Dollar inflation spills over globally, diverting productive spending and driving military conflict.

Soaring inflation and devalued currencies have created a catastrophic debt crisis for much of the world, including in countries like Lebanon, Iraq, Egypt, Sri Lanka and Pakistan. Malaysian economist Jomo Kwame Sundaram says the instability is largely driven by interest rate hikes by the U.S. Federal Reserve, which have the effect of increasing borrowing costs for poorer countries and devaluing their currencies compared to the U.S. dollar. The intensifying U.S. economic war on China is also hurting many countries of the Global South that are linked to Chinese industry, he says.

AMY GOODMAN: This is Democracy Now!, democracynow.org. I’m Amy Goodman, with Nermeen Shaikh.

As debates continue in Washington over raising the debt ceiling and combating inflation, we take a global look at the growing international economic crisis as soaring inflation and devalued currencies leave nations across the globe confronting a catastrophic debt crisis. Lebanon is facing what the World Bank has described as, quote, “among the most severe crises globally since the mid-19th century.” Earlier today, Lebanese protesters attacked at least six banks, setting some on fire, as the Lebanese pound hit a new record low. Since 2019, the pound has lost 98% of its value. Protesters accused the Lebanese government and banks of failing to help the people.

PROTESTER: [translated] What are you Lebanese people waiting for to go down and take your rights from this mafia of thieves and criminals that is ruling? Where are the human rights? There is no electricity, no water, nothing at all in this country. Don’t they feel us while sitting in their palaces? They don’t feel the people. They see us as sheep. We won’t stay silent about our life’s worth.

AMY GOODMAN: In addition to Lebanon, numerous other countries are facing similar crises. In Iraq, protests recently broke out in Baghdad over the plummeting value of Iraq’s currency, the dinar. In Egypt, the value of the Egyptian pound has shrunk in half over the past year while prices have soared. In Sri Lanka, authorities have just raised the price of electricity by 66% in an effort to get a bailout from the International Monetary Fund. Last year Sri Lanka defaulted on its debt for the first time in its history. Pakistan is also facing its worst economic crisis, leading to gas shortages, power outages, rampant price increases. Meanwhile, in Argentina, inflation has hit nearly 100%.

To look more at this global growing economic crisis, we’re joined by Jomo Kwame Sundaram. He is a Malaysian economist at the Khazanah Research Institute in Kuala Lumpur, Malaysia. He was an economics professor and then U.N. assistant secretary-general for economic development. In 2007, he received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.

Professor Jomo Kwame Sundaram, thank you so much for being with us. Can you just comment on what is confronting — in the United States, we focus on inflation here, but the global catastrophe of inflation and what it means?

JOMO KWAME SUNDARAM: Thank you very much for having me, Amy.

The world situation is very, very serious, not because we have a conspiracy to worsen the situation, but we have a confluence of events. Two developments in particular threaten the world economy in very, very deep ways. Firstly, of course, we know that the U.S. Fed has raised interest rates over the last year, and this has had catastrophic consequences for many developing countries. We have seen capital leaving most developing countries, most countries in the Global South, and this has resulted in their currencies depreciating and the U.S. dollar appreciating. That often raises the cost of the imports which are often necessary for the subsistence.

The other major development which has been — the other related development, of course, has been that the cost of debt has gone up tremendously. And the cost of debt going up basically puts many economies into very serious difficulties, because they are no longer able to service the debts, especially given their currencies are declining in value. Of course, some commodity prices have gone up, but many other commodity prices have not gone up, and this worsens the situation in very deep ways.

So, we have, of course — we have, as a consequence, very deep threats of recession in many of these economies. And then, at the same time, we have the stepping up of warfare, warfare not only by military means, which of course are very important and divert precious resources away from needed purposes — dealing with climate change and so on and so forth — and, instead, divert them for military purposes. Germany, for example, has tripled its military spending within the last year.2