Find out how the abolition of the gold standard was the first step towards the creation of the world’s largest market — Forex. In this video, we tell the origin story of the modern Forex market. Happy viewing!
Subtitles for video are available in English.
Abolition of the gold standard
In the early 1970s, the United States Treasury faced a catastrophic shortage of gold. The dwindling reserves could no longer ensure exchanges of the US dollar for gold to investors.
On Aug. 15, 1971, US President Richard Nixon intervened to remedy the situation, stating that the US would no longer exchange gold for dollars. Thus began the abolition of the gold standard, which was later written out in the Smithsonian Treaty.
The era of the Forex currency market
Around the same time, the Basel Agreement was signed among European Economic Community member countries for coordinating the regulation of exchange rates. The Forex market became similar to today’s after the international monetary system transitioned to a floating rate in 1973. Three years later, in 1976, the terms of the transition to the international monetary system were signed in Jamaica.
The agreement stated that exchange rates were to be set by market demand, not by state regulation.
The old rules of currency exchange collapsed
The financial world gradually adapted to floating exchange rates depending on market demand. Thanks to new technologies in 1990, millions of traders and investors gained access to the Forex market.
Due to excessive speculation, several financial crises occurred in 1992. The pound sterling depreciated so rapidly that the Bank of England had to withdraw its national currency from the European monetary system.
The crisis enabled notorious economist George Soros to become fabulously rich. He shorted £10 billion by betting on the pound’s fall and made a billion dollars in profit.
New horizons
Thanks to the internet, in 1995, traders became able to trade currencies in real time. Since 2002, currency trading has seen explosive growth. Today, Forex is the world’s largest market, with a daily transaction volume of $7 trillion.
Nowadays, anyone can trade on Forex. With our app, Olymp Trade has put the world’s biggest market in your pocket. Just register, install and off you go!
There’s always that story of the trader who makes it. Perhaps the next legendary trader is — you.
Trade with Olymp TradeRisk warning: The contents of this article do not constitute investment advice, and you bear sole responsibility for your trading activity and/or trading results.
