Money Exchange | Foreign Exchange | Stock Exchange
Money Exchange – and the foreign exchange market is one of the most influential markets in the
The New York Stock Exchange, the Nasdaq and the Tokyo Stock Exchange are the three largest security markets in the world.
They have a daily trading volume of around 300 billion US dollars combined.
The foreign exchange market has a daily trading volume of around 6.6 trillion dollars per day
according to the Bank for International Settlements.
Which is basically the central bank for central banks.
The daily figure is more than the annual GDP of two the largest nations on earth
China and the USA.
So what is going on here beyond tourists changing their money out to go shopping on holidays why
does this market even exist?
I want to explore three things why is a foreign exchange market so large influential who actually
conducts these trades and how?
And why the UK pound is so valuable compared to all other currencies.
The globalized world with Money Exchange!
We live in an increasingly globalized world.
Every day businesses are more and more dependent on global supply chains.
To ensure that products and services are produced and provided in the best country possible.
if you ask Germany to produce our iPhones they could do it very easily.
Because they have the infrastructure and technical expertise to produce these
devices with no real problem at all.
But Germany has very expensive and limited labor it also has very demanding
environmental regulations regarding industrial waste.
World War II.
In world war II, the conference established the International Monetary
Fund(IMF) and the World Bank but most importantly it set out the guidelines
for a fixed exchange rate system.
The system established a gold price of 35 US dollars per ounce with participating countries pegging their currency to the dollar.
It means there was no real market for currencies.
There was just a fixed rate for a gold price of 35 US dollars per ounce ignoring supply and demand.
This all sounds nice and very simple and it did work well for quite a while.
But anybody that knows anything about economics, you will know that fighting the forces of supply and demand.
The first large crash in the system appeared in 1967 with a run on gold.
And an attack on the British Pound that led to a 14.3% devaluation in the currency
despite the conservative efforts by their government to pull this currency back in line with its predetermined level.
Later President Richard Nixon took the united states off the gold standard in 1971.
And he has directed the secretary
Connolly to suspend temporarily the convertibility of the dollar into gold
or other reserve assets and by late 1973.
The system had collapsed and participating countries were allowed to
float their currencies freely.
This meant the currencies were traded on the open market just like shares or oil.
The growth of global trade and the liberation of currencies to live their best life at whatever value the market decides for them.
- Who is actually conducting this trade?
- And How Whole Money Exchange Work?