BlackRock CEO: Brexit "increases uncertainties in the world"
Britain's decision to leave the European Union was quickly followed by feelings of "Bre-gret" and fears of a "domino effect" in Europe. According to BlackRock CEO Larry Fink, the "anger" that triggered the Brexit vote transcends Britain and applies to a large chunk of the American population, too.
"There are a group of people who truly believe their future is worse... and their children's future may be worse," Fink explained to CBS This Morning on Thursday. "I think there is a component of society that is appropriately in a state of fear. They've seen little or no wage growth for 10 or 15 years, their health care costs have gone up, their food costs have gone up, their children's education costs have gone up, and so they've been squeezed."
BlackRock is the largest investor in the world, with some $4.6 trillion in assets under management. Fink does not see another 2008 financial crisis because of Brexit, but he believes the decision by U.K. voters only adds to "uncertainties in the world" -- with consequences that could take years to determine.
Those uncertainties encourage people to refrain from making long-term investments and instead hoard more cash at a time where a record $55 trillion is already sitting in banks worldwide. According to one recent survey, 34 percent of Americans said they'd park more of their savings in cash as result of the Brexit decision.
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"This is a time when there's over $15 trillion of money that is paying negative interest rates in Europe and in Japan," Fink said, citing central banks overseas with effective interest rates of less than 0%. "There is huge amounts of cash and so there is a reservoir of money to invest, ultimately, but if anything, Brexit probably means there's going to be a large reservoir of cash and less investing, and less investing for the future actually means a slower global economy."
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Fink also addressed an issue closer to home that concerns him: Donald Trump threatened this week to withdraw the U.S. American Free Trade Agreement. Fink denounced the presumptive Republican nominee for blaming the loss of jobs on globalization and trade deals -- the blame should be on technology instead.
"We are the largest exporter in the world. We're also the largest importer in the world, and so we depend on global trade," Fink said. "Technology has reduced the amount of human labor and so this is more of a technology story and it's being rooted in a trade story, but technology has changed the workforce."
With more advances in artificial intelligence ahead, Fink believes the need for human labor will fall further, but said there is a silver lining.
"The silver lining is the cost of the human input in manufacturing is so reduced, we're going to see more on-shoring, so we're going to see manufacturing slowly coming back [to U.S. shores]," Fink predicted.
Should Hillary Clinton win the White House, Fink, a prominent New York Democrat, is being floated as a potential candidate for U.S. treasury secretary. Asked if he'd consider the offer, he answered, "I have a great job, I love living in New York City and I intend to be living in New York City a long time in the coming years."