THE HISTORY OF MONETARY EMPIRES (ACCORDING TO RAY DALIO)

The legendary hedge fund manager Ray Dalio offers an insight into the dynamics that he saw when studying the rises and declines of the last three reserve currency empires (the Dutch, the British, and the American) and the six other significant empires (Germany, France, Russia, India, Japan, and China) over the last 500 years.

Monetary Patterns & Key Findings

After studying these past cases, he has identified clear patterns that occurred for logical reasons:

1. Behind the success and failure of great monetary empires, over time, there are giant cycles

2. 17 forces affect the big cyclical swings in wealth and power (check below)

3. Of the 17 forces, the debt cycle, the money and credit cycle, the wealth gap cycle, and the global geopolitical cycle are the most important to understand

Major Forex Currencies and Their Short History

Currency names vary from country to country based on domestic culture and linguistic factors. Many monetary units got their name from the domestic word for ‘weight’ or the word for ‘golden’. This was happening probably because these domestic currencies had an equal value of their weight in gold.

The Modern History of Currency Trading

Modern currency trading started in 1973, after the end of the Bretton Woods system. On August 15, 1971, President Nixon announced a ‘New Economic Policy’ that was the beginning of the end for the Bretton Woods agreement that was established at the end of World War II.

The Bretton Woods system (1944-1971)

The Bretton Woods system tightly regulated all exchange rates by linking them to their gold reserves. More specifically, all participating countries guaranteed the convertibility of their currencies into U.S. dollars to within 1% of fixed parity rates, with the dollar convertible to gold bullion for foreign governments and central banks at US$35 per troy ounce of fine gold.