The Greek problem is not going away

The dollar should continue to see a slide given the overall global economics, but we have seen strong gains against the Euro because the EU debt issues will not go away. Greece credit issues have not been solved and may get worse without another bail-out. The market is pricing more risk with CDS spreads. The Greek credit rating has moved from A- in January 2009 to B this month. It was BB- in March of this year.

There is over $50 billion euros that will be maturing in the next 18 months. Tax revenues are down so costs cannot be covered even with the austerity programs. Greece is in a fiscal death spiral that even selling assets will not help.

The simple problem is that European banks as the some of the largest holders of Greek debt cannot take the losses. Moody's suggests that the European banks hold about 95 billion euro in reek debt, but the real problem will occur if there is a contagion to other debt-ridden countries. German banks, for example, hold $34 billion in Greek debt but also $36 billion in Portugal, $44 billion in Belgium, $118 billion in Ireland and$344 billion in Italy and Spainish debt. European bank stocks have been hit and trail the general stock market. They will not be able to raise capital.

There is talk that the Greek debt will have to be restructured which the rating agencies will view as a default, but in Europe there cannot be a default. We will have to call it a "reprofiling". Reprofiling is still a default and this is where we are going.