May 06, 2010

http://www.dailyfinance.com/market-news/

The debt problem in Greece is only getting worse. As I wrote a few days ago, the austerity measures demanded for a Greek bailout are unacceptable to the people of Greece. So it is likely that Greece will reject the bailout, preferring to go bankrupt and take down a lot of other European banks with them.

This could have serious repercussions. It is getting likely that Greece will drop out of the EU, even though its constitution does not allow it. Probably more likely, however, is that Greece will have to stay, but Germany will drop out.

That would be the destruction of the European Tower of Babel.

Yesterday the Dow dropped 260 points. Today the Dow dropped nearly 1000 points in mid-afternoon before recovering. For the day it lost only a bit over 347 points. The drop of 998 points was the biggest drop in history. In that it came on President Obama's "Day of Prayer," it makes me wonder if perhaps some prayers are being answered.

By the way, United States banks own $18.1 billion of Greece's debts. European banks own about $193.1 billion. The largest US holder of Greek debt is J.P. Morgan. Everyone has a lot to lose.