Well, perhaps it is. But, really, is there anything new at all in his four points? If not, how can this possibly be a great strategy? Everybody and his donkey could have thought up these four points, I’d say. Certainly all the financial pundits could – and in all likelihood they did. Yet in spite of that, they kept moaning about a missing exit strategy – and rightly so. Clearly, that must mean that all those regular tools which those pundits could think of, did NOT constitute a viable exit strategy in their view. Yet now all of a sudden when the greatest donkey of all brags about exactly those same tools again and how great those will do the job, that would constitute briliant thinking showing the safe way out?

On a related note, in all those repos the Fed is supposed to do, and the treasuries and securities it woul sell – just what exactly does it think it can repo with and what it can sell off? Bernanke just said today (7/22) the Fed will soon (don’t remember his exact timeline) have +less+ treasuries on its balance sheet than it had two years ago before the crisis started. Yet for an exit strategy to be effective it will have to sell massive amounts of – well, what? The Fed will find itself equally massively wanting of treasuries (and then some), since it has swapped the ones it once had out to the banks at the start of the crisis, in return for all the banks’ toxic nonsense – which has been loading up the Fed’s balance sheet ever since. Are we to believe the banks are going to buy that crap +back+ from the Fed (instead of the treasuries it doesn’t have) in return for all the cash those banks have been so desparately hoarding?? Seems highly unlikely. Ergo: the Fed just has not enough quality assets to repo or sell off.

So that would leave the Fed only with paying interest to the banks on their reserves at the Fed. I haven’t done the math but something tells me that is a ridiculous measure in view of the huge task it needs to accomplish.

Oh yes, and then there still are those treasuries the treasury is supposedly going to sell for the explicit purpose of +not+ using the money it will generate, and instead dropping it dead at the feet of the Fed. Surely, after all the massive amounts of debt the treasury is already struggling to sell, it would not at all be problematic to sell yet another similarly massive amount, would it?

In short: not only is the Fed’s ‘strategy’ hopelessly inadequate old news, but the Fed doesn’t even have the beef to execute it.