Fink (BlackRock): «Efficient markets are wanted for pensions and infrastructure» | EUROtoday

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«Today's society places a variety of vitality into serving to folks dwell longer. But it doesn't put even a fraction of that vitality into serving to folks dwell comfortably all these further years.” Larry Fink, president of BlackRock, the largest asset management company in the world, in the usual letter he writes every year puts his finger on a plague of modern society: the extension of life is a beautiful thing, but it must also be associated to a pension and welfare system that is capable of supporting aging people over the years. This is one of the most important challenges for the future. And the answer, in his opinion, is only one: the capital market. In short, markets will be fundamental to face this challenge and also another, which Fink emphasizes: infrastructure.

The importance of financial markets

The president of BlackRock starts, in his letter, from a personal memory of his parents. When they were elderly and retired – he recalls – they had enough savings to allow them to live well. «My parents lived the last years of their lives with dignity and financial freedom – writes Fink -. Many people don't have this opportunity.” But everybody might. As? The reply, in his opinion, lies within the improvement of an environment friendly capital market.

To clarify the significance of markets, Fink returns to the 2008 monetary disaster following the collapse of Lehman Brothers. Why has the United States recovered higher and quicker than different nations? Because they’ve an environment friendly capital market, explains Fink. «In Europe, the place financial savings are primarily held in banks, economies froze from the second banks needed to flip off the credit score faucets. Naturally, banks additionally closed within the United States, however since there was a market within the US able to offering various capital, the nation was in a position to get better extra rapidly.”

Today the stock and bond market provides 70% of business financing in the US, more than anywhere else in the world. This – underlines Fink – is the great lesson that the 2008 crisis left us: «Countries that aspire to create prosperity not only need a solid banking system, but also a strong capital market». This is why many countries do everything they can to build an efficient market.

The challenge of aging

«By half a century, one sixth of the global population will be over 65 – writes Fink. In 2019 he was one in 11 people of that age. To support these people financially, governments must make it a priority to build a robust capital market.” What ought to governments do to attain this outcome? Fink doesn't have a solution.