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Brexit Buffet

Published by Matthew Davidson on Tue, 05/07/2016 - 4:14pm in

I don't get politics. I understand particular political issues, but I never understand the state of popular opinion about them. Politics, in that sense, is that thing I'm perpetually out of step with. So I should have known that the UK leaving the European Union, appearing to me such a self-evidently bad idea, was inevitable. I am further surprised to find that on the wisdom of "Brexit" some really super-smart people disagree with me. This almost never happens; coincidence of opinion is my infallible yardstick for intelligence, after all.

I understand the main criticisms of the EU, and they bear repeating:

  • The Maastricht fiscal rules (national debt must stay below 60% of GDP and annual deficits below 3% of GDP) guarantee that any country under that regime which happens not to have a large export-driven economy (like for instance Germany) will be unable to use fiscal deficits to offset current account deficits and maintain spending power in the private sector (see Godley's sectoral balances for how that works), and will be driven into a debt deflation spiral that shrinks their economy. That is, the more the Eurozone periphery nations try to stick to the rules and end up liquidating productive capacity in the attempt to reduce debt/deficits, the less able they become to stick to the rules, and the worse they suffer. When Portugal, Ireland, Italy, Spain, and Greece joined the EU, they also joined the third world. Any other outcome was a logical impossibility.
  • The Euro is the most disastrous faux-gold-standard since the last one. If you ever need an argument against independent central banks, just point to the way the ECB, the most independent central bank in history - 100% free of democratic accountability, has turned Europe into a game of beggar-thy-neighbour mercantilism. Unnecessary suffering on a grand scale, for no reason other than the ridiculous pursuit of larger numbers on the ECB's computer. Not even any useless lumps of soft yellow metal to show for it! Under the Euro, a country's economic prospects end up not being a function of their real productive capacity, but a result of a surfeit of or lack of those magic numbers.

So I understand why Bill Mitchell would welcome the Leave vote as the return of the class struggle, and why Steve Keen and Mark Blythe also see leaving as the most sensible course of action for any country able to do so. I have two reasons to disagree:

1. The quickest and easiest solution for any individual EU member state able to leave is not the best long-term solution for Europe.

Thanks to the City of London, the UK has the economic heft to wear any negative consequences of Brexit (although this is rather like sailing into a storm and thinking "It's a good thing we have that huge, unexploded bomb to use as ballast!"). Countries currently under the thumb of the "troika" of the ECB, the IMF, and the Eurogroup do not have a realistic, or at least tolerably painless, exit option, and it is in nobody's interest that they should continue to suffer. It may be satisfying to say "Congratularions Dr. Schauble, your prize is the 1930s," but it would have been better to deploy the UK's weight towards building a democratised EU, rather than a disintegrating Europe.

2. There is no reason to believe the scope for meaningful democracy in the UK will be improved by Brexit.

I will be dancing in the street when Jeremy Corbyn's Labour wins the 2020 (or earlier, maybe) general election. But it will be more for what it says about the UK's political aspirations than in anticipation of of what Labour will be able to achieve. John McDonnell has already undertaken to follow monetarist "balanced budget", "sound finance" policies, rather than the "functional finance" which is necessary to defuse the City of London financial bomb and rebuild the real economy. Regardless of which party is in power, for the forseeable future the UK has merely shed the straightjacket of Maastricht for the straitjacket of the Charter for Budget Responsibility. In the process the far right has come to feel vindicated and emboldened.

I would love to be wrong about this, but I fear I am merely in the minority, as usual.

Sunday, 3 July 2016 - 4:49pm

Published by Matthew Davidson on Sun, 03/07/2016 - 4:49pm in

This week, I have been mostly not reading, with some exceptions:

  • Ignored for Years, a Radical Economic Theory Is Gaining Converts — Michelle Jamrisko in Bloomberg, no less: “There’s an acknowledgment, even in the investor community, that monetary policy is kind of running out of ammo,” said Thomas Costerg, economist at Standard Chartered Bank in New York. “The focus is now shifting to fiscal policy.” That’s where it should have been all along, according to Modern Money Theory. The 20-something-year-old doctrine, on the fringes of economic thought, is getting a hearing with an unconventional take on government spending in nations with their own currency.
  • How I Stopped Worrying and Learned to Love the Drone — Ted Rall: The Penagon said it would never deploy Predator or Reaper drones in the United States. Now USA Today reveals that they do, and have for years. But noit to worry: now the Pentagon says they won't be used to kill Americans the way they're used in Somalia, Yemen and Pakistan.
  • E.J Dionne Is Far Too Generous, “Moderate Progressives” Were Promoting Inequality — Dean Baker, CEPR: It's also worth noting that Clinton's cult of deficit reduction and balanced budgets contributed to the victory of austerity politics following the downturn. Many Clintonites absurdly argued that the prosperity of the late 1990s was due to the fact that Clinton balanced the budget and subsequently ran surpluses. Of course the reality was the exact opposite. (The unexpected boom, due to a stock bubble, lead to the surpluses.) Nonetheless, the power of this Clinton myth made it more difficult for progressives to push the case for stimulus following the collapse of the housing bubble.
  • The Era of Free Trade Might Be Over. That’s a Good Thing — Jared Bernstein: So we should welcome the end of the era of F.T.A.s, which had long devolved into handshakes between corporate and investor interests on both sides of the border, allowing little voice for working people. With such noise behind us, we might be ready to foster the next generation of advanced production and help our exporters fight back against currency manipulators. That would be more productive than fighting tooth and nail over the next big trade deal. Plus additional remarks on his blog, "where real estate is dirt cheap".
  • The New Truth About Free Trade — Robert Reich notices the US has spent decades negotiating the export of monopolies and the import of monopoly rents: Big American corporations no longer make many products in the United States for export abroad. Most of what they sell abroad they make abroad. The biggest things they “export” are ideas, designs, franchises, brands, engineering solutions, instructions, and software, coming from a relatively small group of managers, designers, and researchers in the U.S. The Apple iPhone is assembled in China from components made in Japan, Singapore, and a half-dozen other locales. The only things coming from the U.S. are designs and instructions from a handful of engineers and managers in California.
  • Both sides now. — Jonathan Rees: Yes, MOOCs can’t do what professors do, but what happens if what you do gets redefined so that they can? You know that education is not the same as content transmission, but unless you stay engaged with all the two-bit hucksters who think it is they will win the battle of public opinion and your tenured sinecure will dry up when your students all enroll at some barely acceptable online clown college.
  • Global Inequality: Branko Milanovic Takes on the World — Dean Baker in HuffPo: It is more than a bit absurd that many intellectual types are running around worried that the robots will take all the jobs (when they aren’t worried about the demographic crisis creating a shortage of workers) when the “problem” can be easily solved by reducing work hours. But this issue actually segues nicely into my more fundamental criticism of [Milanovic's] book. While it does not outright say this anywhere, many readers will likely believe that the harm to the middle class and working class in rich countries was a necessary price for the gains in the developing world. This is a huge leap which certainly does not follow from standard economic theory. […] There is also the question of intellectual property rights, which Milanovic frustratingly treats as a fact of nature. Again, one of the great absurdities of debates on inequality is that we have people wringing their hands over how we can reverse the upward redistribution of income, while we constantly write new laws and trade agreements that make patent and copyright protection longer and stronger. Instead of deliberately designing policies that promote upward redistribution, we could instead look to alternative mechanisms to finance innovation and creative work.

Saturday, 2 July 2016 - 6:25pm

Published by Matthew Davidson on Sat, 02/07/2016 - 6:25pm in

Look, I'm no expert in the psychology of child abuse, but it seems self-evident to me that if you cover some poor woman with gold paint, and force her to assume a stress position, bearing the weight of a bloody great sword and a pair of scales that aren't even being used to weigh anything, you really have nobody but yourself to blame if afterwards she's a bit short-tempered. Who's the real villain here?  Clearly there's somebody high-up, with a gold paintbrush, who isn't being held to account, while she's left holding the baby.

Friday, 1 July 2016 - 10:14pm

Published by Matthew Davidson on Fri, 01/07/2016 - 10:14pm

Driven by nostalgia for shag pile carpet, blue eye shadow, my non-drinking parents' very sophisticated (and devoid of drink) drinks cabinet, and televisions that need time to warm up, I've been re-watching Dave Allen at Large from the year of my birth, 1971 (episode five, if you're playing along at home). He tells this gag:

Today we are perhaps more affluent than we've ever been in man's history, and the strange thing about man, no matter what he has, or how much of it, he wants more. And if you think it's bad nowadays, what do you think it's going to be like in about fifty years time? Can you imagine the year two thousand and twenty? And the shop steward, taking to his members.

And he says "Alright lads, I've had a chat with the management. They've agreed to our demands. A rise of thirty-five pound a week, bringing our basic weekly wage to three hundred and fifty-two pound per week. One condition: we've got to work on a Wednesday."

And a voice from the back said "What? Every bleeding Wednesday?"

Never mind 2020. Can we imagine 1971?

Tuesday, 28 June 2016 - 9:34pm

Published by Matthew Davidson on Tue, 28/06/2016 - 9:34pm in

The jewel in Coffs Harbour's cliche crown is still putting out the red light for any real estate agents in need of discreet, high-class services, after rejecting suggestions that a news story requires more than one source before it can be considered journalism.

The Advocate's advertorial editor-in-chief, Mr. Earnest Hardwicke-Goodge said he was disappointed by so many readers mystified as to why the unchanged ownership of prime CBD graffiti canvas was considered newsworthy.

"The continued presence of readers is a regrettable distraction from our core business of connecting advertisers with other sophisticated, consensual, like-minded advertisers," Mr. Hardwicke-Goodge said. "Unfortunately, despite filling any unsold advertorial space with the most unreadable tripe imaginable, we've been unable to shake them off."

Mr. Hardwicke-Goodge said that while an upcoming series of particularly nauseating stories of wholly uninspiring local people doing utterly unremarkable things had the potential to turn the situation around for the paper and it's key stakeholders, he urged any remaining would-be readers to remember one simple rule: "If you're not looking to scam or be scammed, just put the paper down and walk away; it's not for you."

Sunday, 26 June 2016 - 5:20pm

Published by Matthew Davidson on Sun, 26/06/2016 - 5:20pm in

This week, I have been mostly reading:

  • How Bernie Gives Hope for the Future — Ian Welsh provides a nuanced and pursuasive variant on the "nothing left to lose" argument for social change, to which I've never subscribed, but hey, you take your hope where you can get it: This is not the 2000s or 90s. This is not the age of compromise. The fruits of neoliberalism, neoconservatism, and oligarchy are being reaped; the youngsters have now grown up and never known a good economy. Many barely remember a time when the US wasn’t at war. […] The Democrats are the conservative party right now. They are about the status quo: Keep neo-liberaling, keep bombing and invading brown people’s countries, keep shoveling money to the rich. […] But Bernie lost in a genuinely hopeful way, showing that a socialist is now viable in the US and that young people are massively against the status quo.
  • On decriminalizing the sex trade — Chris Dillow: Here, though, is the thing. I – and I, strongly suspect, Mr Corbyn too – favour legalization of the sex industry in the context of other policies that empower women to reject exploitation. For me, these include full employment policies to give them other career possibilities; a mass housebuilding programme to reduce rents; and – of course - a basic income to improve their outside options.
  • What Will Many Bernie Sanders Voters Do After July? — Ralph Nader in Common Dreams: Here we go again. Every four years, the Democratic leaders define the Democratic candidate by how bad the Republicans are. This is designed to panic and mute their followers. Every four years, both parties become more corporatist. Sanders’ voters want to define the Democratic Party by how good it can be for the people. […] Where does this leave the Sanders people who see Hillary as experienced in waging wars, qualified as an entrenched pol, and realistic to suit the plutocracy’s tastes, and not really getting much of anything progressive done (alluding to the ways she has described herself)?
  • The trouble with getting the BBC to be less popular — David Mitchell, who—damn him—is still occasionally funny, in the Guardian: A report, commissioned by the Department for Culture, Media and Sport and published last week, argues that “greater distinctiveness” in the BBC’s output will allow its commercial rivals to make an extra £115m a year. […] Unfortunately the distinctiveness of a Hitchcock movie, a Lowry painting or a Cole Porter lyric doesn’t seem to be the sort the report is getting at, because that’s a kind people really like. That would be entirely counterproductive to its stated aims. By “distinctiveness”, the report means that the BBC should deliberately target smaller and more niche audiences, in order to allow the commercial sector to take the bigger ones. Its distinctive flavour would be less like chicken liver and more like calves’ brains. Because that would be fairer on the market place.
  • Paul Samuelson on Deficit Myths — L. Randall Wray at New Economic Perspectives: […] the need to balance the budget over some time period determined by the movements of celestial objects, or over the course of a business cycle is a myth, an old-fashioned religion. But that superstition is seen as necessary because if everyone realizes that government is not actually constrained by the necessity of balanced budgets, then it might spend “out of control”, taking too large a percent of the nation’s resources. Samuelson sees merit in that view. It is difficult not to agree with him. But what if the religious belief in budget balance makes it impossible to spend on the necessary scale to achieve the public purpose? […] We don’t need myths. We need more democracy, more understanding, and more transparency. We do need to constrain our leaders—but not through dysfunctional superstitions.
  • The Fed shouldn’t accept the “new normal” without a fight — Josh Bivens at the Economic Policy Institute: [A] key contributor to productivity growth is technological advance. This technological advance does not fall from the sky, rather it is the product of directed investment (R&D) and trial and error (workers learning by doing). When the pace of R&D investment is slow and output growth is slow enough to provide fewer opportunities for learning by doing, it is not shocking that technological advancement may slow. Further, there is ample evidence that firms boost labor-saving investments (which boost productivity) when labor costs are rising rapidly. Rapid labor cost growth has not been a feature of the recovery from the Great Recession. Between 2007 and 2014, real hourly pay for the median worker, for example, has slightly declined (see Table 1 here), and the share of corporate sector income accruing to capital owners rather than to employees reached historic highs. This labor market slack and weak wage growth has provided very little spur to boost productivity in the search for higher profits.
  • How negative-gearing changes can bring life back to eerily quiet suburbs — Kim Dovey in The Conversation: It is impossible to say how much this production of empty architecture is a function of negative gearing since it also goes hand-in-hand with neoliberal markets and high disparities of wealth. However, the curbing of negative gearing will have a significant impact in getting empty housing onto the market. This in turn could go some way to reversing this cycle of emptiness – bringing life to the shops, offices, streets, parks and public transport.
  • It's Time to Rid the DNC of DINOs, Starting With the Chair — by a gestalt creature called The Daily Take Team, from The Thom Hartmann Program: Jim Fouts, a three-term Independent mayor of Warren, Michigan, attended Sunday's Democratic debate, just like he had attended the Republican debate on Thursday. […] He told BuzzFeed News that he was seated behind Wasserman Schultz, and that he was praising Bernie's performance and talking about how this debate proved that more debates were a good idea for the Democrats. Then, during an early commercial break, Fouts and his assistant were taken out of their seats and the sergeant at arms told him, "The people that run this want you ejected, they don't want you here." Fouts was allowed to watch the rest of the debate from his seat, but he had to be careful about even clapping too loud or at the wrong time, for fear of getting ejected. […] Debbie Wasserman Schultz isn't the only Democrat-In-Name-Only (DINO) in the Democratic leadership. But as the DNC Chair, she is the highest-ranking DINO in the party. Tim Canova will take her seat in Congress, but Clinton is sure to give her a plum job elsewhere, for services rendered during the primaries.
  • On the results of the UK referendum — DiEM25: OUT won because the EU establishment have made it impossible, through their anti-democratic reign (not to mention the asphyxiation of weaker countries like Greece), for the people of Britain to imagine a democratic EU.
  • The American Fascist — Robert Reich: As did the early twentieth-century fascists, Trump is focusing his campaign on the angers of white working people who have been losing economic ground for years, and who are easy prey for demagogues seeking to build their own power by scapegoating others. […] As the Washington Post’s Jeff Guo has pointed out, Trump performs best in places where middle-aged whites are dying the fastest.
  • Whither Europe? The Modest Camp vs the Federalist Austerians — Yanis Varoufakis and James Galbraith: Soon after the Great Crisis of the Eurozone struck, Europe decided to treat it piecemeal – as though each affected country had committed separate and unrelated policy errors. The governing institutions of Europe denied that the difficulties of Greece, Ireland, Spain, Portugal and Italy could be part of a single disaster, spanning at once the realms of banking, public debt and investment.
  • Negative Gearing. It's turning us into a nation of landlords and serfs — Peter Martin: The great Australian dream meant owning your own home. "Getting ahead" means getting ahead of someone else. It's how Treasurer Scott Morrison sees the Australian dream. […] It's certainly what negative gearing is about. "The vast bulk of Australians who use negative gearing are just trying to get ahead and trying to get their family in a better position," Morrison says. But negative gearing only gets them ahead if prices climb. The more that people negatively gear in order to get ahead, the more prices climb. The further they climb, the harder houses become to buy. And the harder they become to buy, the more the Australian dream recedes.
  • Whittingdale is wrong: it is advertisers who are destroying the digital economy — Alexander Hanff in openDemocracy: Publishers feel like they have no control over the type of ads being forced on them by adtech companies and advertising agencies. This is a situation that needs to change – publishers should control all of the content they publish – including ads; and traditionally that was always the case. […] Advertisers and brands need to understand that their route to the audience is via the publishers whose content they are poisoning through invasive technologies and an ever increasing greed for more and more data. They need to purify the water before they can persuade us to start drinking it again – they need to stop tracking and profiling us, they need to better police their networks and platforms to eliminate malvertising and they need to yield control of the experience back to the publishers who own the audience. [Needless to say, we should object to being considered "owned" by publishers as well.]

Monday, 20 June 2016 - 9:44pm

Published by Matthew Davidson on Mon, 20/06/2016 - 9:44pm in

This confirms my long-held suspicion that Bellingen is really an extended episode of Father Ted.

"And you say the giant rock hasn't moved since? … Yes, I agree that is curious. … Well, I'm no giant rock expert, but I'd say that if it's got it into its head to stay where it is, you'll be wanting to undertake some processes - safe ones if at all possible. So it's on the left-hand side of the road - is that my left or your left? … Ah, the rock's left, of course. Right you are. Listen to me now; big eedjit!"

Sunday, 19 June 2016 - 9:29pm

Published by Matthew Davidson on Sun, 19/06/2016 - 9:29pm in

This week, I have been mostly reading:

  • Saturday Morning Breakfast Cereal (via Timothy Taylor):
  • The rise of Donald Trump — Dean Baker, Real World Economics Review Blog: Whatever the final outcome of the presidential race, Trump has exposed a sense of extreme anger among large segments of the population. These people are unhappy about economic policies that have undermined their financial security. Their anger may be misdirected towards immigrants or other countries, but it is not about to go away unless the policies change.
  • Larry Fink and His BlackRock Team Poised to Take Over Hillary Clinton’s Treasury Department — David Dayen at The Intercept: BlackRock is far from a household name, but it is the largest asset management firm in the world, controlling $4.6 trillion in investor funds — about a trillion dollars more than the annual federal budget, and five times the assets of Goldman Sachs. And Larry Fink, BlackRock’s CEO, has assembled a veritable shadow government full of former Treasury Department officials at his company. […] And his priorities appear to be so in sync with Clinton’s that it’s not entirely clear who shares whose agenda. Clinton, for her part, has refused to rule out a treasury secretary drawn from Wall Street.
  • Joe Wilson to Hillary Clinton in 2010: Baghdad “Has Been Bled to Death” — Zaid Jilani in The Intercept: My trip to Baghdad (September 6-11) has left me slack jawed. I have struggled to find the correct historical analogy to describe a vibrant, historically important Middle Eastern city being slowly bled to death. Berlin and Dresden in World War II were devastated but they and their populations were not subjected to seven years of occupation that included ethnic cleansing, segregation of people by religious identity, and untold violence perpetrated upon them by both military and private security services. […] The service people don’t see themselves there to bring peace, light, joy or even democracy to Iraq. They are there to kill the “camel jockeys.”
  • Why Trump? — George Lakoff: Language that fits [a conservative or progressive] worldview activates that worldview, strengthening it, while turning off the other worldview and weakening it. The more Trump’s views are discussed in the media, the more they are activated and the stronger they get, both in the minds of hardcore conservatives and in the minds of moderate progressives. This is true even if you are attacking Trump’s views. The reason is that negating a frame activates that frame, as I pointed out in the book Don’t Think of an Elephant! It doesn’t matter if you are promoting Trump or attacking Trump, you are helping Trump.
  • The Federal Reserve and the Global Fracture — Antti J. Ronkainen interviews Michael Hudson: The aim of lowering interest rates was to provide banks with cheap credit. The pretense was that banks might lend to help the economy get going again. But the Fed’s idea was simply to re-inflate the Bubble Economy. It aimed at restoring the value of the mortgages that banks had in their loan portfolios. The hope was that easy credit would spur new mortgage lending to bid housing prices back up – as if this would help the economy rather than simply raising the price of home ownership. […] Banks did make money, but not by lending into the “real” production and consumption economy. They mainly engaged in arbitrage and speculation, and lending to hedge funds and companies to buy their own stocks yielding higher dividend returns than the low interest rates that were available.
  • RICHARD KOO: The 'struggle between markets and central banks has only just begun' — David Scutt of Business Insider Australia points us towards this illustration of how trying to increase the amount of broad money by issuing base money is "pushing on a string":
    Nomura Koo
  • The Unemployment Rate Isn’t Used to Keep Unemployment Low (With Graph) — Ian Welsh: So, the unemployment rate from late 70s and on, has been used to determine if wages should cause inflation, and to then raise interest rates to make sure they don’t. Not incidentally, the result is also to crush wages, because, essentially, wages that improve are nothing more than wages that increase faster than non-wage inflation. The unemployment rate not only doesn’t measure how good the economy feels for ordinary people, it was actually used, with purposeful action, to crush wages.
  • There's more than one way to kill negative gearing — Peter Martin: Before John Howard halved the headline rate of capital gains tax at the turn of the century, negative gearing was relatively unattractive. Landlords as a group made money. In 1999-2000 they made a combined $219 million. Ever since then they've lost money. In 2012-13 they lost a net $5.4 billion... Capital gains matter because they are the mechanism negative gearers use to make money. The profits they make from eventually selling their properties are meant to exceed their annual losses from rent. A cut-rate capital gains tax makes those profits more likely. Investors can write off their annual losses at the full tax rate and pay tax on their eventual profits at only half the rate.
  • Exit Planning — Thomas Geoghegan in The Baffler: Toe-to-toe, it’s the elderly and not the robots who are taking jobs from the young. […] The more we shrink the welfare state—I mean cut back on private pensions, Social Security, and Medicare so that older Americans must stay in the workforce—the harder it is for a young person to land a job. D.C. think tanks love to tell the elderly that we’re really in fine shape and that it is our duty to keep on working. To an audience of older college grads, like me, they say, “Hang on to those college-type jobs.” At the same time, they push more young people into college. Isn’t this a contradiction? It seems that the one hand does not know what the other hand is doing. That’s the problem with neoliberalism.

Friday, 17 June 2016 - 8:43pm

Published by Matthew Davidson on Fri, 17/06/2016 - 8:43pm in

I briefly considered doing a Cat Stevens act, but it's such a crowded market. And the turf wars are brutal. I mentioned I was thinking about it to Steve Moonshadow and he savagely lashed out, giving me the most horrendous swollen black eye, saying "Come anywhere near my patch, and I'll do the other one, then you won't have to look no more. Understand?".

Anyway, you really need to go niche to make an impact. I thought maybe James Taylor, Donovan, even Mary Hopkin (promising, but I just couldn't make the blonde wig work).

Finally, I hit on the perfect, under-exploited formula. You can catch "Turned Out Nice Again - A Moving Homage to George Formby" during my 2016 east coast tour, starting in Grafton and ending slightly north of Grafton. Check local pubs, community theatres, and scout halls for dates and times. Celebrate the life and work of a man who has united generations around the simple pleasures of flat caps, ukuleles, leaning on lampposts and appreciating the occasional little stick of Blackpool rock. Who knows - you might see what I can see, when I'm cleaning windows!

Friday, 17 June 2016 - 6:09pm

Published by Matthew Davidson on Fri, 17/06/2016 - 6:09pm in

Ha! We stride boldly into a vision of the future from the 1970s. More roads! More cars! More shopping malls! More dormitory suburbs! Knock it all down, and if you can't knock it down, knock something else down to bypass it!

Soon the current plague of property investors will pass, leaving ghost malls sitting alongside the ghost arcades of a previous plague. A home for tattoo parlours, the ever-expanding offices of the privatised dole police, and placards proclaiming "This space for rent" and "Vote Hartsuyker".

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