The History of Forex

Foreign Exchange as we know it now, has gone through a very long process before it became much more stable and internationally accepted. Centuries ago, barter was the trade system that was used.

Goods like pretty stones, feather or even teeth were matched with other goods for individual exchanges. Owing to the limitations of the perceived values of these goods, this kind of exchange soon enough became unreliable and obsolete.

There emerged a need for a much more stable means as trade began to slowly flourish. Ordinary knick-knacks eventually got knocked off with the use of precious metals like gold and silver, which really have more use and economic values.


A major problem rose when people had the notion that there may, in reality, be more paper money being circulated than there are gold reserves to match their values. This scenario would soon lead to inflation and political instability, which called for necessary control of the exchanges.

In 1944, a conference held in New Hampshire led to the Bretton Woods agreement, which aimed to install monetary stability among nations by imposing some controls that would prevent speculations in world currencies.

It was also during this period when the International Monetary Fund (IMF), World Banks, and the General Agreement on Tariffs and Trade (GATT) were established to avoid and prevent destabilization and crisis which all lead to wars.

This agreement collapsed in 1970 under the Nixon presidency when the US dollar cannot serve as the lone, international currency convertible to gold due to issues on budget and trade deficits.

Eventually, more stable nations began to implement a free-floating concept of exchange. The new system looked to supply and demand as bases for monetary rates.

This carried on to see deregulations, which gave way to more liberalized trade between countries. Foreign Exchange or Forex to this day, continues to be the most lucrative and fast developing business for governments and individuals as well.


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