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The New Math: Fed + Treasury = Stabilization and Punishment

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Message Brock Novak

The recent Bear Stearns fiasco will legacy itself as a watershed event in the history of U.S. government inter-agency relations, transforming at least one key heretofore non-existent official affiliation and related operation/execution models. That positive byproduct in the form of a completely new Fed and Treasury relationship and intervention model, that will not only help the U.S. financial system and economy over the long term, but more importantly in doing so, be of great value in helping thwart Commulism and its ever tightening grip on the global economy.  

This article therefore outlines a proposed mission statement/theme for the new "Batman and Robin" Fed/Treasury dynamic duo, and concludes with a “20/200/2000” recommendation to Treasury Secretary Paulson and Fed Chairman Bernanke regarding tomorrow’s G7 Finance and Central Banker Meeting. 

In short, the old mantra of "the Fed does this and the Treasury does that" separate and reactionary approach to market forces was conducive to fueling an insidious Commulism gameplan. On the other hand, a pro-active, synergistic, combined Fed/Treasury approach to pre-emptive financial market intervention, provides what Commulist nations (e.g. China and Russia) fear most - a stronger and more legitimate “financial superpower” foe. Combine that with an integrated monetary/fiscal and intervention policy/approach with U.S. allies equivalent Fed/Treasury organizations, provides the foundation for a powerful anti-Commulism financial power counter, and therefore boost to U.S. national security. 

Historically, and no pun intended, the Fed and Treasury have traditionally maintained a disparate, Chinese Wall-like separation. In fact, no direct working relationship. And intentionally so, to maintain the Fed’s desired governmental “independence” appearance.  

Both had been tasked with support of the financial markets in more or less a "reactive", yet separate and non-integrated manner. The recent pivotal landmark Bear Stearns debacle has however, forever transformed that paradigm into a new model going forward - that being a relationship and execution model built upon being not only pro-active, but powerfully now, integrated. 

The Analyst highlighted the specific March 14, 2008 Bear Stearns crisis situation, which transformed the Fed from historically a crisis creator to going forward, solution generator, in the following two articles. 

Commulism and the Bear Stearns Fiasco: Cancel the Stimulus Package and Backstop the Credit/Confidence Crisis (dated 17 March 2008): New

Cabinet Post: Czar of Prudent Judgment (dated April 4 2008):  

The case now to be made to thematically link the new Fed and Treasury "joint, pro-active intervention" model under a new integrated mission statement or theme as follows:

                          Stabilization and Punishment” 

That is, the two will now pro-actively (pre-emptively), “collectively and collaboratively” intervene as necessary to "stabilize" financial markets and then be given (TBD) the authority to "punish" the individual entities and or individuals that created the respective "confidence crisis" and necessitated their intervention.

Indeed the dawning of a new age of accountability on free willing financial market institutions engaging in renegade and risky "cowboy finance" activities. 

And that sage, age old "Don't Fight the Fed" advice will too evolve to a new advisory diet - "Don't Fight the FaT (Fed and Treasury)". 

Interestingly as if a harbinger of the Bear Stearns paradigm changing event on March 14, 2008, the Analyst proposed this non-traditional teaming up of the Fed and Treasury “before” it occurred, evidence his article titled: 

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The cleverest of all, is the man who calls himself a fool at least once a month - Fyodor Dostoyevsky It is a curious fact that people are never so trivial as when they take themselves seriously...Some cause happiness wherever (more...)

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