Getting Started in Currency Trading, + Companion Website: Winning in Today's Market, 4th Edition

Chapter 2

A Brief History of Currency Trading

Introduction

This material may not seem relevant to day-to-day currency trading , but even a modest perspective adds substance and depth to a trader. “He who knows only his own generation remains always a child,” George Norlin once said.

Ancient Times

Foreign exchange dealing can be traced back to the early stages of history, possibly beginning with the introduction of coinage by the ancient Egyptians, and the use of paper notes by the Babylonians. Certainly by biblical times, the Middle East saw a rudimentary international monetary system when the Roman gold coin aureus gained worldwide acceptance followed by the silver denarius, both a common stock among the money changers of the period. In the Bible, Jesus becomes angry at the money changers. I hope His wrath was directed at the poor exchange rates and not the profession itself!

Into the Middle Ages, foreign exchange became a function of international banking with the growth in the use of bills of exchange by the merchant princes and international debt papers by the budding European powers in the course of their underwriting the period’s wars. By the end of the Renaissance, money and currency trading were the lifeblood of most civilized nations. In the eighteenth century, banker Mayer Rothschild said, “Give me control over a nation’s money and I care not who makes her laws.”

The Gold Standard, 1816 to 1933

The gold standard was a fixed commodity standard: Participating countries ...