Random Europe

It is a lazy summer day here in Texas, and the market and investment news front is rather quiet as well. But that will change before too long. We should enjoy the relative calm while we can, because Europe will soon be back in full crisis mode, coming off the summer. In today's Outside the Box we'll look at three brief pieces that may give us a preview of the near future, as well as an incisive retrospective on the recent past.

The first is from Roubini Global Economics. It's part of a longer piece by Megan Greene, looking at what lies ahead in Europe. The fun & games there promise to ramp back up all too quickly. Then we have another extract from a longer piece by Kiron Sarkar, looking at Germany, that echoes some of the themes from last week's Thoughts from the Frontline. The German leadership has not really been transparent with their people, but then you can't hide trillion-dollar commitments very easily.

Finally, we wrap with Ambrose Evans-Pritchard's latest column, which I think is one of the better ones he has done in years. I would call it a must-read. Under the title "Five years on, the Great Recession is turning into a life sentence," he concludes with:

"As for our [the developed world's] debt mountain, we have barely begun the great purge. Michala Marcussen from Societe Generale says the healthy level is around 200pc of GDP for advanced economies. If so, we have 100 points to cut.

"This cannot be achieved by austerity alone because economic contraction would tip us all into a Grecian vortex. Such a cure is self-defeating.

"Much of the debt will have to be written off. Whether this done by inflation (1945-1952) or default (1930-1934) will be the great political battle of this decade. Pick your side. Pick your history."

When you come to the Endgame of the Debt Supercycle, something must indeed be done with all the excess debt that has been accumulated. Different countries will choose different options, but no matter the choice there will be pain. It remains to be seen how that pain is spread around.

In the US, Romney has evidently decided to stop playing small-ball politics and turn the discussion into a referendum on the direction of the country. Both sides think this discussion will be to their advantage, which, if it were not my home country with consequences for my kids, I would find somewhat entertaining. But, as I wrote almost two years ago, this is a national discussion we absolutely must have. The issues are complicated, and there are no easy answers when you have to move out of the realm of theory and into the messy real world. Workable solutions to our big fiscal problems will be a much harder "sell" to the American public than either side currently thinks, as the majority of Americans, according to the polls, would like to eat their cake without paying for it. It is not clear what our choices will be when the true consequences are understood. I will comment further on this topic on Friday.

In the meantime, have a great week. My congratulations to my British friends on a marvelous Olympics.

Your getting ready to kick back a little analyst,