How the Fed Is ‘Shaking the Entire System’

“There are moments when history making creeps up on you,” writes the economic historian Adam Tooze. “This is one of those moments.” Countries across the world are raising interest rates at unprecedented speeds. That global monetary tightening is colliding with spiking food and energy prices, financial market instability, high levels of emerging market debt and economies still struggling to recover from the Covid pandemic. Alone, each of these factors would warrant concern; combined, they could be catastrophic. We’re already beginning to see what happens as these dynamics intersect: Britain just experienced a bond market meltdown that threatened one of the most advanced financial systems in the world. Developing countries like Sri Lanka, Argentina and Pakistan are experiencing political and economic crises. The World Bank believes we could be headed for a severe global recession. Tooze is the director of the European Institute at Columbia University and the author of multiple histories of financial crises and near crises and of the excellent Chartbook newsletter . He believes this particular confluence of high inflation, rising interest rates and high levels of debt points to an eco…