The establishment of foreign currency across the worldJanuary 4th, 2012
Before any form of foreign currency was invented people simply exchanged merchandise for merchandise – for example, if a farmer wanted two loaves of bread from the baker, he and the baker would have to agree on how many bottles of milk were equivalent to two loaves of bread.
Some commodities were highly sought after and were normally accepted by a group of people to function in the same way as foreign currency does in the modern world. These agreed commodities would circulate so that individuals could purchase products that were valued in terms of these particular items. Examples of highly sought after commodities included: coffee, tobacco, cocoa and livestock. However this method did cause inconveniences. Trading with people who did not share the same standardised commodities, along with additional challenge of transport and the short life of fresh foods saw the need for an alternative method of money exchange – namely, the coinage system.
The first coins are said to have been used in the 7th Century BC. Metal coins are said to have been used in Anatolia which is where modern Turkey has grown up. Foreign currency was becoming more established around the world with coins becoming unique, with designs that were distinctive to a particular culture. When major economies were built and other precious metals discovered, coins began to be made out of gold, silver, copper and other metals.
The weight of the coin often symbolised its value. Gold coins were often worth more and used for large purchases by Kings and Governments. The idea of each coin being specific to a level of transaction was first established in India and developed throughout much of what is Europe today during the medieval period. It is only within the last century that coins have become accepted for their extrinsic value versus their metal content value.
Paper money goes back to the Middle Ages when goldsmiths would use paper money as a form of receipt to a person trading in gold or silver. These receipts would change hands until one wished to claim the initial payment. Paper money was then developed when coins were not sufficient to deal with large payments. Problems with counterfeiting inevitably began and with the opening of banks and committees to oversee a country’s finances, there was a need to protect the country by introducing a variety of different security measures. Major countries began printing their own foreign currency, adding their own emblems and designs to their currencies.
Today, trading and exchanging currency has become a lot more convenient and significant. The world’s trading takes place within the foreign exchange market and foreign exchange brokers compete with each other to provide the best foreign exchange rates.
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