Although right now trading seems like it is impossible to do without the perfect computerized systems and all of the luxuries given to us by progress, it is in fact an old way to make money. I can even say that it originated so long, that it can be called ancient.
1. Early stages of development.
2. 1875.
3. Bretton Woods system.
4. Techno-boom.
1. Early stages of development.
In the very beginning trading existed in the form of a barter. People would exchange goods for other goods and services. I can say that prices were almost fixed and the exchange system of goods and commodities per money stayed the same until the 19th century. Primitive forms, although were the simplest, also would never satisfy cravings and needs of a modern man.
2. 1875.
Why is this year so important? Well, because that is the year of the creation of a gold standard. What is a gold standard? Well, before 1875 countries would use gold and silver in order to make international payments. This greatly affected the price for the metals as the only variable that built up the price was the supply.
The main idea behind the gold standard was the guarantee of the government to supply a certain amount of gold behind every banknote and behind every coin. This made sure that the currency was always backed by gold. That gave birth to the idea that every country needed a gold reserve in order to meet the needs for a strong currency.
Although right until this day gold is the support behind our money, gold standard was dropped at the beginning of the WWI when Germany decided that the country needed to issue more money in order to meet the demand and the situation turned on them, when country simply ran out of gold to back the currency up.
3. Bretton Woods system.
Bretton woods system came right on time when it first appeared in the end of the WWII. Bretton Woods system proposed to have USD as the main benchmark for the currencies of the world and not gold. He also was the one who proposed that the three governing facility be created: International Monetary Fund (IMF), International Bank for Reconstruction and Development, and General Agreement on Tariffs and Trade (GATT).
Of course the consequence from this decision we are facing to this day every day. USD has firmly occupied the main benchmark and the main status as reserve currency. Although the system was eventually killed off by Richard Nixon it is safe to say that Bretton Woods is standing on his place in history firmly.
4. Techno-boom.
After the creation and popularization of the internet everything changed. The machines took over. All of the indices, that used to be counted with a pencil, are now counted automatically. All of the exchange rates are out there and can be seen changing instantly. Although there are still some voices from the past – for example GBP/USD couple still holds the name ‘the wire’ because the transactions used to be done via the submarine wire back in the day. Technology allow us to see changes instantly and we like it that way.
Did our ancestors have it right? Is everything too complicated now? How far away are we from another trading milestone? No way to tell, but I can tell you this – every one of us is making history happen by simply taking action and stepping into trading right now.
