Development of global financial markets

Times have changed since wealth was measured in terms of salt, corn, or gold coins. Even paper money is losing value as the nearly 200 million Visa credit cards accepted in 6.5 million stores throughout the world are used to transact about $650 million in business every day (Toffler 1990, p. 61). Including other credit cards, the figure is five times this amount. In addition, a huge number of transactions are carried out using cheques, shares, money orders, and so on. As a result of the information revolution, a growing volume of financial operations is carried out with “electronic money.” The trend is clearly toward more widespread substitution of paper-based transactions with electronic operations.

The development of this “virtual” framework has made international monetary systems more volatile; financial and commercial transactions can be carried out at a speed that is changing the rhythm of political and economic events. Financial decisions are made at a moment’s notice, at any hour of the day or night. Global markets never close. Effects are almost instantaneous. When a major financial operation takes place or an economic policy announced, repercussions can be felt throughout the world in a matter of minutes.

A further consequence of the information-based management of money has been the internationalization of money markets and a subsequent blurring of financial borders. There are increasing ties between currencies and national governments are experiencing greater difficulty in defining autonomous policies.

Somewhat paradoxically, however, financial trends are developing “on their own.” It is becoming increasingly difficult to control markets, as many more people, acting on their own, are making many more decisions over short periods of time. Central banks are having problems ensuring the stability of national currencies or the behaviour of other financial parameters.

This situation is exacerbated by the similarly widespread automation of markets and the development of new, early forecasting programs. There are “a dozen firms...managing more than 100 million dollars [US] each on the basis of advice generated by computers” (Economist 1993a, p. 3). Growing numbers of mathematicians and computer experts are dedicated to predicting market trends by computerized nonlinear forecasting and other tools that increase the speed and accuracy of financial decisions. The effects of this practice are not yet wholly understood, but they are already playing a role in the globalization trend and in liberating at least some aspects of the financial market from monopolistic control.