Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Eurozone

White House Jobs Growth Celebration is Premature

South façade of the White House, the executive...

White House announcements celebrating the jobs report from the Bureau of Labor Statistics (BLS) were optimistic: “Private sector employers added 233,000 jobs to their payrolls in February [which] means the economy has added jobs for 24 consecutive months…” This illustrates “the progress of the last two years and the importance of doing everything we can to continue strengthening our economy and creating jobs for the months and years ahead,” wrote Megan Slack on the White House blog. Alan Krueger, chairman of the Council of Economic Advisors, was equally enthusiastic:

Today’s employment report provides further evidence that the economy is continuing to heal…. It is critical that we continue the economic policies that are helping us dig our way out of the deep hole that was caused by the recession…

MarketWatch.com joined with the White House in its analysis of the numbers: “By almost every measure the employment picture has brightened considerably…”

Unfortunately both sources were reading from the top line of the BLS report. A closer look would likely have dampened their enthusiasm. From that report, 

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Group of 20 Balks, Stalls and Dithers

Español: Foto de familia de líderes del G20 en...

The Group of 20 meeting in Mexico City over the weekend decided that the best course of action was inaction, putting off making any decisions on how to “rescue” the European Union from its financial and economic difficulties until next month at the earliest. The statement justifying kicking the can down the road for another month or so was breathtaking in its obfuscation: putting off any decisions, it said, “will provide an essential input in our ongoing consideration to mobilize resources…” This is how finance ministers and world economic experts explain that, after two days of meetings, the best thing to do was nothing at all.

There were great expectations before the meeting ended that something of substance would come out of it. The plan was not only to pave the way for the second bailout of Greece but for each of the G-20 members (including the U.S. and most of the other industrialized nations on the planet) to pony up additional taxpayer funds to the International Monetary Fund (IMF) which would then be used, at its discretion, to bail out over-indebted countries like Greece, Portugal, Spain, and others as they need them. Expectations were that commitments totaling $1 trillion would be made before the end of the meeting on Sunday.

Plans went awry when Germany’s Chancellor Angela Merkel, responding to pressure from more sensible voices, said Germany would be unable to participate in any further assistance. This reluctance no doubt stems from the fact that the German parliament, the Bundestag, still hasn’t

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The Greek Deal Saves the Banks

Map of Greece with EU flag

Following a 13-hour marathon session on Monday, eurozone ministers announced an agreement to loan Greece another $170 billion, which saves the banks while punishing private investors and damaging Greek national sovereignty.

The bailout brings the total spent or committed to save the eurozone countries of Greece, Ireland, and Portugal to $500 billion with little assurance that more won’t be needed very soon. Details of the agreement require that 90 percent of private bondholders agree to take a 53-percent haircut on their investments by exchanging old bonds for new. It requires acquiescence by Austria, Finland, Germany, the Netherlands, and Slovenia to allow the European Central Bank and the International Monetary Fund to part with the funds. And it forces Greece to accept permanent and rigid enforcement of debt service payments by outsiders monitoring government revenues and expenditures and forcing debt service payments to be made ahead of any other government commitments.

The parties who come out whole on the deal are, naturally, the European Central Bank and other banks that hold Greek debt. Their holdings will be paid off at par.

Observers with chips in the game were decidedly guarded in their enthusiasm. Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt, said, “Greece will find it difficult to shoulder even the

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Plans Revealed for Greek Default on March 23

March 25 - Greece Independence Day

Writer Bruno Waterfield’s claim that Germany has drawn up plans to deal with the inevitable Greek default was published in the British newspaper The Telegraph a little after 8 p.m. Saturday night. Within hours his claim was confirmed separately by blogger John Ward with times, dates, and consequences all spelled out by those drawing up the plans.

German Finance Minister Wolfgang Schauble has increasingly voiced his opinion that the economic implosion taking place in Greece would result in its bankruptcy despite official protestations to the contrary from German Chancellor Angela Merkel. One official close to Schauble said, “He just thinks the Greeks cannot do what needs to be done. And even if by some miracle they did what has been promised, he…[is] convinced it will not pull Greece out of the hole.”

Schauble’s opinion gained increasing credence by a report issued last week by the European Commission, the European Central Bank, and the International Monetary Fund (EC, ECB, and IMF—the “troika”). According to their report, even if Greece were successful in accomplishing all that it has promised in order to secure the next round of financing, it will still fall far short of bringing down its debt load to manageable levels. Waterfield went on to say that Schauble, behind the scenes, is pushing Greece to declare itself bankrupt and demand a 70 percent “haircut” from the banks holding the bulk of its debt.

The timetable is pushing events inexorably forward: Greece must receive the next round of financing in order to pay debt service of $20 billion on March 20. Without it the debt will default and government checks will start bouncing. But it will take at least four weeks to get a formal agreement on

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Eurozone Recession Accelerates; Moody’s Piles On

Board of Governors - International Monetary Fu...

Economists polled by Reuters predicted that the recession in Europe that began late last year would continue into the new year and they weren’t disappointed. Reuters announced that economic output in the 17-member eurozone declined by 0.3 percent in the last quarter of 2011, the sharpest since the second quarter of 2009 at the start of the recession. Those same economists are now predicting that European GDP growth will stay negative at least for the rest of the year with only modest chances of improvement in 2013.

The International Monetary Fund (IMF) has the same negative expectations, predicting at least a 0.5-percent contraction of the eurozone countries next year. Even Germany, long the anchor to windward and the engine of growth for the European community, went negative in the last quarter compared to its modest growth rate of 0.6 percent in the third quarter.

Investment banking firm ING admitted that the decline caught their forecasters by surprise. Carsten Brzeski said the economic contraction “turned out to be weaker than expected.”

The Netherlands declined into recession (defined as two quarters of declines in GDP, or “negative growth” in economic parlance) with its third quarter contraction of 0.4 percent followed by another 0.7 percent decline in the fourth. Italy’s economy dropped by 0.7 percent in the last quarter with little improvement expected for at least a year. This puts Italy into the same recessionary camp as Belgium, Portugal, and Greece.

Portugal may be looking for another bailout as its economy suffered at 1.3 percent decline in the fourth quarter, more than double the 0.6 percent decline from the third quarter.

But Greece is the basket-case poster child for economic performance, with a stunning

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European Fiscal Pact: Closing the Ring

Graphic "When Greece falls" presente...

Monday’s meeting of the European Union in Brussels resulted in agreement of 25 of the 27 member states to inflict upon themselves and their hapless and increasingly powerless citizenry the tools of international fiscal dictatorship.

The purpose of the “fiscal pact” is to enforce “budgetary discipline” so that the present euro crisis can be contained and future such crises averted. In the short run that means granting the European Central Bank (ECB) additional power to expand its reserves so that bailouts to failing countries can continue, subject to enforcement rules. In the longer run, the pact puts in place the primary tool of coercion, the European Stability Mechanism, to be effective in July.

European Council President Herman Van Rompuy said that initially the ESM will be limited to just €500 billion ($650 billion) but that the ultimate number “will be reassessed down the line.”

Critics say that’s the entire purpose of the ESM: to set up the mechanism of control under the guise of providing bailout funds to members in need while installing ruling class elites (bankers with ties to Goldman Sachs) out of reach of the taxpayer class. Angela Merkel, German Chancellor and mouthpiece for the ESM, was clear: “It is an important step forward to a stability union. For those looking at the union and the euro from the outside, it is very important to show this commitment.”

She failed to mention that Great Britain and the Czech Republic have both

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Greeks About to Learn the True Cost of Bailouts

Ευάγγελος Βενιζέλος, συνέντευξη τύπου στα μέσα...

Greece’s Finance Minister, Evangelos Venizelosrejected the German idea of imposing a eurozone “overseer” as part of the agreement to keep bailout funds flowing to his country.

He said that the proposal, floated late last week as a condition for Greece to receive another $170-billion bailout from the European Central Bank, would force his country to choose between “financial assistance” and “national dignity.” He said that forcing Greece to accept such an overseer—with the power to veto Greek tax and spending decisions and make sure that debt service is paid before any other government expenditures—“ignores some key historical lessons.” An unnamed official privy to the conversation put it even more clearly: “If you went with that model, you’d do away with the normal democratic decision-making in a member state.”

Venizelos failed to be explicit about those “key historical lessons,” but the threat was clear: Here was Germany trying to enforce its version of financial austerity and “behavior” onto another sovereign nation, just as it did in the 1930s. It was also a reminder of the continuing failure of the EU, which was sold initially as a way to keep the German threat from rising again in the years following the Second World War.

Greece has so far been successful in negotiating a 70-percent “haircut” with private bondholders as part of the deal to bring its national debt down from the current 160 percent of Gross Domestic Product to an allegedly more manageable 120 percent by 2020. The bond holders will exchange their current bonds for new bonds that have 30 percent of the value of those they exchanged. They have agreed to take a loss of 70 percent of their original investment. But the Greek economy continues to languish, and its shortfall in tax revenues is widening rather than shrinking, putting into jeopardy another part of

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World Economic Forum in Switzerland: Global Elites Celebrating Hypocrisy

Davos, Switzelrand, Klaus Schwab, Founder and ...

Global elites—many of the 2,500 of them billionaires—are spending a few days in Davos, Switzerland, attending the World Economic Forum (WEF), a group founded in 1971 “committed to improving the state of the world.”

The state of the world doesn’t appear too rosy. The recent downgrades of major economies, the clamor over perceived income inequality, the crisis in the Eurozone, and other concerns are weighing heavily on the participants. Vikas Oberoi, chairman of India’s second-largest real estate developer, observed, “Many who will be in Davos are the people being blamed for economic inequalities. I hope it’s not just about glamour and people having a big party.” Azim Premji, chairman of India’s third-largest software company, was equally somber: “We have seen in 2011 what ignoring this aspect can result in. If we don’t take cognizance of it and try to solve this problem, it can create a chaotic upheaval globally.”

Not just the movers and shakers were expressing concern, either. Mainstream economists were of one mind about the world economy, agreeing with the downbeat report from the International Monetary Fund on January 24 which reduced its economic growth outlook for 2012 significantly, predicting at least a “mild recession” in Europe and the rest of the world to slow further from its current tepid pace.

Carmen Reinhart of the Peterson Institute for International Economics agreed that there will be a “serious economic crunch [with] another sub-par year of stubbornly high unemployment, weak growth and delayed recovery in general in all the advanced economies.” Professor Joseph Stiglitz of Columbia University, also on the roster of attendees, said that the IMF might be underestimating the projected difficulties and that the crisis will be “all the worse because of the weakness of appropriate government response.”

Manpower CEO Jeff Joerres admitted, “Twelve months ago we were all looking forward to a pretty good 2011. Twelve months later, here we are in a completely different world.” That was the tone set by the founder of the WEF, Klaus Schwab, in his opening remarks. The problem is that capitalism, according to Schwab, is failing and that

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The Imminent Collapse of the Euro

Safe deposit boxes inside the vaults of a Swis...

One of the unintended consequences of the ongoing and accelerating crisis in the eurozone is that ordinary citizens are taking their money out of the banks and burying it. Lack of both confidence in the stability of the European economy and credible solutions to the crisis have led to the exit of currency from banks in Greece, Italy, and other European countries.

One Greek banker said that safe deposit boxes are in great demand: “There has been a big increase in rentals…about five-fold compared with last year. About 10 percent of the withdrawals we see are headed there. The most extreme case was a client who told me he was building a safe under his pool.” Retail bank deposits in that country are now at five-year lows, adding to the instability of banks whose balance sheets depend on those deposits staying put.

Italian citizens are moving their money out of the country into Switzerland while others are purchasing German bonds. Those purchasers have been so willing to pay for the privilege of owning safe German bonds that they have driven interest rates to less than zero.

Others are putting their paper into hard assets such as apartments in Berlin. Frederico Racca, a realtor in Berlin, reported, “Sales skyrocketed in the last two months due to

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The Coming of the Universal Financial Transaction Tax

Jean Leonetti

In the clearest indication yet, a high French government official confirmed last week that an FTT—Financial Transaction Tax—will be implemented by the European Union by the end of 2012, a year earlier than planned. Jean Leonetti, France’s minister for European affairs, said on television that “This is on the program for the next European summit [on January 30th]. Nicolas Sarkozy and Angela Merkel have decided on this and it will be put in place before the end of 2012.”

The tax would be levied, initially at least, on every financial transaction taking place by any entity with a connection to the Eurozone, and would be levied at the rate of 0.1 percent on shares of stock and bonds, and 0.01 percent on all derivatives transactions. It is estimated that the FTT would cover about 85 percent of all transactions between financial institutions such as banks, investment firms, insurance companies, pension funds and hedge funds. It is expected to raise, in the beginning, about $70 billion annually to help fund the EU.

It’s being touted as punishment for the banks that were allegedly instrumental in causing the economic meltdown, but would have no impact on ordinary citizens or small businesses. According to the European Commission, the FTT “would help to reduce competitive distortions in the single market, discourage risky trading activities [such as high frequency trading and highly leveraged derivatives contracts] and complement regulatory measures aimed at avoiding future crises.”

Because of Great Britain’s Prime Minister David Cameron’s resistance and because under the current treaty such imposition requires a

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Latest Numbers from Germany Confirm Recession

English: Night view of the euro monument (euro...

The announcement from the German Economy Ministry over the weekend confirmed that the long-awaited European recession has officially begun: German factory orders dropped to the lowest level in three years, down nearly five percent in the past month. The ministry also revealed that orders from outside the EU dropped by 10.3 percent.

Said Jennifer McKeown, an economist at Capital Economics Ltd. in London, “It’s quite clear that we’re heading into a pretty sharp downturn in Germany, which has been one of the strongest of the eurozone’s economies. Orders are very clearly on a downward trend, as is industrial production itself.”

The German economy is the fourth largest in the world, generating nearly $3.5 trillion in goods and services annually. Most of its trade is inside the eurozone, resulting in its position as the second-largest exporter in the world. Despite its strong economy relative to its neighbors, its debt-to-GDP ratio is 142 percent, and it is running an annual deficit of almost nine percent of GDP. It nevertheless retains its AAA rating from the three major credit rating agencies, which is strong enough compared to its eurozone partners to have caused a strange anomaly in the markets: yields on its six-month bonds have gone negative.

Translation: Banks are so nervous that they would rather

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Blowing Up the Euro

George Soros, billionaire

In her article on Monday, financial journalist Jessica Mortimer said that the euro had just set a new record low against the Japanese yen: Its value is now the lowest it’s been in 10 years. The irony wasn’t lost on her as she also noted that it was just 10 years ago that the euro was first denominated in coins and currency, three years after being introduced electronically among the member states.

And she sees further weakness in the euro, now trading below $1.30 versus the dollar, and likely to move ever lower into the New Year: “In the absence of a comprehensive European policy response to the debt crisis, the euro could test its 2010 low of $1.18.” This would imply at least another nine-percent loss in value in less than a year.

She touched on only one of the few remaining options open to keep the euro from blowing up altogether: more austerity on the backs of the citizens of the member states who took excessive advantage of lower-than-market interest rates to load up on debt that they can’t pay back. She noted the survey that came out over the weekend indicating that a key European manufacturing index remains persistently below recovery levels, with further declines into a full-blown recession in Europe likely. Additional austerity measures would simply hasten that recession. Kathleen Brooks, director of research at FOREX.com, told her clients: “We remain a sell on rallies (with the euro) as we tend to think the eurozone crisis will actually get worse before it gets better.”

That’s one option: Increase the pressure on the taxpayers to

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Is the Economy Slowly Gaining Momentum?

SP 8033, a GE Dash 8-39B, leading an EMD SD40T...

Zachary Karabellwriting at The Daily Beast on Thursday, claimed that the latest numbers on the US’s economy were showing some modest improvement. After reviewing comments from the Federal Reserve in their final statement of the year (the economy is “expanding moderately”), the Institute for Supply Management (index above 50 for several months, indicating growth), the Gross Domestic Product numbers (growing at about 2 percent on an annual basis), unemployment (dropping slightly), and consumer sentiment (up a little), Karabell concluded “The real dirty little secret of the American economy is that we are doing OK.” Some other numbers that came in after his article was published seemed to confirm that the economy is showing a faint blush of rose. The National Retail Federation said it expects Christmas holiday sales to rise to $469 billion this year, up about 4 percent from their October forecast, but still down from the 5.2 percent gain a year ago. The latest from the Association of American Railroads shows weekly traffic gains of nearly 4 percent year over year. The Business Outlook Survey from the Philadelphia Federal Reserve Bank showed that “all the broad indicators remained positive and suggest a modest expansion of activity…[and] the broadest indicator of future activity reflected a trend of increased optimism about growth over the next six months.” That report noted further that hiring expectations in that region are beginning to improve as well, along with indicators for

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European Union Agreement: Too Little, Too Late

English: The City of London skyline as viewed ...

As reported by Annika Breidthardt for RealClearMarkets.com, the latest European crisis summit that ended last weekend resulted in “a historic agreement to draft a new treaty” which she then characterized as “too little, too late.” Reaction of the equity and currency markets agreed, with substantial losses in American and European stock markets opening the week, and the euro dropping to lows not seen since last February.

The agreement will require EU member states to ante-up $267 billion to the International Monetary Fund which will then turn around and re-lend it to those member states in financial trouble. Exactly how those needing the funds will “ante-up” was left unexplained. The existing bailout fund—the European Financial Stability Fund, or EFSF—will be leveraged, debt upon debt, to give it more ability to lend to those same struggling countries.

But the big news is the moving forward of the date for ratification of the ESM—the European Stability Mechanism—by a full year, to June of 2012. This is the elephant in the living room that few in the media have spent much time reviewing, although a careful analysis is available here. The reason for moving ahead with such a grotesque totalitarian program is obvious: there may not be enough time left to implement it. Investors continue to demand

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Back-Door Bank Runs in Europe Have Started

 

English: Euro bank notes Türkçe: Euro banknotlar

In his interview at King World News, James Turk, founder of GoldMoney and author of The Coming Collapse of the Dollar, noted in his travels around Europe that “there is one common trait, regardless of which country I am in: people are really frightened about the possibility of the collapse of the euro. Money continues to move out of the European banking system, which explains why central banks stepped in with some money printing last week.”

He then went on to explain that there are only three sources of funding available to a bank: its customers lending it capital through checking and savings accounts, the issuing of long-term bonds which it sells to bond investors, and short-term financing provided mostly through money market funds. If any of these sources dries up, it puts the bank almost immediately into

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“Merkozy” Letter to EU: Strip Sovereignty Now

Deutsch: 45. Münchner Sicherheitskonferenz 200...

In his candid appraisal of the letter from Germany’s Angela Merkel and France’s Nicolas Sarkozy to the European Union meeting that starts Friday in Brussels, Dan Murphy makes clear that this summit will be different from the previous 20: This one is determined to override national sovereignty to save the euro. The core of the letter is the offer of the fatal alternative to the euro zone nations: Either give up essential sovereign control over your budgets to the EU, or destroy the euro.

The “Merkozy” letter said,

The current crisis has uncovered the deficiencies in the construction of the [European Monetary Union] mercilessly. We need to remedy those deficiencies…. We need more binding and more ambitious rules and commitments for the Euro area Member States. They should reflect that sharing a single currency means sharing responsibility for the Euro area as a whole. The building blocks of the new Stability and Growth Union are: A strengthened institutional architecture. Euro area governance needs to be substantially reinforced.

The problem, until now, has been the virtual impossibility of amending unanimously the various treaties under which the EU currently operates. With the clock ticking amid increasingly nervous financial markets, there is no time for that nicety. And so a way has been found: doing an end run around the process by using a little-known clause in the Schengen treaty to

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Central Bank Easing Misses the Point

International Money Pile in Cash and Coins

Economist and TV personality Larry Kudlow explained that the decision on Wednesday by many of the world’s central banks made it easier for European banks to borrow dollars from the Federal Reserve.

He made it clear that “nothing has been solved in Europe. The Europeans are not yet helping themselves. Why should the ECB (the European Central Bank) write a trillion-dollar check to near-bankrupt governments?” The real problem isn’t liquidity. There’s plenty of money sloshing around in the banks of the world. The instant problem is the type of money. The banks want to hold dollars, not euros, and the costs of holding dollars was rising to levels not seen since the collapse of Lehman Brothers in 2008.

And the reason dollars were getting increasingly expensive? One main reason was that American money market funds were 

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Ministers Meet as Eurozone Time Bomb Ticks Down

English: Various Euro bills.

As the finance ministers from each of the 17 members of the eurozone meet in Brussels yesterday, the main topic was “integration.” It’s a race against the clock.

One of the first items being discussed is putting in place the leveraging of the stability fund—otherwise known as the EFSF, or European Financial Stability Fund. At present, this fund holds some $600 billion in assets, much of which has already been invested in government bonds issued by the eurozone’s weak sisters: Ireland, Greece, and Spain. The leveraging, through some opaque maneuvering, will then allow the fund to do some serious purchasing of enough of Italy’s debt to solve two problems at the same time. One is to bring down interest rates to some level that Italy may be able, in the short run, to afford to pay. And the other is to give

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Euro’s Failure Imminent, Says “The Economist”

European Commission

In its attempt to quell rising uneasiness in the wake of the failed German bond sale last week, the establishment magazine The Economist rushed in over the weekend with a series of four separate articles promoting its globalist and internationalist perspective on the matter.

The first article noted that the risk to the euro within the next few weeks is “alarmingly high” unless measures are taken. The article blamed lack of leadership—“denial, misdiagnosis and procrastination”—for the unfolding and accelerating crisis. First, a recession appears to be imminent as the austerity measures are taking hold across the eurozone and slowing already shaky economies.

Second, there is evidence of a run on banks holding large positions in the sovereign debt of the weaker countries. As the banks are facing a June 2012 deadline to improve their capital positions they are now seizing this opportunity to

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Latest Economic Surveys Show Little Optimism

South façade of the White House, the executive...

The Republican Small Business Committee reported on November 8 that small-business optimism “remains extremely low,” and that business owners “simply are not hiring because they are pessimistic about consumer sales, the nation’s economic climate, and the amount of regulations to comply with.” Committee Chairman Sam Graves (R-Mo.) added, “The overall mood of the nation’s job creators is still at historic lows. The [Optimism Index of the National Federation of Independent Business] shows that over the next three months, only 9 percent of small business owners plan to increase employment [while] 12 percent plan to lay off workers. These numbers are…worse than the previous two months.”

NFIB’s Optimism Index has shown precious little change going back to January of 2009 and is matched by the University of Michigan’s Consumer Sentiment Index, which noted that “more households reported that their finances had worsened rather than improved for the 48th consecutive month [and that] just

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.

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