Cables and Computers in the 1980s Post-Bretton Woods Financial Turmoil

Abstract

This article examines the role of telecommunication systems in a post-Bretton Woods world in the early phase of capital flows globalisation in the 1980s. Three financial events form the historical context of the study. The Plaza Accords of 1985, the Louvre Accords of 1987, and the stock market crash of October 1987. The Accords of 1985 and 1987 triggered coordinated G5 Central Banks interventions to attempt to regulate USD global exchange rates. The article then goes on to discuss the development of a Reuters communication technology, Reuters Monitor Dealing System, and its role in amplifying market turmoil as well as its impact in increasing and facilitating Central Banks’ efficiency and effectiveness. The stock market crash of 19 October 1987 spread to all major markets and threatened the stability of the financial system in the US. The article describes the role played by ‘automatic trading systems’ and ‘closed telecommunication systems’ like the DOT or ‘Designated Order Turnaround System’ in creating the conditions for the worst market crash in history to date. The conclusion points to the prominence of the new telecommunication systems in transferring geographic distances and different time zones into one ‘virtual global marketplace’ within which all participants could transact and exchange information instantly. This trend evolved into a global financial system today in which a majority of transactions are executed by automated computer and telecommunications systems.

Keywords

Central banks telecommunications stock markets foreign exchange globalisation

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