Floating Debt Speculative Theory – Case of Study: Dona Branca

Ok this study bases itself on Portuguese sources, so you have 3 choices, you either read Portuguese, or you use Google Translate, or you trust what I say, I’m sorry, I just couldn’t find anything about this in English, however during this article, I’ll translate everything I feel that is necessary.

What if I told an story of true crime? Of an amazing banker, who could give an amazing interest rate to her clients, a dream beyond your wildest dreams, money guaranteed, interest always raising? Hell such deal is almost a STEAL. Hell I’m even going to set up the mood here:

Now if I told if that banker, was an analphabetic, poor-class, Portuguese old-lady? Now it sounds more like this:

No?

Well that happened in Portugal, back in the 80’s.

Her name was Maria Branca dos Santos, a.k.a Dona Branca (Mrs. Branca), and she looked like this:

Credits to the newspaper Tal&Qual (now extinct)

If you wanna see how easy is to rig the system just look at this. To be clear, in Portugal everyone call this woman a up-to-no-good scammer, but the truth is that she was a genius, she understood the system better than anyone, and she was honest, which to do was something like that is necessary. And that’s why it worked, she was honest, in Circular Economies that’s absolutely necessary. So, let’s go to the facts, according to this encyclopedia (this is going to be long, but will explain in detail):

[Dona Branca was a] Famous Portuguese scammer, who was born in 1911 and died in 1992. Little is known about the history of this woman until the 80’s. Her real name was Maria Branca dos Santos, and was vulgarly know as Dona Branca [Mrs. Branca]. Very known by the people of Lisbon and surroundings, became known for the nickname that was given to her by the media and more specifically the newspapers: the “people’s banker”. This nickname had origin in the businesses that were related or parallel with the banking activity that D. Branca had fed for a plentiful of years.

However, if we analyze the general context of the epoch that she lived, her activities were nothing more than the reflex of the Portuguese: hard economic situation; the risking social position after the Carnation Revolution and also the crisis in the oil prices in the 70’s. In the beginning of 80’s, Portugal suffered from: unemployment, inflation, commercial deficit and high public debt, bankruptcy threats, IMF pressure, working conflicts and little belief in the future. This was an epoch that was very susceptible to corruption and to the “easy” and less obvious businesses. 83-84 was a hard period, it was the period of the “Bloco Central” [Central Block] (the PPD – PS government, led by Mário Soares) [PPD – PS = Socialist Center Left}, this was hard because the external debt was at Third World level. Portugal lived for loans, and those were becoming harder to negotiate.

The government adopted an austerity policy, this aggravated the economic situation of many families, mainly due to the increasing of basic goods (the inflation was of 30% in the Christmas of 83) and taxes. The social-economic crisis became anguishing, the late wages were visible and there was a dramatic appeal from the Bishop of Setúbal: “there is hunger in Setúbal!”. After this the fixed-term contracts appear and the social situation degrades. There are also financial scandals coming out, like the DOPA (organization that commercialized illegally foreign exchange) case.

In such a favorable conjuncture for corruption, D. Branca, a very wise woman after all, creates something that looks like a particular and domiciliary bank, to which thousands of people frequented. These people were moved by the faith of being able to earn more money with their deposits than in the legal and traditional banking system. Her “business” was simple: in her parallel bank, people deposited money, that money’s interested reached spectacularly high percentages (it reached the 120%). In a clandestinely that was covered by the peacefulness of the Lisbon’s neighborhoods, the bank of D. Maria Branca dos Santos prospered day by day without big problems. But there was a day when the “people’s banker” failed to resist the temptation of notoriety, and she gave an interview to the journal Tal & Qual. This publicity of the “business” wasn’t, however, well regarded by the depositors. They panicked and exalted fervently in D. Branca “installations”. In 18 of September of 1984, another interviewed boiled even more their nerves, in the journal Diário de Notícias a client from the “fake” bank said that one while doing “ a deposit, saw so many piles of money that she felt sick”. The depositors then felt that they were being tricked, and that their money could have a destiny that they didn’t know.

This interviews generated a huge impact in the depositors and a suspicion and mistrust climate in the Portuguese society, that ended with the judicial authorities taking power over the situation. With this, on 8 of October of 1984, D. Branca was arrested, starting the juridical process. With 75 starting suspects, lots of them ran and were judged in absentia, making the process polemic. In 25 of July of 1986, with a bail of 2 000 000 escudos (9976 euros, later reduced to 500 000 escudos, which corresponds to 2494 euros) D. Branca was released. However, this lasted shortly, because in September she would be committed to the Cadeia das Mónicas [a prison]. In 1989, she was condemned by the court of S. João Novo in Porto, to 15 months in prison and to the payment of 1 237 000 escudos (6170 euros) for emitting bounced checks. In February of 1990, the Boa Hora court in Lisbon, sentenced her to 10 years in prison for aggravated burglary and the emission of bounced checks. From the other 69 culprits in the “D. Branca” case, 24 were absolved and 44 were condemned to sentences ranging from two to eight years in prison. It was one of the most outrageous judgements realized in Portugal, even becoming internationally famous.

D. Branca ended up dying in 4 of April of 1992 at age of 81, with a thrombosis. She died in misery and oblivion, even if it was speculated during a lot of time that she had an eventual personal fortune, even if until now, is not know the right global value resulting from her scamming business. The truth may be not totally revealed.

Dona Branca in Artigos de apoio Infopédia [em linha]. Porto: Porto Editora, 2003-2016. [consult. 2016-12-02 18:05:45]. Available in the Internet: https://www.infopedia.pt/$dona-branca . Translated and adapted by Carlos Barros from Portuguese to English.

If you want, to know what this excerpt says without reading, I’ll give a short resume, it speaks about an almost analphabetic woman, named Branca (Mrs. Branca), she managed to create a fake bank where the interest rates for your money growth were 120%, her bank was pretty much like a normal bank, were, she relied on people depositing to give the next person more money. It worked like charm, people deposited and earned insane rates, but when she made an interview for a newspaper named Tal&Qual (a tabloid), her clientele grew anxious and started taking the money from her bank, in the end she became penniless and died in a clinic.

This is a great example how banks fail, if people trust the banks and deposit, they are able to give people interest, if people start to grow suspicious they fail, this all work in a circle, or like a clockwork, like explained before, and if a dent break, all will break.

Update: I forgot to say this when I uploaded this, but this case draws a parallel with the John Law case, the explanation goes as the same, one small error or one lucky strike, and there’s negative/positive domino effect, and that’s why so many banks fail nowadays, they apply the same principles drawn by Law. Mrs. Branca may have done a ponzi schemes, but the way banks work nowadays are nothing more than legalized Ponzi scheme, because they fail the exact same way.

I’ll give to you the scheme of Mrs. Branca (however this is just the simplified version).

The money circulates in a flow, through many people, in a never ending circle, however if the influx of money is broken, the system breaks also.

I also gave this example for another reason, I spoke about not banning fiscal paradises, well if people ban fiscal paradises, schemes like this one will be bound to happen, people will find other ways to hide their money, effectively forming cartels, instead we must incentivize those people not to put their money offshore, it is a bit counter-intuitive like everything I said until now, but if we find a way to give those people some sort of benefit, we could tax their money and have some more money to other areas in need, one thing that I think would do good and as far as I know not many (or no countries) applied was to create total insurance on fortunes (even if paid), we would have to tighten up fiscal responsibility, and little by little work in communal ways to manage banks and cut short the “money hose” for those fiscal paradises.

Ok, I think for today I told enough, if you want to check another sources about this person you can also check this newspaper link.

See you in the next part (which will be about Economic Happiness)!

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