{"id":414679,"date":"2021-08-27T08:46:43","date_gmt":"2021-08-27T06:46:43","guid":{"rendered":"https:\/\/ftmo.com\/?p=414679"},"modified":"2024-12-13T11:23:58","modified_gmt":"2024-12-13T10:23:58","slug":"the-history-of-money-and-the-emergence-of-forex","status":"publish","type":"post","link":"https:\/\/ftmo.com\/en\/the-history-of-money-and-the-emergence-of-forex\/","title":{"rendered":"The history of money and the emergence of Forex"},"content":{"rendered":"
How did we get from barter, exchanging shells and precious metal coins, through traditional paper money, all the way to today\u2019s purely electronic cryptocurrencies and internet trading? When did Forex actually come into existence and what led to it? In this article, we will try to cover the complete path of the foreign exchange market.<\/span><\/em><\/p>\n Money, in the form we know it today, has a relatively short history, but barter trade has virtually existed since people began to feel the need to exchange manufactured or cultivated goods for something else.<\/span><\/p>\n This form of trade can be dated tens of thousands of years back, which historians believe to be situated around the early Palaeolithic period.<\/span><\/p>\n The barter trade lasted for quite a long time until it ceased to be practical because with the Earth population increasing, it became quite difficult to find suitable goods for exchange. The next evolutionary form of barter was the first form of money, which was back then still far away from the present structure. Nevertheless, the common feature was that the things or products being used as means of payment were generally in demand, and therefore had some exchange value in society.<\/span><\/p>\n It could be anything from furs to various grains, salt, or linen, simply things that were useful for the general public. Later on, shells of small molluscs were discovered and spread across the world. To this day, we consider them as one of the longest used forms of payment in the history of mankind.<\/span><\/p>\n However, even this method has encountered its limits, mainly due to the growth of the society and the expansion of trade, when the selected commodity forms of money did not have exchange potential between different parties.<\/span><\/p>\n At that time, metals were also used in some areas instead of commodity payments (depending on availability) because they were durable, portable, and easily divisible.<\/span><\/p>\n The Mesopotamian shekel, which represented both a unit of weight and a currency, can be considered a precursor of the first coins. Then in China, replicas of bronze shells appeared, replacing small bronze objects such as daggers, spades, etc. However, due to insufficient practicality, these objects were eventually replaced by their circle-shaped successors.<\/span><\/p>\n However, the true predecessor of modern coins was eventually first minted in Lydia, which was located in today\u2019s territory of Turkey.<\/span><\/p>\n The first coins that date from 650 to 600 BC were minted from a mixture of gold and silver with standardised weights ranging from 0.15 to 14 grams. The coins were stamped with various symbols to distinguish their nominal value.<\/span><\/p>\n The method of minting later spread to other parts of the world, which resulted in using new types of metals, as well as their mixtures. The ability to control the minting and circulation of coins slowly equaled an instrument of political power.<\/span><\/p>\n Even metal coins proved impractical over time, especially when transporting large quantities. In China, the first paper money began to appear around the seventh century AD. Later, around the end of the 10th century, the first financial bonds were issued, although their validity was limited to a certain period of time and to certain regions.<\/span><\/p>\n The government, of course, soon realised the economic advantage of printed money and secured a monopoly on its printing. Just as today\u2019s US Dollar bears the statement \u201cIn God, We Trust\u201d, so did Chinese paper money bear the warning \u201cThose who counterfeit will be beheaded\u201d.<\/span><\/p>\n The first nationally valid gold-backed banknotes were introduced in the second half of the thirteenth century. Marco Polo, who visited China in the thirteenth century as well, later introduced paper money in Europe. While addressing the state monopoly on printing money, he declared that \u201cthe Chinese emperor issues so many banknotes a year that he could buy all the treasures in the world, though it costs him nothing\u201d.<\/span><\/p>\n The distrust in paper money in Europe delayed its spread there by a few hundred years.<\/span><\/p>\n The first modern banknotes in Europe were printed by the predecessor of today\u2019s Swedish central bank, Stockholms Banco, in 1661.<\/span><\/p>\n Although the banknotes were a huge success, the bank eventually went bankrupt in 1667. The bank began printing so many of them that it could no longer cover them with its assets.<\/span><\/p>\n Several years later, the Bank of England was the first bank in Europe to start issuing banknotes permanently.<\/span><\/p>\n It was founded in 1694 to finance the war against France and began issuing banknotes in 1695.<\/span><\/p>\nFrom barter to money<\/h2>\n
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Metal coins as a catalyst for world trade<\/h2>\n
Paper money from China<\/h2>\n