Trade has always been part of civilized societies. At first, people used bartering to get what they wanted. It was a very simple system: goods were traded for other goods or services. However, this system showed its limits when civilizations became sedentary. Villages changed into towns and exchanges were more and more common and complex. Because bartering was a limited solution to exchange, people looked for other ways to trade. Some objects were used during the Antiquity for trading such as shells but they were not really convenient for large transactions. In 600BC, the Kingdom of Lydia minted the first coin. It is considered the first “official currency” ever created.
The first banknote
The paper note was created in China, under the Tang dynasty (618AD-907). At first, it was mainly used by merchants but gained popularity among common folks during the 11th century. Marco Polo introduced this concept to Europeans after his travel to China but paper notes only started to be used in Europe several centuries after the first banknote was produced in Sweden, in 1661.
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The Gold Standard
The development of the currency and economy of European countries during the 17th century led to the creation of the first ForEx market in Amsterdam. Later in 1875, the Gold Standard Monetary System was introduced to regulate currencies. Basically, this system forbade countries to print more money than their actual gold reserve. Moreover, currencies were not suffering from gold price variations anymore as a fixed rate was established to regulate currencies. But this system fell during the First World War as countries involved in the war were printing more money than their real gold reserve.
Bretton Woods
After the Second World War, in 1946, the Bretton Woods System was introduced to regulate currencies. Currencies were exchangeable either in gold or US dollar. However, as countries preferred to exchange their currency in the US dollar rather than in gold, the US dollar became too strong and investors flew away from the United States to look for other countries with lower currency rates. The Bretton Woods System officially ended in 1973 and European countries launched the European Monetary System (EMS) to have better control over European currency variations. However, EMS did not bring the intended effects which led later to the creation of a unique European currency: the euro.
What’s Next?
Nowadays, ForEx markets attract many people as, thanks to recent technological improvements, trading is much easier than it was a couple of decades ago. People are also starting to get into another kind of currency such as cryptocurrencies – especially BitCoin – as they are free from any governments regulations. Only the future will tell us if these virtual currencies will take more and more place in our lives but one thing is certain: we will always find new ways of trading.
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