Exchange Market

The Gold Standard has been around for as long as our parents’ parents have been alive. Years ago, gold came in the form of bouillon. Now the price of gold has been at constant fluctuating prices. Gold is known as one of the first metals to have been found. The word gold means yellow and is known to have different uses. Back in the old days, people would trade goods for their gold. Gold was and is also used in the form of jewelry. Gold has played many facets throughout our time. Today we use the US dollar as opposed to gold. They both go hand in hand in terms of the buying power they both have. Today, we use the US dollar to purchase our goods, and other countries use their own monetary. In turn, money is exchanged through the Foreign Exchange Market to purchase goods from anywhere in the world.

Since the time of the Gold Standard, the price of gold has fluctuated. When the US dollar loses its value, the price of gold goes up. As well as when the US dollar goes up, the price of gold goes down. Even though gold is not used in the US in terms of purchasing, the significance of gold will stay because the power it holds over the US dollar. We can look at the value of gold in terms of backing of the US dollar. By definition, gold standard is when countries agree to buy or sell gold for a reputable number of currency units (Ball, McCulloch, Frantz, Geringer, Minor, 2006). Each country has a set number of units of its currency per ounce of gold, and the assessment of the numbers of units per ounce from each country was how they determine the exchange rate between any two currencies on the gold standard (Ball et al., 2006).

There are many stances to contemplate for the use of the gold standard. The gold standard has a few positive outlooks. The first being is that many people are advocating for the return of the gold standard. These believers in the gold standard are fighting for this because of our economy. The

Exchange Market 3

economy for the United States is that it is not stable. This would ensure economical stability if gold standards were used today. Another factor is the gold standard could decline the rate of inflation. This is a possibility because with the government controlling the monetary supply now, the gold could be once again used as the medium for international trading. Lastly, gold would have an exact value and therefore congress could not influence the currency to spend more than they can take in.

The negative viewpoints on the gold standard being brought back are limited. The major hurdle to overcome would be this could lead our economy into a recession. The value of gold is high and always will be. With the value of gold at that height, it would be too large of a risk to jeopardize our economy in such a way.

If the country decided to return to the gold standard this would mean that gold would have a fixed rate. Allowing gold to have a price that is consistent with the market is not feasible right now. There is too much of an unknown with the return of the gold standard, and there is not enough information on the gold standard to put our country into such risks.

The Foreign Exchange Market came about in the early 1970’s. The Foreign Exchange Market is a market that converts the currency of one country’s into another country’s (Ball et al, 2006). The foreign exchange market is the largest financial market in the world. This market is an over the counter type where buyers and sellers exchange rates between currencies internationally. The foreign exchange market has no trading center and has no fixed address. There are major foreign exchange markets all over the world. They are open 24 hours a day and five days a week. The only reason for the five day a

Exchange