The expression Banqiao Banker was coined by professional traders comparing current Central Bank monetary policy to the Banqiao Dam disaster. In short you can’t fix a problem by making it larger. In the case of Central Bank policy you can’t fix a debt crisis by creating a larger debt crisis.
Correlations Banqiao Dam Disaster and Banqiao Banking Disaster
Weight of water that the dam holds
Weight of the debt that the government holds
The dam was poorly designed, hastily constructed and not safe from the start.
The US Fiat monetary system was poorly designed, hastily constructed and not safe from the start.
The Chinese Government told its citizens the solutions they implemented to resolve the problems with the dam worked.
The Fed is telling US citizens and debt investors that their economic “solutions” are working and that the US economy is in “recovery”.
Reality; the damage the dam was designed to prevent and costly solutions to repair and “improve” the dam created an even larger problem.
The costly Central Bank solutions for economic crisis are putting the global economy at far greater risk than the problems these solutions were designed to correct.
An apathetic public believes government rhetoric about the dam’s safety contrary to the facts.
An apathetic public believes government rhetoric about Inflation the Fed’s Central Bank Policies and representations of “economic recovery” contrary to the facts.
The weight of the water eventually collapses the poorly designed dam setting off a chain reaction that impacts 62 facilities down river ultimately killing over 170,000 people and destroying 5,960,000 buildings. The total carnage done by the dam’s collapse is far greater than any flood damage the dam was originally designed to prevent.
The weight of debt generated by Central Bank “solutions” could collapse the US economy setting off a global chain reaction destroying or damaging smaller economies creating an even far greater economic crisis than what Fed policy solutions are trying to correct.
Banqiao Dam Disaster
The Banqiao Dam was hastily designed by academics using hypothetical hydrology theory with less than ½ as many gates as recommended by those who had actual hydrology experience in the design and building of dams.
Those who had actual experience warned that a dam with less than half the required gates could not possibly hold up against several typhoons that had occurred during the previous 50 years. The academics dismissed those whom had actual experience as dated and insisted their dam would be stronger and last longer than those designed by the “old timers”.
The government sided with the academics and fired the “experienced old timers” as the academic’s version of the dam could be built in a shorter period of time to solve the long term problem of flooding in the Huai river basin which was very problematic in 1949 & 1950.
Construction of the Banqiao dam began in April 1951 and was completed in June 1952.
US Central Bank Policy (Banqiao Banking Disaster)
In 1971 the US decided to abolish what remained of the gold standard and make the US dollar a fiat currency enabling the Fed to “create” as much money as it needed to dam up any debt typhoons generated by Capital Hill and manage the occasional deficit flooding.
Economic Academics using hypothetical theories said it would work, economists and traders with actual work experience said it wouldn’t work.
Source Federal Reserve
Banqiao Dam Disaster
After a series of higher than expected rainfalls in the in the 1950’s & 1960’s the Government acknowledged the Dam might have “minor” structural issues (as it was made in majority out of clay).
They told residents not to worry as the best hydrology engineers and other professionals had been deployed to resolve the structural issues with the dam.
They represented the issues had been resolved and their solutions had made the dam stronger than most, the Government renamed the Banqiao Dam to the “Iron Dam” and considered it to be unbreakable.
The Government that built the dam then appointed a team of engineers to monitor the dam the Government built.
The Government employed engineers routinely provided glowing updates on Dam’s structural integrity.
The Government sponsored monitoring team told residents there was no danger when in reality the solutions didn’t repair the dam they had made the Dam less safe, putting the complacent residents at even greater risk.
Decades after the collapse it was learned the governmental monitoring agency “revised” these updates to more accurately reflect the structural integrity of the dam.
US Central Bank Policy (Banqiao Banking)
1971 the US abandons the gold standard
1971-1979 The US had been hit hard by a series of debt typhoons causing massive deficit flooding, the national debt grew from 391 billion in 1971 to 845 billion by 1979 or +116.11%.
Source Federal Reserve
Buy 1979 the debt level behind the fiat monetary dam had risen above any level the dam was designed to accommodate. Cracks in its structure became unmanageable and the design flaws became very apparent.
By 1980 the warning sirens of inflation were blaring at full volume, telling investors to seek the safety of higher ground in tangible assets such as gold.
At the same time the US Government Fed, and B.L.S. told investors not to worry about the structural flaws in the newly created fiat monetary system because the best financial engineers led by Paul Volker (then Fed chair) had been deployed to resolve any issues. Volker’s team made a valiant effort in vain to repair it.
The US government also told investors the Bureau of Labor and Statistics (BLS.GOV) was “at the scene”.
The US government reiterated the people of the BLS.GOV who they hired to monitor them would provide US citizens and debt holders with regular updates on the structural integrity of the 9 year old Fiat Monetary System.
The US Government at the same time told their employees at the BLS.GOV to revise their inflation calculations to more accurately report inflation. Government employees at the BLS.GOV immediately complied and implemented the largest number of revisions to the CPI calculations since the CPI’s inception in 1919. Essentially the calculations started moving from a constant cost of living Index to the minimum cost of living index.
The US Government, Fed and BLS assured investors their assets were safe despite the ever increasing debt load behind the fiat monetary system dam. The BLS.GOV using the “revised” and more “accurate” inflation reporting gave US citizens and investors in US debt a false sense of security. See Consumer Price Index fact or BLS.GOV fiction.
The US didn’t fix the inflation or debt crisis they just turned off the warning sirens of accurately reported inflation and other economic releases putting US citizens and investors in US debt at far greater financial risk.
Banqiao Dam Disaster
Typhoon Nina landed onto the scene with a bang in 1975, hitting China hard and quickly.
On the night of Aug 8, 1975, a line of people frantically piled sandbags atop Henan Province’s Banqiao Dam while being battered by the worst storm ever recorded in the region. They were in a race with the rapidly rising Ru River to save the dam and the millions of people that lay sleeping down river. It was a race they were about to lose.
Just after 1:00 am, the sky cleared and stars emerged from behind the storm clouds. There was an eerie calm as someone yelled, “The water level is going down! The flood is retreating!”
There was little chance to enjoy that calm. One survivor recalled that a few minutes later it “sounded like the sky was collapsing and the earth was cracking.” The equivalent of 280,000 Olympic-sized swimming pools burst through the crumbling dam, taking with it entire towns and ultimately hundreds of thousands of lives.
The 24.5-meter dam of Banqiao Reservoir which took the most rain from the typhoon first breached at wee hours of Aug. 8, releasing within six hours 700 million cubic meters of water that wiped Daowencheng down river from the map immediately, killing all 9,600 citizens.
“Houses and trees disappeared all in a instant. Thousands of corpses and cattle floated in water.”
To worsen the situation, the facilities of 62 reservoirs collapsed or were damamged down river one after another unleashing about 6 billion cubic meters of water over an area of 10,000 square kilometers.
Official statistics recorded 30 years latter show more than 10 million people were affected, all communication to and from the cities were cut off for months, some never restored until years latter.
The appalling images of the dams burst were not publicized during at that time. Chinese leaders considered natural disaster death tolls a state secret, an investigation by the central government soon after the floods found a series of “unexpected structural failures” that led to the disaster.
Li Zechun, who first arrived at the scene (now the Chinese Academy of Engineering Sciences) qualified the tragedy “as a man-made calamity rather than a natural one.”
Li said the water storage for irrigation function of a reservoir was overemphasized amid reservoir construction despite warnings by scientists that much of a reservoir’s flood control was inadequate .
The Banqiao Reservoir was designed with a capacity of only 492 million cubic meters but it had to accommodate more than 700 million cubic meters of floods and it has less than half the recommended gates.
The dam collapsed killing approximately 26,000 people from the initial flooding and another 145,000 during subsequent epidemics and famine. 5,960,000 buildings collapsed, 10 million residents were affected. Unofficial estimates of the number of people killed by the disaster have run as high as 230,000.
US Central Bank Policy (Banqiao Banking)
The Fed’s collsal experiment based on hypothetical academic theory and assumptions Led by Alan Greenspan enabled the crisis.
Greenspan apologizes for his decades of failied Fed policy in this short video.
Then the unproven solutions that Bernanke implemented made the crisis multiple times worse and did irreparable damage.
How could Bernanke with his bio and bad calls on the economy ever have be appointed Fed chair as the US faced its debt crisis?
His Bio and calls on the economy
Now Grandma Yellen tells an apathetic US population economic recovery fairy tales while the 45 year old fiat monetary dam holding back unknown trillions in debt and unfunded liabilities is cracking hard, right down the middle.
Red = Federal debt
Green = Debt service on the national debt
Blue = Debt held by Federal Reserve Banks
Black = Federal government receipts from personal taxes
Grey = Federal government receipts from corporate taxes
Source Federal Reserve
Are we really supposed to believe this fester of Central Bankers (FOMC voting members) made up mostly of Academics with very little private sector actual work experience will lead the US out of its biggest financial crisis in history?
Click here for their career history
I run a family office from a beautiful tax free Caribean Island, I’ve been a professional trader for over 20 years including time on the floor. My sole professional purpose is the preservation and enhancement of family wealth. I don’t sell a newsletter, I won’t manage a penny of US investor money but I do enjoy trading US markets especially on days like Brexit.
The gains we make on the moves generated by events such as Greece or Brexit would be a whole lot more rewarding if they we’re generated by good news rather than bad and we didn’t have to worry about preservation of the money we make on the back end.
Watching the US and european financial systems in a death spirale, the jeopardy current Central Bank policies is putting our US assets in, the potential of these policies setting off a chain reaction impacting our Global assets is more than disturbing
I should be getting drunk and chasing sea turtles with my beautiful wife but at the beach but nooooo, I’m stuck here in my office, buying metals like I’m going to live in a bunker for the rest of my life. I’m working like a galley salve on collaring up my long positions, defining what short positions I’ll be taking next, and when as the current collection idiots tries to figure out you can’t solve a debt problem by creating an even bigger debt problem.
I know the US is becoming more 420 friendly but it appears to me the FOMC members are abusing 24% cannabis while on the toilet, getting so high that they’re flushing ethics, responsibility and common sense down the toilet and what should have been flushed ends up being their decisions.
From their pictures it looks to me like they just can’t handle those 24% Indicas, maybe they should try some milder 4-6% Sativas? I have yet to develop a taste for cannabis but I may have too after their monetary policies banish me to the bunker so I can kill the boredom while I polish my guns before the big rat hunts so I can feed my family.
Please elect leadership that has a backbone and can make responsible decisions. Trump with his temper/business failures and Hilary Clinton who couldn’t even keep an eye on her own husband is the best you can do?
What ever happened to leaders like Franklin Roosevelt not only did he put millions of Americans back to work rebuidling the infrastructure of the United States he delt with Hiltler, Mussolini and Hirohito and they prepared to try and take over the entire world.
Please find a leader like F.D.R. audit the Fed for the first time in its 102 year history, trash the BLS.GOV and replace the BLS.GOv with a totally indemendant agency that will generate actual economis data (what a concept) . Hold those that created this debt mess responsible, taking vile little vermin like Greenspan and blowhard Bernanke off the 100K to 250K dollar an hour “lecture tour” and onto the jail tour.
All the money the “Quantitative Easing” printing press can print up, all the BLS.GOV revision magic they can dream up, all of Grandma’s Yellen’s economic recovery fairy tales can’t repair the US debt damage, its stage 4, the dam has cracked right down the middle, the charter builder and financial hemorrhage are dead on th horizon
If Greece with an economy the size of Orange County California or the UK (3.94% of the global economy) abandoning a sinking EU ship can rattle the markets, just imagine when the fertilizer hits the fan in the US representing 23.32% of the global economy.
Sure it’s going to be a lot of fun to trade the major market moves that will be generated, sure we stand to enhance our fortunes, but I for one would rather make money off of good news than economic misery fueled by surfeit of politicians and intrusion of miscreant Central Bankers.
Quotes for the day
Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself. – Mark Twain
In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress. – John Adams