Translated from Russian by Google Translate
31 Август 2009

Foreign Exchange Forex. Historical development

Origin of trading activity between the various States originated many centuries ago. And if you apply the exchange rate, it’s worth noting that such a need has arisen since the days of Babylon. While speculation has never known such magnitude and trends, what it took today. But if the modern business activity in the form in which it is presented today, to move at that time, I think that such activities are unlikely to find approval.


In those days the value of all goods evaluated through the prism of the cost of other goods. This assessment was entitled «barter system». But the disadvantages of such a system, valuation of goods are quite obvious. Barter system is encouraged commodity installation cost. In some countries, for the purpose of determining the value of the goods were goods, such as feathers, stones and other products, but as the historical development of the place of such goods have come various metals, particularly gold and silver. Subsequently, it was precious metals have been established as generally accepted means of payment. The system got its distribution mainly in Africa and Asia.

In the Middle Ages have been recognized, paper and metal money. In general, such a trend was observed in countries characterized by a stable political regime. True, the first moves in this direction have been made more force than by persuasion.

On the eve of the First World War, most central banks of several countries supported the idea of converting currencies to gold. However, despite the apparent prospect of development of this theory, there were a number of conservatives who believed that the gold standard influenced the economies of various countries. But over time, gold reserves of the country began to play a supportive role in the economy of any state.

This mechanism works as follows. Each state had to handle a certain amount of money. When the money supply increases, the national currency becomes less attractive, so the power of the state tried to take measures to stabilize the economy. This was expressed primarily in the regulation of interest rates. Over time, the gold standard was abolished, but it happens gradually. Serious lull in business activity in the foreign exchange market occurred from 1931 to 1973, when the world economy have been a number of changes.

First of all, it concerns an agreement that was reached during a conference held at Bretton Woods (USA) in 1944. Under the agreement was created principally new system of monetary and credit relations. It was the fact that for all member countries of the agreement was established formal content of the national currency, which was expressed in gold reserves. It is through the gold content of all participating countries were established mutual exchange parities. In addition, as a global currency has been set dollar.

To ensure the functioning of this system was established a number of specialized agencies: International Bank for Reconstruction and Development (IBRD) and International Monetary Fund (IMF). The main objective of the newly established system was the desire to achieve a sustainable balance and revive the global economy in the postwar period. Was also a need to create a balance of payments in several countries.

However, over time it became evident that this system has significant weaknesses. In addition, began to develop an irreversible path of inflation. All this pushed to the systematic re-calculating the parity. And, despite the fact that the Bretton Woods monetary system was considered a system of hard currency, from 1948 to 1967 exchange rates 109 countries from time to time. That is, from time to time arose imbalance in the various economic regions, which gave rise to economic imbalance and deviation from the established framework. In general, the average depreciation rate at the time amounted to about 48,2%. As a result, about 48 countries were forced to devalue the national currency several times.

In the 60’s inflationary processes and struck the U.S. economy. One manifestation of inflation is that the market price of gold exceeded the price, which was established formally. It became clear that the maintenance of a fixed price, even if artificially will not give the expected results. In addition, in 1971 the U.S. authorities have decided to make a devaluation of the dollar. This was the first major measure taken in the postwar period. Gradually, the world community came to the conclusion that the former - «The Bretton Woods system» outdated and needed to take emergency measures to establish a balance of economies. This balance has been the agreement that was signed in g.Kingston (Jamaica). This agreement established a new system - a system of floating rates. From now on all forex exchange rates are determined on the basis of market supply and demand.

Accordingly, it was decided to amend the Charter of the IMF. These changes affected the unbinding of national currencies to gold and fixed exchange rates. New currency system was named «Jamaica system». But the establishment of floating exchange rates does not mean that some countries to achieve mutual agreement is not entitled to set fixed exchange rates in the «modified representation». This possibility is based on one of the definitions, which is reflected in an agreement signed in g.Kingston. According to this definition member country of the International Monetary Fund can determine the parity of its currency in the SDR, or through other currencies or «currency basket». Such a possibility has been widely used in several European countries, resulting in the creation in 1979, the European Monetary System.

Since the founding of the Jamaican currency system got its birth the currency market, which today is known as the currency market Forex. Initially, the foreign exchange market forex worked under the central banks and several government agencies, but then the circle of participants has expanded and now here is a range of agencies and financial institutions around the world. The scale, which is characterized by the foreign exchange market forex, amazing. In addition to the extensive range of participants, forex forex has an enormous amount of money in circulation. The daily volume of these funds now stands at about 3 trln.doll. Therefore we can say that in our day forex forex is the most promising place for investment for large financial corporations and for small investors.