Like the mind-boggling, global naval expeditions of Chinese Admiral Zheng He, we may never know how widespread the use of foreign exchange was in the past. Part of the problem is cultural differences. For instance, we take global commerce as a given. In Zheng’s case, however, a change of emperors resulted in his voyages being erased from all official records and all further international voyages being banned “forever”. It would be centuries before China ventured beyond its shores again. Nonetheless, Great Britain picked up where the Ming Dynasty stopped and, as a result, the entire world is now trading with each other, using almost 200 different currencies in the process. Of this amount, approximately 80 are “floating” and publicly traded through various forex markets. Many of these currency pairs are available on trading platforms provided by your forex bank or broker.
Through the use of high-speed internet services, you can now trade forex just as the banks of yesteryear used to do. What was very private is now very public.
How Did Foreign Exchange Trading Start?
Fx trading is recorded in some of the oldest human records in existence. Historians believe that it was the advent of sedentary agriculture in the Middle East and in Egypt which produced monetary surpluses that lubricated the wheels of long-distance commerce. During the “Bronze Age”, for instance, there was a very vibrant civilization along the Indus River (“Mohenjo-Daro”) that traded with people as far away as today’s Iraq and Lebanon, using clay seals for money. Similarly, it appears that a lively “salt for gold” trade, up and down the Niger River, in western Africa, has been in existence for a very long time. Indeed, this trade may be origin of the tradition of using gold as an international currency.
How Trading Foreign Exchange Took Place Before The Internet
Prior to the internet, most foreign exchange transactions were recorded on paper, either by banks (in the industrialised world) or by money changers (in the developing world). This situation allowed foreign exchange to remain essentially a “wholesale business” (i. e., the general public was not involved) and kept the entire industry away from any media limelight. It also necessitated the opening of branch offices, all over the globe, in order to facilitate the explosion of international foreign exchange trade that took place after commercial airplane flights became relatively reasonable in cost. A prime example of this process is the history of the “Hong Kong Shanghai Banking Corporation Limited”, whose origins started with a seafaring Scot setting up a bank in Hong Kong in 1865.
When Did Trading Foreign Exchange Become Popular?
After World War II, international foreign exchange trade began to mushroom (and, so did the forex community). The creation of the United Nations in 1945 plus advances in communications and shipping spawned greater international trade between Europe, North America and Asia. The establishment of “GATT” in 1947 (the predecessor to the World Trade Organisation) facilitated this process. The booming economies of North America became an export magnet, resulting in millions of US dollars leaving the continent and not returning. This, in turn, created developed economies in parts of the world where none had existed before (and, consumers wanting to buy imported goods). The history of the Republic of Singapore, over the last 50 years, is an outstanding example of this process.
Get a free Forex PDF PLUS:
- 14 Video Lessons
- Free One-on-One Training
- A 5000$ Training Account
- In-House Daily Analysis
- Get FULL ACCESS