The history of Forex started as early as the civilization of Babylonians, though no one can really predict the exact date the foreign exchange started. Other historians say that the history of forex may have started the same time the human history flourished. This may due to the fact that goods in the old days were exchanged using all kinds of valuable things or goods. This system was then called the barter system - a system where in traders are allowed to use other means of trading, like the use of precious metals, stones and even teeth and bones of humans. As the civilizations become modern, gold, silver and other precious stones are accepted in the trading process. This is due to the fact that stones and other form of gems are extremely easy to store and they have the capacity to be stored for a very long period of time.
In the beginning of the Roman Regime, the Roman people have initially introduced the use of gold coin as one way of making foreign exchange transactions and this has really revolutionized the trading during those times. The history of Forex shows that traders who came from Arab countries and other parts of the globe has expressed wide acceptance of the gold coins which were first introduced by the Roman people and this has eventually created the elementary international monetary system - currency system which was accepted all over the world.
As the world becomes more civilized, the use of paper money are generally encouraged for easy and fast banking transactions among traders all over the world. However, it is the modernizations of global trading in different major economies that have greatly shaped the history of Forex trading in the Forex market all over the world.
One point in the history of forex, a large number of traders realized that using the paper currencies are more advantageous compared to the use of coins and precious metals when it comes to trading. Because of this major governments have finally approved the use of bills. This progress in the history of forex happened sometime around 1816 to 1933 and this is known as the gold standard. Because during this time in the history of Forex, though paper currency are already widely accepted, gold are still used as back up for the paper currencies. Also around this time in the history of forex, gold are accepted as money which can also be exchanged with other precious metal or stones. Gold has become the leading form of reserve that can be used to trade locally as well as globally.
The gold standard was greatly supported by most Central Banks all over the world just before the First World War started, because of the fact that gold has the capacity to be exchanged with any paper currencies that was currently used by any country all over the world. However, the use of gold as the means for trading was not all good because a lot of people have used this in a disastrous manner. It is when they announced that they will convert the gold to mass; this has eventually created confusion and panic among the traders. This mixture of large number of paper money with no gold to cover it as reserve is the perfect recipe for the economic devastation and political insecurity.
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