Short History of Forex
The international money exchange has gone through different phases and has become what it is today. The forex that we know today started to develop in the 1970s. The first important changes started in the 19th century, after the year 1870, when most of the countries began to use a gold based money.
The most important thing at this type of currencies is that every currency is based on the gold and the exchange rates are fixed. And another important thing is, that gold can be imported and exported with no need to pay taxes. The system worked without any problems till the beginning of the 1st World War. During the 1st and the 2nd World war, countries wanted to go back to the system that was in use before the 1st World war, but did not manage to do so.
That is one of the reasons why at that time financial situation was quite unstable. After the end of the 2nd World war the leading countries did not want to use the old gold based system and that is why the countries started to talk about the future of currency market.
The USA said that they would change dollars for gold and all the other currencies will be declared with dollars, so the exchange rates were fixed again. The system worked well for few years, but the problems came due to very low liquidity.
In 1973 the system that was based on American dollar stoped and the new system that is still in use today came.
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Source: http://ezinearticles.com/
Added: May 1, 2008