Gerald Celente named “Self-Sufficient Economies” as a de-globalization related Top Trend in November of 2021.
By now, most of the world realizes that trend has become reality.
BlackRock CEO Larry Fink talked about de-globalization and other matters his leading investment firm was focused on in a recently posted annual letter to investors.
His remarks dismissed bitcoin, but expressed some positive sentiments for crypto technology.
Fink also gave his assessment of the current banking crisis.
Concerning self-sufficiency, Fink said the desire of the U.S., China, the EU and Russia to be less dependent on rival powers was leading to changes in sourcing and production.
He said those objectives had positives, but also involved costs that would keep inflation elevated over the next several years at least.
Like Peter Zeihan, who has offered some contrarian and interesting assessments of geopolitics vis a vis China and the U.S., Fink argued that America is relatively well-positioned in a de-globalization environment:
“I believe that North America could be one of the biggest global beneficiaries. We have a large and diverse labor force. We have abundant natural resources, with the potential for both energy and food security. Public policy is helping to keep chip manufacturing in the U.S., and the latest innovations in AI have become a new preoccupation. Other national winners will emerge as well.”
Regarding the current banking crisis, Fink mentioned several kinds of “mismatches” plaguing the financial system. One was the “asset-liability” mismatch of banks holding relatively low yielding bonds, after the Fed rapidly raised rates at a pace not seen since the 1980s.
Another was an asset-liquidity mismatch, where banks are heavily invested in relatively illiquid assets like real estate, and thus unable to provide needed levels of on demand liquidity.
Fink said the banking crisis might play out in relative slow motion over a period of years, somewhat analogous to the savings and loan crisis of the 1980’s through mid-90’s. That crisis saw over a thousand institutions eventually go under.
Fink said high interest rates and other factors meant governments could not spur or sustain growth via high spending:
“After years of global growth being driven by record high government spending and record low rates, the world now needs the private sector to grow economies and elevate the living standards of people around the globe. We need leaders in both government and corporations to recognize this imperative and work together to unleash the potential of the private sector.”
Channeling a bit of Elon Musk, Fink said aging populations and lower birth rates were complicating future growth even more:
“Populations in Europe, North America, China, and Japan are aging due to increased lifespans and falling birth rates. Fertility rates have fallen to an all time low of 1.7 births per woman in the U.S., 1.5 births in Europe, and 1.2 births in China. This has profound implications for each of these markets over time. It will result in a smaller working population and cause income to grow more slowly or even decline.”
Not unexpectedly, Fink advocated for Americans to invest in capital markets, instead of hoarding cash “in tin cans,” and cited a statistic that only 58 percent of Americans were exposed to the stock market. He said 1,000 dollars invested ten years ago in the S&P 500 would’ve returned 3,000 dollars today, and that 1,000 invested with BlackRock would’ve netted 4,000.
Regarding the crypto sector, Fink took a swipe at bitcoin, mentioning a “media obsession” with it.
Maybe we can explain this one: a thousand dollars invested in Bitcoin 10 years ago would’ve purchased about 11 bitcoin, which would be worth 297 thousand dollars at the current moment (bitcoin price at the end of March 2013 was 92 dollars).
Of course, sold in 2021, the bitcoin profit would add up to a lot more.
Fink did have some positives to say about the crypto sector, especially concerning tokenization of assets, which he said was bound to increase, though he said BlackRock would focus on “permissioned blockchains”:
“For the asset management industry, we believe the operational potential of some of the underlying technologies in the digital assets space could have exciting applications. In particular, the tokenization of asset classes offers the prospect of driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors. At BlackRock we continue to explore the digital assets ecosystem, especially areas most relevant to our clients such as permissioned blockchains and tokenization of stocks and bonds.”