I want to start with some interesting comments by Kansas City Fed President Thomas Hoenig, who said: “We need to think about and assure the markets we are aware of longer term implications” of low rates.

Notably, he added that the Fed will discuss changing the “extended period” language in the FOMC statement, and the Fed should consider changing the statement before any future rate hike.

Investors should be attentive.

Once the Fed changes its language on “extended period,” the Japanese yen will tumble and become the “carry trade” currency of choice.

He continued saying that ideally, rates should be raised "sooner rather than later" and monetary policy could be tightened even with unemployment at 10 percent.

Hoenig also said the Fed should end its purchase of mortgage debt as planned in March because the private market for the securities is “healing.”

Hoenig said last week’s report showing the economy lost 85,000 jobs in December doesn’t change his outlook for a “modest” and “persistent” recovery, with growth of 3 percent to 3.5 percent this year.

Please don’t overlook the fact that Hoenig is one of the regional Fed presidents that will vote this year.

He is also noted as a hawk who fits in the camp of the so-called “freshwater” economists from the U.S. heartland who believe the central bank should take a hands-off approach to both the economy and financial markets.

Now, I have to come back for a moment to Greece.

Desmond Lachman, resident fellow at the American Enterprise Institute who formerly worked at the IMF stated, “There is every prospect that within two to three years, after much official money is thrown its way, Greece’s euro membership will end with a bang.”

Lachman said that if there is anything that the Greek authorities might learn from Argentina, it is the folly of attempting to fight the inevitable.

"Not only does this saddle a country with a mountain of official debt that cannot be rescheduled; it also deepens and prolongs the recession from which any post-devaluation recovery might begin," he said. "Athens should leave the euro zone sooner rather than later. However, that is not the way that Greek tragedies play out.”

Also, Olli Rehn, the European commissioner-designate for economic and monetary affairs, said at his confirmation hearing before the European Parliament that “the problem in Greece concerning the excessive deficit and the rapidly rising public debt is a very serious one, especially for Greece, Greek citizens and taxpayers. Of course, it also has potential spillover effects for the whole euro zone.”

In his testimony, Mr. Rehn repeatedly stressed that the commission would deploy powers vested in the Lisbon Treaty to deepen and broaden its co-ordination of economic policy with “spine and rigor” to protect the nascent economic recovery.

He remained completely in line with the recent statements of the European Council president Herman Van Rompuy and Spain’s new rotating presidency of the European Union since Jan. 1.

The distressing situation of Greece doesn’t bode well for the euro and the euro zone as a whole.

When Greece became member of the euro-zone in 2001, it agreed to comply with the Maastricht criteria established in 1992 of keeping its budget deficit below 3 percent of gross domestic product and its public debt-to-GDP ratio below 60 percent.

Since 2001, Greece's budget has widened to 12.7 percent of GDP, while its debt-to-GDP ratio is projected to reach 120 percent in 2010.

Already we see the markets putting high question marks on the sustainability of the Greek euro agreement of 2001 with the European Central Bank (ECB) whereby it pegged and replaced its currency, the drachma at a fixed rate to the euro.

In some ways, it is comparable to Argentina's case, whose Argentine Currency Board pegged the Argentine peso to the U.S. dollar between 1991 and 2002 in an attempt to eliminate hyperinflation and stimulate economic growth thanks to sponsoring of the US-backed IMF.

For Greece, the question is for how long the European Central Bank will stave off the inevitable.

In Argentina's case, conditional IMF support staved off the inevitable for a couple of years before the proposed adjustment measures led to rioting in the streets and it became clear to the IMF that it was dealing with a solvency rather than a liquidity problem.

It is difficult to see how Greece's present crisis can end on a happier note.
If Greece would bring its budget deficit down to the Maastricht target it would surely deepen the recession and, for now at least, any serious attempt for restoring Greek competitiveness through wage cuts would lead to years of painful and politically unacceptable deflation that would provoke widespread labor-market unrests.

Similar to the IMF-Argentina situation, the ECB won’t indefinitely continue to provide low cost funding to the country.

The euro is for Greece an impossible dream, period.

The big question remains, of course, what will happen the other weak PIGS, which is the unfortunate acronym for Portugal, Italy, Greece and Spain once Greece will have to leave the euro and be cut off from the sponsoring of the European Central Bank?

As said before, the euro has to face serious uncertainties moving forward.

We all know that markets don’t like uncertainties.

In the meantime, the Fed and the dollar don’t have to face that kind of problem, whereby a state of the U.S. Federation could be obliged to quit the dollar.

That doesn’t mean that the states in the United States are in good shape!

And talking about the dollar, Peng Junming, executive at China's sovereign wealth fund China Investment Corp's (CIC) asset allocation department, stated during a speech at the Chinese Academy of Social Sciences said he thinks “the dollar is at its bottom now.”

He said “there will be very limited space for the dollar to drop further. The Japanese yen is what, I think, has the worst outlook. The Japanese yen will continue to drop, unlike the dollar, which will not serve for long as a source of funding carry trades.”

He also interestingly noted that “China should have the right attitude about investing in gold. There is no urgent need for China to increase gold buying for now, because prices are high.”