculative activity increased ten fold. Speculation in the Forex market was not looked on as favorable by most institutions and the public in general. The Great Depression and the removal of the gold standard in 1931 created a serious lull in Forex activity. From 1931 until 1973, the Forex market went through a series of changes. These changes greatly impacted the global economies at the time. Speculation in the Forex markets during these times was little if any.

The Bretton Woods Accord

The first major transformation, the Bretton Woods Accord, occurred toward the end of World War II. The United States, Great Britain and France met at the United Nations' Monetary and Financial Conference in Bretton Woods, New Hampshire to design a new economic order. This location in the U.S. was chosen because, at the time, was the only country unscathed by war. Most of the European countries were in shambles. Up until WWII, Great Britain and the British Pound had been the major currencies by which most currencies were compared. This changed when the Nazi campaign against Britain included a major counterfeiting effort against its currency. In fact, WWII vaulted the US dollar from a has been currency after the stock market crash of 1929 to the benchmark by which most currencies were compared. The Bretton Woods Accord was established to create a stable environment by which global economies could re-establish themselves. The Bretton Woods Accord established the pegging of currencies and the International Monetary Fund ("IMF") in hopes of stabilizing the global economic situation.

The history of Forex is continued on the next page, please click here.