An Overview of the History of Financial Markets
The Foreign Exchange market, more commonly referred to as Forex is one of the largest and most dynamic financial markets in the world, exchanging billions of dollars daily. But how can such a buzzing market be brought into existence? What’s the history of financial markets? This article will seek to trace a path from how the very first financial markets were set up to how they evolved into what we currently have. Follow along as we trace the history behind some of the most popular financial markets in the world.
The First Steps: Creation of National Currencies and Trade Currency
Currency exchange and international trade have been normal since the formation of the first empires and early days of human trade. Over time, however, with the rise of banks and stable monetary systems, currency trading became more centralized. The first currency exchange was established in Amsterdam during the 17th century.
A Shift in Direction: The Gold Standard
Paper money was a great medium of transaction, but the printing of banknotes without any control and backing became a problem. In the 19th century, new standards were in place to curb the issue of too many banknotes being printed. These standards created a direct link between the gold reserve of the central bank and the volume of banknotes they printed.
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Return to Currency: The Normal Exchange Rate System
New norms of pricing the currency started to emerge in the two decades that passed since World War II. During this time, the gold standard was no longer in action while the normal exchange rate system became custom. This currency pricing system was dependent on the forces of supply and demand of the currency. This, in turn, made banks more vital as intermediaries in selling and buying currencies.
The Modern Forex Phenomenon: The Modern Forex Phenomenon: Technology and Globalization
Starting in the 20th and 21st century, as technology was developing and improvements in communication took place, exchanges became fully digital. Most of the transactions on exchanges are now executed through computer networks and the Internet. This has dramatically expanded access to the stock market and the expansion of trading activity.
With the invention of the internet and other technologies, the Forex market has become very accessible to the common people. Through the internet, anybody can trade in the Forex market nowadays and gain profit from the fluctuation in the prices of currencies. Within a very short time, anyone can join the Forex market and initiate the trading business by learning the basic principles of Forex.
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Although Forex is a rather modern product, its ancestry is rooted in key milestones. From the emergence and prosperity of Amsterdam’s currency exchanges to today’s world of currency trading, the evolution of this mesmerizing market invariably caught the attention of any financial market enthusiast. From ancient times to the modern-day Forex market, the realm has encountered several complexities and transformations; however, it never lost its charm.
Conclusion
The financial markets have been gradually developing to reach the shape they are in today. Such markets, which have taken quite some time to mature, have reached today the most advanced state. Today, no matter what place you belong to or which city or country you live in, by just sitting over a computer or even a mobile phone, you can trade the financial market.