Why does the Forex market exist?
The Bretton Woods Agreement of 1945 attempted, in a post World War II climate, to fix exchange rates - effectively, pegging the principal currencies of the world to the U.S. dollar, which in turn was pegged to gold and that at the time fixed at $36 per ounce. This was known as the Gold Standard.
However, a world-wide fixed exchange rate could not forever cope with the continual changes in real currency values resulting from the daily flows of political and economic stresses between the various nations of the world - their different rates of economic growth; their different fiscal policies, beholden to different and changing forms of governments; their different work force considerations and a multitude of other individual political pressures. Because of all of this The Bretton Woods Agreement was doomed to failure and on the 15th of August 1971 President Richard Nixon eliminated the Gold Standard, effectively releasing the dollar and other major currencies from a fixed exchange rate and allowing them to float against one another. Thus putting at an end The Bretton Woods Agreement - creating the necessity for a universal Foreign Exchange Market and ushering in the new and present era of flexible exchange rates, without which no reasonable international economic system could exist.
Riding the currency wave.
Oddly, the general public knows very little about the Foreign Exchange market.
Yet, it is the largest market place in the world. If one were to combine all of the stock markets in the world, the amount traded would only be a fraction of what is traded on the Forex market. For example, less than $10 Billion is traded on the U.S. stock markets daily while trading on Forex is in excess of $3,500 Billion per day, and the principal participants are government central banks, commercial banks and other financial institutions. Almost a closed shop, for professionals only!
“There is a tide in the affairs of men which, taken at the flood, leads on to fortune;”
