Foreign Exchange Markets Now and Then
Kenneth A Dietz
Axia College of the University of Phoenix
INB 205 International Business
James Yelton
May 18,2007
From the beginning of man-kind there has been buying selling and trading. Rice for corn, gold for coal, liquor for tea are just a few examples of trade from the beginning. But how could man-kind make this easier if they did not have anything to trade? How about a monetary system, something that you could give that is worth money. This is still trading but instead it is trading goods for other goods this is trading goods for money. What happens when you decide to trade internationally? How can your tribe or country’s money compare to others’ worldwide? This is where the “Gold Standard” comes into effect.
Finally something that is worth the same everywhere will base how much your broken-down monetary system is worth. Today we have the Foreign Exchange which does trillions of dollars a day in monetary trading, but first let us start from the “Gold Standard” to learn how it started.
The “Gold Standard” is a way to trade internationally for goods and products. Let us say that $20 USD can buy 1 ounce of gold and 200 Yen can buy 1 ounce of gold. With this in mind 200 Yen is equal to $20 USD. That is a ten-to-one ratio and now we know that when buying a $1000 USD product from the United States the person paying in Yen would have to pay 10,000 Yen.
The “Gold Standard” was a great leap in the monetary system allowing trading between countries much easier. The downfall was that not all of the countries were using this system and had difficulty trading. The Un ...