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Published May 5, 2023

Best Of: How the Fed Is ‘Shaking the Entire System’

Adam Tooze delves into the profound global ramifications of the Federal Reserve's interest rate hikes, analyzing their impact on currency values, international debt, and financial vulnerabilities, while also unpacking the concept of polycrisis amid today's unique inflationary pressures and examining the economic strains in South Asia.
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  • South Asia's Challenges

    South Asia faces a unique set of economic and environmental challenges that are exacerbated by global changes. highlights the region's exposure to rising interest rates, escalating commodity prices, and a strong dollar, which collectively impact countries like India, Pakistan, and Bangladesh 1. These nations, representing a significant portion of the global population, are particularly vulnerable due to their reliance on liquid natural gas, which has become a contested resource amid global competition 1. Additionally, the region is severely affected by climate change, with extreme weather events such as heatwaves and floods posing existential threats 2. Tooze emphasizes the gravity of these challenges:

    South Asia really is the absolute crosshairs of climate change, and it works in a double way there.

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    The combination of economic pressures and environmental vulnerabilities creates a precarious situation for South Asia, demanding urgent attention and innovative solutions.

       

    India's Economic Resilience

    India's economic landscape is marked by both resilience and vulnerability in the face of global financial dynamics. notes that India's relatively closed economy shields it from some global shocks, yet it remains dependent on energy imports and faces structural challenges 3. The country's growth has been impressive, but concerns about infrastructure, education, and crony capitalism persist 3. Despite these issues, India has demonstrated resilience, particularly during crises like the COVID-19 pandemic, where innovative use of technology helped mitigate humanitarian impacts 4. Tooze reflects on India's situation:

    The big questions are all about the longer run in India and whether or not there is a growth model that can be sustained over the next two generations.

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    The future of India's economy hinges on addressing these structural issues while leveraging its technological advancements to foster sustainable growth.

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