History of Forex Trading - The Bretton Woods Agreement

In 1967, a Chicago bank refused a college professor named Milton Friedman a loan in the amount of £ (Pound Sterling) because he intends to use this loan to sell and buy back the dollar, he we have recognized that the Pound is the price too high against the dollar. He wanted to sell this cash, and then bought it when the Pound fell to a low price and return them to the bank. Of course, by the way he was quick profit. The bank's refusal led to the Bretton Woods Agreement agreement is set 20 years later. Agreement of the Bretton Woods Agreement took dollar (USD) as standard, and set the exchange rate between gold and dollars is $ 35 / 1 ounce.


Agreement of the Bretton Woods Agreement was established in 1944 aims to build a stable monetary policy to prevent free cash to other countries. Prevent currency speculation in the world, as the gold exchange standard - prevailing from 1876 until the First World War I, it controls the economic system in the world. By using gold exchange, currencies into a new era for the firm due to the shielding of the gold price. In ancient times by kings and dictators in totalitarian transactions using gold as the main and lower the value of money causes inflation.

However, the standard used for exchange and not the lack of "defective." As the economy strengthened, the import of goods from foreign countries increased rapidly. But as the economy weakened, the national gold reserves are required to release the money to buy abroad has run, the result is depreciating currency, interest rates fell and the economy began operations slow down and lead to a recession. Final goods prices increased more than its normal level, and of course at this attraction of the sale of goods to other countries increased. This led to the massive buying power and increase the price of gold rose high at the moment, interest rates dropped to low to create prosperity for the economy. Using gold as the prevailing standard transaction until the end of World War I, ending the flow of transactions and gold is now move freely.

After the war the Bretton Woods agreement was established. Countries participating in the treaty agreed to maintain the currency value of their own security by the amount equivalent to the Dollars and the corresponding rate of gold as needed. The lower the price of copper is prohibited in their own language to facilitate the transactions with foreign countries, and are only allowed to lower the price of less than 10%. In the 50 years of the 19th century, when the currency of international transactions was extended to the service of capital for reconstruction and rebuilding in the aftermath of the war moved massively. This has led to destabilize foreign currency exchange rates were established in the Bretton Woods agreement.

The Bretton Woods pact finally abolished in 1971, and at this dollar (USD) may be used instead of gold (gold). In 1973, the currencies of the industrialized countries were freely floating, controlled resources at this rate depends on the strength of the demand-supply (supply and demand) of the economy, they are dynamic the impact force on the foreign exchange market. Rates of the pair was floated daily, with a large amount of transactions, speed and ever-changing rates during the 70 years of the 20th century, the application of these new financial instruments market, leading to the earlier rule was abolished and gradually entered a period of liberalization of global trade.

In the '80s, the amplitude of movement of capital are constantly expanding thanks to the explosive growth of computer industry and technology, constantly expanding market across from Asia, Europe and America ... Amount cash transactions in the foreign exchange market increased dramatically from 70 billion dollars per day to 1.5 trillion dollars a day in two decades later.