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Foreign Exchange Markets Summary

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Submitted By fleurdeamour
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The functions of the gold standard was to give the worth of a countries currency a true measurement of its worth. The countries participating would measure their currency against the worth of gold. Since gold was highly sought-after, it was a fair measurement of how a currency would hold its value. The gold standard came and went, over a matter of 100 years and is no longer used today. Arguments have been made for the return of the gold standard, to no avail the fall out in the late 1970’s still carries its weight. After World War II, the Bretton Woods agreement controlled the European and American economy, with the intentions of repairing damage after the war. Eventually, the strategy failed and thus gave way for the start of the foreign exchange market and the free-floating system. The gold standard began in the early 1800’s and was used as a measurement of the worth of currency. The idea was that as gold held a certain value according to the demand and supply of itself, the currency of a country would be worth a fraction of the worth of gold. For example, if one ounce of gold was worth $100 then one U.S. dollar would be worth 1/100th of an ounce of gold. It also kept a hold on any country from printing too much money, so that it would not lose its value over time. This measurement could also be used with any metal, as in the 1800’s silver was also a precious metal (Moffatt, n.d.). During the presidency of Franklin D. Roosevelt, in 1933 the gold standard had come to an end due to the discontinuance of gold as a personal asset. Gold was no longer available for personal ownership, aside from jewelry. After this further relationship between countries currency and commodity was abruptly ended, thus putting a stop to the gold standard being used in any major economy (Moffatt, n.d.). The gold standard was viewed as a way for countries to have a...

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