International Exchange Rates. "The Gold Standard"

1322 words - 6 pages

In this lecture we will be learning about the golden standard and how it relates to the worlds major currency exchange markets along with the positive and negative aspects of using a gold standard. The golden standard is when a country sets there standard to there rate in gold per ounce or unit. That would give the other countries knowledge of what there rate would be if an exchange was to be made pertaining to currencies. No one countries government can produce more money without the standard amount of gold. As stated by Moffatt, "that the value of money is set by the supply and demand for money and the supply and demand for other goods and services in the economy." (Moffatt, 2007) ...view middle of the document...

EUR/USD = Euro vs. U.S. Dollar, 2. JPY/USD = Japanese Yen vs. U.S. Dollar, 3. USD/CHF = U.S. Dollar vs. Swiss Franc, 4. AUD/USD = Australian Dollar vs. U.S. Dollar, 5. GBP/USD = British Pound vs. U.S. Dollar, 6. USD/CAD = U.S. Dollar vs. Canadian Dollar" (Miliaresis, 2005) The Forex market is open seven days a week twenty four hours a day, it never sleeps unlike people. So the trading never stops. Banks and people all over the world are constantly trading and frequent changes tend to take place rather rapidly and on a daily bases. In the Forex markets people who want to invest does not have the confusion of dealing with a middle person. All there transactions go straight to the market maker. This allows for the cost of the orders to be at a cheaper and reasonable price. It also allows for orders to be handled in a quicker or timely manner.Participants of the Forex are from around the world and the three places that take in the most transactions would be London, New York and Tokyo. London would be the first out of the three taking in at least a total of all transactions which would amount to approximately thirty percent of the market, "The City does not dominate all financial markets, but Forex is one that it does. UK's foreign exchange market accounts for almost one-third of global turnover, with its share steadily edging higher - helping to strengthen the City's position as a financial centre" (New Economist, 2006) And with New York following second taking in at least a total of all transactions which would amount to approximately sixteen percent of the market, and then Tokyo following third taking in at least a total of all transactions which would amount to approximately ten percent of the market.Positive and Negative Aspects.Some positive aspects of the gold standard are within the Forex where a trade or exchange of currencies from one country to another will have to be met with an agreement between the both parties which relies on each others needs and reserves. This makes the exchange beneficial for both parties involved. As stated by Forex Market "Another essential feature of the FOREX market, no matter how strange it might seem, is its stability. Everybody knows that sudden falls are very typical of the financial market. However, unlike the stock market, the FOREX market never falls. If shares devalue it means a collapse. But if the dollar slumps, that only means that another currency gets stronger." (Forex Market Currency Trading, 2004 - 2006)Another positive aspect would be that the Forex is open all the time and trading continues at all hours of the day and night so having no specific set time gives who ever that is doing there business through Forex personal flexibility. The negative side to that would be transactions done in cr...


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