Exclusive Interview with : Arvind Sanger, Managing Partner of Geosphere Capital Management
Updated on: 30 Jun 2016
The United Kingdom's referendum to leave the European Union has triggered intense volatility in the global markets. While developed markets have been roiled, emerging markets are also feeling the heat.
Speaking to Bloomberg TV India, Geosphere Capital Management Managing Partner Arvind Sanger says the vast mass of disappointed voters — the middle and the lower class — in numerous western nations are essentially disenchanted by the current framework, which they believe is not working for them. The real danger is, whenever there is a political issue, the central banks are forced to pump in liquidity. But the question is, can central bankers fix free trade?
The world, and in particular the EU, is in a major upheaval after Brexit. What is the take-away from what you have been hearing?
A month and a half ago, I attended a conference in the UK that focused on the political risk and the political upheaval in many western countries. And I came back with a slight fear.
I think the biggest risk is what Brexit signifies. Brexit by itself has its own dislocational effect on the EU. But what it signifies is there is a large mass of frustrated voters — middle and lower-middle class — in many western countries that feel significantly disenchanted by the existing system, which they think is not working for them post financial crises. And they are willing to completely ignore what experts and politicians say. So the risk I see is really a risk that we have been used to since the financial crisis of 2008 — that central bankers have to fix everything.
Anytime there is a political problem, the central banks rush in and pump in liquidity and it is fine. Now the question is, can central bankers fix free trade? If Britain is leaving the EU, it can affect trade significantly because it has to negotiate in terms of trade. US presidential candidate Donald Trump is talking of a completely anti-free trade message. But that would not imply significant risk to free trade whether it is Mexico or China.