This week, we begin by discussing the inflated price of financial assets, which may be cause for concern as the era of “cheap money” comes to an end in the face of geopolitical turmoil and financial uncertainty. We then examine some of this geopolitical turmoil by looking at Turkey’s recent election and the rising tensions between Serbia and Kosovo. Moving on, we examine the future of the “flying car” industry. Finally, we end on a discussion of US foreign policy missteps in the Global South in our era of renewed great power competition.

Inflated Financial Assets are a Cause for Concern

We should all be worried about the ‘financialisation’ of our world

Gillian Tett, Financial Times

US Faces $48 Trillion Moment of Truth This Decade, McKinsey Says

Rich Miller & Alexandre Tanzi, Bloomberg

Since 2000, global paper wealth has increased by $160 trillion, driven by a rise in global debt and money supply through quantitative easing. For every $1 of global investment, $1.90 of debt was added, rising to $3.40 during 2020-2021. This growth in asset prices, mainly in real estate and equity markets, has exacerbated wealth inequality and may soon end as central banks tighten monetary policies. A McKinsey Global Institute report outlines four possible outcomes as the era of cheap money ends: first, a return to inflated asset prices with low growth; second, stronger growth at the expense of asset prices; third, a crash in both growth and asset markets; or fourth, accelerated productivity leading to robust growth and healthy financial markets. This last possible scenario is the most desirable but requires a significant boost in productivity. To prepare for a less-than-ideal outcome, we must “adjust our minds” to an era where asset prices do not always rise.

Southeastern Europe’s Political Turmoil

Erdogan leaned into defense, religion to win tight Turkish election

Momoko Kidera, Nikkei Asia

Balkan Violence Poses New Risks for Europe

Michael Winfrey, Bloomberg

Turkish President Recep Tayyip Erdogan won reelection, overcoming both massive inflation and a united opposition candidate. His campaign largely appealed to Turkish conservatives by promoting Islam and the defense industry, and his political power seems to be cemented due to his coalition securing a majority of seats in the earlier parliamentary election in May. His bizarre economic policy of monetary easing despite high inflation – which is fueling the Turkish lira’s depreciation – is expected to continue. The president will likely also continue pursuing a foreign policy independent from the West, making Sweden’s ascension to NATO difficult and keeping relations warm with Moscow.

In other news relating to Southeastern Europe, tensions between ethnic Serbs and Albanians are rising again in Kosovo. The small country, still unrecognized by neighboring Serbia, has been a powder keg since a 1999 NATO bombing campaign drove Serbian troops out of Kosovo at the end of the Yugoslav wars. A recent mayoral election in a majority-Serb area was boycotted by Serbs, leading to the victory of an ethnic Albanian. Serb protestors clashed with NATO-led peacekeepers in the northern city, injuring around 30 soldiers. Serbian President Aleksandar Vucic put Serbia’s army on its highest level of alert and moved it close to the border. Kosovar Prime Minister Albin Kurti argued that the government in Pristina has the right to govern all its territory, and the resulting standoff has endangered US-backed, EU-led negotiations which aimed to restore ties between the two countries. It also gives Russia, which backs Serbian efforts to prevent broad international recognition of Kosovo, a continued foothold in the Balkans. 

Future Flight – Electric “Flying Cars”

Japan’s SkyDrive eyes 2026 U.S. launch of flying cars

Akihide Anzai, Nikkei Asia

China’s flying car developers ready for takeoff in 2025

Takashi Kawakami, Nikkei Asia

China’s flying car developer eyes ASEAN aerial tour market

Kentaro Iwamoto & Sayumi Take, Nikkei Asia

The electrical vehicle takeoff and landing (eVTOL) aircraft industry, colloquially known as “flying cars”, is preparing for commercialization as soon as 2025 or 2026. Chinese and Japanese startup companies, such as China’s EHang and Japan’s SkyDrive, are gearing up for flight with SkyDrive having released plans to conduct commercial flights in South Carolina starting in 2026. While the vehicles look like helicopters, they offer certain advantages over them, such as reduced maintenance, autonomous flight, electric or hybrid engines, and the capability to land and take off from very small spaces. The industry is currently dominated by startups, including American Joby Aviation, British, Vertical Aerospace, and German Volocopter, with Morgan Stanley forecasting a $1.5 trillion dollars global market by 2040. Expectations lift off from there to up to $9 trillion by 2050.

Still, the fledgling industry and its entrance to the market will largely be dictated by the development of government regulations for flight. A well-constructed regulatory framework will make the 2025 target more likely, while restrictive or unimplemented regulations could delay commercialization. The Chinese government has been especially proactive in supporting the industry, which may offer the regulatory springboard needed within China and other countries to approve commercial flights. Flights will principally serve as taxi services, such as the SkyDrive operation to be set up in South Carolina, or will be used for tourism, such as Volcocopter’s planned flights over Marina Bay and Sentosa in Singapore.

The U.S. Is Asking the Wrong Questions About the Global South

Aude Darnal, World Politics Review

Read the full article here

The US focus on great power competition is negatively impacting political and diplomatic initiatives with Global South countries as America seeks to counter Russian and Chinese influence there. Currently, American policy has created zero-sum conditions focused on securitization with the Global South countries. Yet that policy structure has failed to bring many Global South countries on side, especially over the war in Ukraine, frustrating Washington policymakers. At its core, Global South countries are expressing frustration over persistent inequalities in multilateral institutions and the imbalanced distribution of globalization’s dividends. While unacknowledged, the Global South offers a great deal to the US as a partner, as seen for instance by the high volume of trade collectively from ASEAN countries with the US. Therefore, the US ought to explore options to mold the global order so as to incorporate Global South countries as partners, lest the US lose countries in the Global South to the competition.