The Globe and Mail: High food prices are here to stay
The rising cost of food is a big issue for Canadians. The market perspective on this comes from a small concept involving personal budgets. The higher the percentage of household income that Canadians spend on food, the less they spend on other items, like clothing, dining out and travel. This will, overtime, put pressure on the Canadian discretionary sector of the economy unless Canadian incomes rise more than the rise in food costs. If this trend of food costs rising more than wages continues, look for potential signs of struggle in Canadian retail stores and restaurant chains. (I will do my best to eat all the Swiss Chalet I can!)
Reuters: Exclusive: North Korea's military to share power with Kim's heir
The economic story of the death of Kim Jong-il is just getting started. If his son, the successor, is able to keep things exactly the same, nothing could happen for years. As is the case with most power transitions, there is a jockeying for positions that occurs internally. South Korea is one of the world's largest economies and all eyes will be on it if changes start to occur. South Korea will feel the most dramatic effect of any changes in the North. This is not to say the changes will be better (although, it is painful to think of the lives of North Korean's getting worse) if they do indeed occur. There could be anything in the future, from an opening up of the country economically, to more nuclear threats. The next six months could be very interesting and made even more uncertain by the lack of proper journalism in North Korea. This could be the beginning of a long twisted story ending in nothing or maybe in a "Korea winter" like the Arab spring?
Bloomberg: European Banks Devour ECB Emergency Funds
There are two big themes you should take note of in this piece. The first is that European banks are able to access funds to keep themselves solvent enough to continue to offer loans to their customers and to keep the money flowing and the economy sluggishly moving along in that region. That at least offers some clarity to the markets over the next few months. The second takeaway is more imbedded. It relates to how the health of the banks is connected to the health of the governments in Europe. Sarkozy is inviting the banks to take this money and invest in more troubled sovereign debt to help the problem (a debatable solution). This highlights that this is a temporary band-aid solution, but a necessary one to keep things moving forward in Europe.
