QUESTION: 

ANSWER: Feudalism did not take place because of the greedy rich. Government collapsed with the Roman Empire following Romulus Augustus. People abandoned their property in Rome and fled away from taxation to the suburbs. With no government, there was no rule of law. People thereby agreed to be serfs to work the land in return for security. This system lasted until the Black Death of the 14th century.

So it was not the “rich” that created the system or the collapse of government. The rich have no power or desire to compel society to accept such a system. For that to emerge, we need a Dark Age with losses of probably 50% of the population through disease/plague, and in turn the collapse of government. Then the landscape would break up into small units for safety. Major corporations would collapse for they need a coherent society to sell products.

The danger of “socialism” is stepping in the direction of communism where it is the government that consumes everything for they have the army, guns, police, whatever. Government seeks to sustain itself and thus consumes everything, which ultimately leads to revolution. The police are already moving toward being the enemy against the people by supporting the state rather than protecting the population. This was the PRECISE complaint Thomas Jefferson included in the Declaration of Independence — protecting the agents of the king with mock trials.

So the danger (ABSENT OF A DARK AGE) is we move toward a totalitarian state, and ultimately toward revolution whereby we create a real democracy for once rather than a republic that devolves into an oligarchy with career politicians. NO REPUBLIC has ever resisted the path to oligarchy and that is the real danger we face. The question becomes how far down this historical path do we go? The path is well worn. The markers are clear and never change.

A Dark Age is a control-alt-delete; reboot and start all over again. The problem: Dark Ages have existed numerous times and they tend to last 600 years. When we look at such things, it is important to dig to the foundation to reveal how such trends emerge.

QUESTION: Mr. Armstrong; I have not read anywhere else how the money created by the Fed you call elastic will evaporate when the bonds they bought mature. You seem to do much more in-depth research than anyone else who just spins conspiracy theories leaving one question what is real or not. Can you elaborate on this topic a bit more?

Thank you for a most fascinating blog I recommend now to everyone.

UT

ANSWER: Perhaps you are right. Sometimes when you know the topic, you do not explain it in detail because you assume everyone knows the facts as well. Elastic money was a brilliant idea that, if implemented properly, would help to stabilize the economy during economic declines. The problem is that Congress usurped and transformed it into buying government bonds that do not help the economy at all. The original design was to “stimulate” by directly buying corporate paper. The Fed would create money to stimulate, and when the short-term paper was repaid, the “elastic money would expire. Targeting corporate paper funded corporations when banks were not lending, and thus prevented excessive unemployment.

The Fed would expand the money supply during periods of economic decline and it would contract the money supply as the corporate paper was repaid. There was no such authority to perpetually create money at will on some covert perpetual basis. A banking crisis, as we have now in Europe, occurs when banks cannot meet the demand for withdrawals because they lent the money long-term. They would have to sell their portfolios at discounts to raise cash to meet the demands of depositors. Elastic money would meet the demands of depositors without having to liquidate the portfolios.

Elastic money was not some evil conspiracy. If we returned the central bank to perform its original function, then the economy would be much more stable. Our problem is we live in a political economy where politicians just cannot keep their fingers out of everyone’s pockets.