Standard gold (Gold Standard) and golden cash cover (the period from 1876 to 1933)
Currency is a broker of exchange used by people to buy their needs, as they arise was initially shaped pieces of metal (gold or silver), and then evolved over time to become Banknotes express a certain amount of metal (so that it is equal to the currency specific value of gold), and knew this system the gold standard.
In the beginning it was able individuals to replace paper currency with gold at any time they choose, to be abolished central banks the possibility of converting money into gold before the First World War, and with no possibility of conversion there is no longer a need for a cover monetary gold per Banknotes, took central banks printing money without the presence of gold equivalent.
As a corollary been an increase in the quantity supplied of money, which has led to high inflation and the increase in the prices of goods and services; began States that have signed into the trap of inflation, imports large quantities of gold to balance the supply of money with the equivalent of gold, but the World War that stopped the ways Trade between the countries and therefore stopped the importation of gold, and the deterioration of the global economy between the two world wars and the beginning of the world seeks to resolve a quick save the global economy.
(Bretton Woods Agreement) - (from 1944 m to 1970 m)
In 1944, after the economic downturn caused by the two world wars, has been holding a conference in the "Bretton Woods" state "New Hampshire" in the United States in order to put an end to the deterioration in the global economy, and because the United States was less powers affected by World War has been agreed to stabilize currency exchange rates against the U.S. dollar, so that the value of the dollar is installed in front of gold, equivalent to $ 35 per ounce of gold.
It was not allowed to change currency worth more than 1% of the value of fixed, and if increased up or down interfere with the state (represented by the central bank) to be returned to its original value.
The collapse of the Bretton Woods Agreement and floating exchange rates (1971)
In 1970, the U.S. President "Johnson" funded the Vietnam War, which led to the current account deficit the U.S. and led to an economic catastrophe in the value of the dollar, and in 1971 the president, "Richard Nixon" the newly-elected a timely manner, to prevent conversion of dollars into gold, and canceled the installation rate of exchange in front of gold.
And all the major countries affected economically, and began to search for an alternative system restore economic stability of the world, so By the year 1973 has been floating currency exchange rates and allowing the value of currencies that change according to supply and demand.
And became Currency goods bought and sold, and there has been trade independent to take advantage of buying and selling currencies due to changes in prices, and here appeared the currency market, featured investment companies that trade in it in order to achieve a profit, and appeared brokers retail who buy currencies in large amounts and then they divide their customers, and income small investors the currency market.
Advent of the euro
In the first of January 2002 euro became the official currency of twelve European countries agreed to replace their currencies to the previous, to be replaced by the euro, these countries are (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain).
The euro managed to become a global currency with a significant weight, and is now the second most actively traded currencies in the currency market after the U.S. dollar.
Lesson Summary:
Currency is a broker of exchange used by people to buy their needs, and was initially in the form of metal parts.
Gold standard system is the use of gold as a standard value for money.
Central banks abolished the possibility of converting money into gold and began printing money without a cash cover and thus greatly inflated Event.
Tried to tackle inflation countries import large quantities of gold, but stopped import operations for the First World War.
Deterioration of the economy between the two world wars, and states began seeking to revive the economy was agreement "Bretton Woods".
"Bretton Woods" agreement to stabilize the exchange rate of the dollar against gold and fixing the exchange rates of currencies against the dollar.
After the Vietnam War, the deterioration of the U.S. economy and the president, "Nixon" disengagement dollar and gold therefore collapsed Convention "Bretton Woods".
With the collapse of the Convention "Bretton Woods" has been floating currency exchange rates and exchange rates became determined based on supply and demand and this is the beginning of the emergence of the currency market.
In early 2002, the euro became the official currency for 12 European countries, to become one of the strongest global currency and the second largest volume of trading in the currency market.
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