Apocalypse Europe: The Smell Of Draghi’s Eau De Napalm

Tuesday, June 5, 2012
By Paul Martin

by Tyler Durden

As we look forward to tomorrow’s scorched-earth policy-fest from Draghi-et-al., Jefferies’ David Zervos, in his typically understated manner, notes “I love the smell of napalm in the morning. We are back in the kill zone – Apocalypse Europe.” There will be no more strategizing, no more war games, no more speeches imploring the politicians to act. This is the real deal – a full scale European led global financial crisis that requires immediate and aggressive response from the only entities with the authority to act in the world financial “theatre”.

Jefferies’ David Zervos, I love the smell of napalm in the morning

On the battlefields it’s not the heads of state, but the generals, colonels and majors that execute. These leaders have mandates – with the most important one being the dual mandate of the US Fed – “maximum employment and price stability”. And now, the European fallout has become a clear and present danger to both the US recovery and the Fed’s “potential” achievement of its dual mandate goals. The weak data last Friday (as well as many of the past couple months’ soft economic releases around the globe) can easily be attributed to structural uncertainty emanating from Europe. And to be sure, the Fed has been warning us about this eventuality in nearly every FOMC statement for a year now – “strains in global financial markets pose significant downside risks to the economic outlook”. Those risks are front and center, and there is only one key variable we need to look at to understand the level of the threat – the DXY. At 84, we are fast approaching the red zone!

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