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There Is No Nobel Prize in Economics

AlterNet [1] / By Yasha Levine [2]

October 12, 2012  |  

It’s Nobel Prize season again. News reports are coming out each day sharing the name of the illustrious winner of the various categories — Science, Literature, etc. But there’s one of the prizes that’s a little different. Well, that’s putting it lightly… you see, the Nobel Prize in Economics is not a real Nobel. It wasn’t created by Alfred Nobel. It’s not even called a “Nobel Prize,” no matter what the press reports say.

The five real Nobel Prizes—physics, chemistry, literature, peace, and medicine/physiology—were set up in the will left by the dynamite magnate when he died in 1895. The economics prize is a bit different. It was created by Sweden’s Central Bank in 1969, nearly 75 years later. The award’s real name is the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” It was not established by Nobel, but supposedly in memory of Nobel. It’s a ruse and a PR trick, and I mean that literally. And it was done completely against the wishes of the Nobel family.

Sweden’s Central Bank quietly snuck it in with all the other Nobel Prizes to give free-market economics for the 1% credibility. One of the Federal Reserve banks explained it succinctly [3], “Few realize, especially outside of economists, that the prize in economics is not an “official” Nobel. . . . The award for economics came almost 70 years later—bootstrapped to the Nobel in 1968 as a bit of a marketing ploy to celebrate the Bank of Sweden’s 300th anniversary.” Yes, you read that right: “a marketing ploy.”

“The Economics Prize has nestled itself in and is awarded as if it were a Nobel Prize. But it’s a PR coup by economists to improve their reputation,” Nobel’s great great nephew Peter Nobel told AFP in 2005 [4], adding that “It’s most often awarded to stock market speculators .... There is nothing to indicate that [Alfred Nobel] would have wanted such a prize.”

Members of the Nobel family are among the harshest, most persistent critics of the economics prize, and members of the family have repeatedly called for the prize to be abolished or renamed. In 2001, on the 100th anniversery of the Nobel Prizes, four family members published a letter in the Swedish paper Svenska Dagbladet, arguing that the economics prize degrades and cheapens the real Nobel Prizes. They aren’t the only ones.

Scientists never had much respect for the new economic Nobel prize. In fact, a scientist who headed Nixon’s Science Advisory Committee in 1969, was shocked to learn that economists were even allowed on stage to accept their award with the real Nobel laureates. He was incredulous: “You mean they sat on the platform with you?”

That hatred continues to simmer below the surface, and periodically breaks through and makes itself known.  Most recently, in 2004, three prominent Swedish scientists and members of the Nobel committee published an open letter [5] in a Swedish newspaper savaging the fraudulent “scientific” credentials of the Swedish Central Bank Prize in Economics. “The economics prize diminishes the value of the other Nobel prizes. If the prize is to be kept, it must be broadened in scope and be disassociated with Nobel,” they wrote in the letter, arguing that achievements of most of the economists who win the prize are so abstract and disconnected from the real world as to utterly meaningless.

The question is: Why would a prize that draws so much hatred and negativity from the scientific community be added to the Nobel roster so late in the game? And why economics?

To answer that question we have to go back to Sweden in the 1960s.

Around the time the prize was created, Sweden’s banking and business interests were busy trying to ram through various so-called "free-market" economic reforms. Their big objective at the time was to loosen political oversight and control over the country’s central bank.

According to Philip Mirowski, a professor at the University of Notre Dame who specializes [6] in the history of economics, the “Bank of Sweden was trying to become more independent of democratic accountability in the late 60s, and there was a big political dispute in Sweden as to whether the bank could have effective political independence. In order to support that position, the bank needed to claim that it had a kind of scientific credibility that was not grounded in political support.”

Promoters of central bank independence couched their arguments in the obscure language of neoclassical economic theory of market efficiency. The problem was that few people in Sweden took their neoclassical babble very seriously, and saw their plan for central bank independence for what it was: an attempt to transfer control over economic matters from democratically elected government and place into the hands of big business interests, giving them a free hand in running Sweden’s economy without pesky interference from labor unions, voters and elected officials.

And that’s where the Swedish Central Bank Prize in Economic Sciences came in.

The details of how the deal went down are still very murky. What is known is that in 1969 Sweden’s central bank used the pretense of its 300th anniversary to push through an  independent prize in “economic science” in memory of Alfred Nobel, and closely link it with the original Nobel Prize awards. The name was a bit longer, the medals looked a little different and the award money did not come from Nobel, but in every other way it was hard to tell the two apart. To ensure the prize would be awarded to the right economists, the bank managed to install a rightwing Swedish economist named Assar Lindbeck, who had ties to University of Chicago, to oversee the awards committee and keep him there for more than three decades. (Lindbeck’s famous free-market oneliner [7] is:  “In many cases, rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.”)

For the first few years, the Swedish Central Bank Prize in Economics went to fairly mainstream and maybe even semi-respectable economists. But after establishing the award as credible and serious, the prizes took a hard turn to the right.

Over the next decade, the prize was awarded to the most fanatical supporters of theories that concentrated wealth among the top 1% of industrialized society of our time.

In 1974, five years after the prize was first created, it was awarded to Friedrich Hayek, one the leading "laissez-faire" -- enrich the rich -- economists of the 20th century and the godfather of neoclassical economics. Milton Friedman, who was at the University of Chicago with Hayek, was not far behind. He won the prize just two years later, in 1976.

Both Hayek and Friedman were huge supporters of the political independence of central banks. In fact, they built their careers on bashing government intervention in economic matters. Hayek developed a whole business cycle theory that blamed government and government-controlled banking systems  for all economic ills. He also equated all government intervention will inevitably lead to totalitarianism. Friedman with a whole new subsection of neoclassical economics called “Monetarism” that had a scientific formula worked out, specifying exactly how much money central bankers needed to keep floating around in the economy to keep inflation low and unemployment high enough to keep big business happy. No democratic control over banking policies needed, just let the free-markets do its thing!  The Swedish central bankers couldn’t get better spokesmen for their cause.

But Hayek and Friedman’s usefulness went way beyond Sweden.

At the time of the prizes, neoclassical economics were not fully accepted by the media and political establishment. But the Nobel Prize changed all that.

What started as a project to help the Bank of Sweden achieve political independence, ended up boosting the credibility of the most regressive strains of free-market economics, and paving the way for widespread acceptance of libertarian ideology.

Take Hayek: Before he won the award, it looked like Hayek was washed up. His career as an economist was essentially over. He was considered a quack and fraud by contemporary economists, he had spent the 50s and 60s in academic obscurity, preaching the gospel of free markets and economic darwinism while on the payroll of ultra-rightwing American billionaires. Hayek had powerful backers, but was out on the fringes of academic credibility.

But that all changed as soon as he won the prize in 1974. All of a sudden his ideas were being talked about. Hayek was a celebrity. He appeared as a star guest on NBC’s Meet the Press, newspapers across the country printed his photographs and treated his economic mumblings about the need to have high unemployment in order to pay off past inflation sins as if they were divine revelations. His Road to Serfdom hit the best-seller list. Margret Thatcher was waving around his books in public, saying “this is what we believe.” He was back on top like never before, and it was all because of the fake Nobel Prize created by Sweden’s Central Bank.

Billionaire Charles Koch brought Hayek out for an extended victory tour of the United States, and had Hayek spend the summer as a resident scholar at his Institute for Humane Studies. Charles, a shrewd businessman, quickly put the old man to good use, tapping Hayek’s mainstream cred to set up and underwrite Cato Institute in 1974 (it was called the Charles Koch Foundation until 1977), a libertarian thinktank based on Hayek’s ideas. Even today, Cato Institute pays homage [8] to the Swedish Central Bank Prize’s role in the mainstreaming of Hayek’s ideas and Hayek’s influence on the outfit:

The first libertarian to receive the Nobel Prize was F.A. Hayek in 1974. In the years leading up to the prize announcement, Hayek had reached a professional and personal nadir. Unable to maintain an appointment in the United States, Hayek had returned to Austria to take up a position at the University of Salzburg, Austria. With the announcement of the prize in 1974, however, Hayek’s work, and the fortune of Austrian economics, took a remarkable turn.

Hayek’s influence on Cato is profound. Two of Cato’s first books were by Hayek: A Tiger by the Tail: The Keynesian Legacy of Inflation & Unemployment and Monetary Policy: Government as Generator of the “Business Cycle.” Perhaps more than any other intellectual in the twentieth century, Hayek has inspired Cato and its researchers to develop policies that ensure a free society. When Cato moved into its current location in 1992, its auditorium was named in Hayek’s honor.

Friedman’s Nobel Prize had a similar impact. After getting the prize in 1976, Friedman wrote a best-seller, got his own 10-part PBS series Free to Choose and became President Ronald Reagan’s economic advisor, where he had a chance to put the society-crushing policies he developed in Chile under Pinochet.

Friedman would spend the rest of his time denying it, but he was deeply involved and invested in the Pinochet’s totalitarian-corporate  economic experiment. Chilean economist Orlando Letelier published an article inThe Nation in 1976 outing Milton Friedman as the  “intellectual architect [9] and unofficial adviser for the team of economists now running the Chilean economy” on behalf of foreign corporations. A month later Letelier was assassinated in D.C. by Chilean secret police using a car bomb.

Friedman’s monetary theory was used by Federal Reserve Bank Chairman Paul Volcker to restrict the money supply, plunging American into a deep recession, doubling the unemployment rate and had the added bonus of getting Reagan elected President. . . . And Hayek and Friedman were just the beginning.

For instance, in 1997 two economists won an award for their derivative risk models that minimized risk, just before the derivatives would explode in the 2000s real estate bubble.

The award was shared by economists Robert Merton and Myron Scholes for their work in figuring out how to value derivatives so as to minimize risk. The two economists used their Nobel-worthy economic models to run “the world’s biggest hedge fund,” which was called Long Term Capital Management (LTCM). And the fund really lived up to its name. Nine months after winning the Swedish Central Bank Prize in Economics, LTCM went belly-up, racking up over $1 billion in losses over a period of just two days. It was of course bailed out by then-Federal Reserve Chairman Alan Greenspan, who considered LTCM “too big to fail.”

Then there’s Vernon Smith. In 2002, Vernon Smith, adored and funded by Libertarians like Charles Koch, won the “Nobel” — his patron looked at the money he spent funding Smith’s academic career as a good investment, saying simply: “The Koch Foundation’s gift was an excellent investment.”

Smith’s research basically entailed setting up theoretical “wind tunnels” to test how, for example, the privatizations of markets would respond in various conditions all in a way that has nothing to do with reality.It will take a brave act to bring this sham to the attention of the public.

One year, one of the prize winners will have to speak out, and explain this ruse to the public as he wins the award.

See more stories tagged with:

Links:
[1] http://www.alternet.org
[2] http://www.alternet.org/authors/yasha-levine
[3] http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3547
[4] http://www.thelocal.se/2173/20050928/
[5] https://www.evernote.com/shard/s1/sh/ebbca597-42ab-4e8a-ba11-1120c53d3769/c761a720b35084f1dec0939d4c90f7d5?noteKey=c761a720b35084f1dec0939d4c90f7d5&noteGuid=ebbca597-42ab-4e8a-ba11-1120c53d3769
[6] http://www.youtube.com/watch?v=dLtEo8lplwg]
[7] http://www.fff.org/freedom/fd0606d.asp
[8] http://www.cato.org/people/nobel-index.html
[9] http://www.evernote.com/shard/s1/sh/21eebc85-ff4e-445b-b53d-13bf46c0be34/8261400fe7fe2823dc60c191f95591f2
[10] http://www.alternet.org/tags/nobel-prize
[11] http://www.alternet.org/tags/economics-0
[12] http://www.alternet.org/tags/nobel-family
[13] http://www.alternet.org/tags/milton-friedman
[14] http://www.alternet.org/tags/vernon-smith
[15] http://www.alternet.org/%2Bnew_src%2B

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Tuesday, October 16, 2012


Fascinating article on the BBC about a modern incidence of corvee labor – Uzbekistan requires its citizens to handpick cotton in the fields for free.
Uzbekistan is one of the world's main producers of cotton and the crop is a mainstay of its economy. The government controls production and enforces Soviet-style quotas to get the harvest off the fields as quickly as possible.

A history of using child and forced labour at harvest time has led to a number of retailers - including H&M, Marks and Spencer and Tesco - to pledge to source their cotton from elsewhere.

In response, earlier this year Uzbekistan's Prime Minister Shavkat Mirziyayev issued a decree banning children from working in the cotton fields. Yet many adults, including teachers, cleaners and office workers, are still forced to return to the land during October and November.

This year, like last year, medical staff have been ordered to join them. There are reports of patients in towns being turned away because their doctor is "in cotton".
Doctors and nurses forced to pick cotton (BBC)

Wikipedia entry on corvee labor is instructive.

I first heard about Uzbekistan’s forcing its citizens to pick cotton because it was used as a prime example of extractive institutions on the Why Nations Fail blog:
Government-imposed prices at which you’re forced to sell; coerced labor; expropriation of assets by the intelligence services and the president’s family. These are just some of the examples of what we call extractive economic institutions — economic institutions designed to extract resources from the population and businesses for the benefit of a narrow elite.

Like almost all nations that are poor, Uzbekistan fails because its people operate under extractive economic institutions, which provide few incentives for investment or technological ingenuity, and force people to engage in activities that they do not wish or are not well-suited to (such as farmers being forced to grow crops that they don’t want and children being forced to pick cotton rather than learn in school).

And the important point is this: these extractive economic institutions are not there by mistake. They have been designed this way for the benefit of the elite. There was no coerced child labor in Uzbekistan when cotton was produced by state-owned firms. This economic institution was introduced when Karimov and his cronies realized that at the prices they were imposing on farmers, cotton production was going to plummet.
Extractive institutions in action: Uzbekistan

This is especially ironic as cotton-picking was a major driver of slavery and indentured servitude in the antebellum United States. The mechanical cotton picker sent millions of former slaves and sharecroppers to northern industrial cities just in time for deindustrialization. Northern cities became ghettos as whites got in their automobiles and decamped to seperatist enclaves in the corn fields surrounding urban areas while America's formerly world-class cities to deteriorated to third-world levels. From these enclaves they could wage a war on the very idea of collective purpose and civil government.

Just as no old and obsolete technology has never truly vanished, it seems like no economic system has ever truly died. It’s almost a guarantee that somewhere on earth today you will be able to find “extinct” economic forms - corvee labor, debt bondage, indentured servitude, chattel slavery, plantations, sharecropping, etc., if you look hard enough. It’s a corrective to assuming that our mutual-obligation system of wage slavery (fixed amount of time per day in exchange for lump sum of currency and subsidized benefits) that we call a “job” is a permanent feature of the human condition.

I and others have noticed a dramatic return to unfree and unpaid labor all around the world as our economic system deteriorates. First there is the vast amount of prison labor used today, including in the United States, the world's jailer. Then there are the “unpaid internships” which keep all but the children of the rich who are subsidized by their families from the most desirable professional jobs. Then there are the “welfare to work” schemes which make the unemployed work essentially for free in lieu of welfare benefits. Then there is the vast amount of overtime “expected” of terrified salaried workers lest they get laid off in the next corporate purge.

Today’s college graduates are often referred to as “indentured servants” because they are forced to fork over large parts of their salaries in wage garnishments to college debt collection agencies in return for the “work chit” of a degree. Tell me materially how this is different from traditional indentured servitude, where people were fined heavily for being transported to America, and then forced to work to pay back their sponsors for free. And of course, the laws protecting debtors have been stripped away, returning to an almost eighteenth-century mode of unforgivable debt and no limits to what can be done to collect it. We’ve even seen the backdoor return of debtor’s prisons. Others have noted the breakdown of what’s commonly referred to as “the rule of law” in financial matters and noted the creation of separate rules and standards of conduct for the rich as opposed to ordinary people. Of course we are all free to "choose" our jobs, just as we are free to be starving and homeless as those jobs disappear.

All around the world we are regressing. Welcome to capitalist “progress.” Uzbekistan is the future.


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By John Aravosis on 5/28/2012 07:00:00 PM

Krugman says we're still in a classic Depression.

Paul Krugman on Bill Maher:

We are in a depression. We are actually in a classic depression. A depression is when nobody wants to spend. Everybody wants to pay down their debt at the same time. Everybody is trying to pull back, either because they got too far into debt, or because if they’re a corporation, they can’t sell because consumers are pulling back. The thing about an economy is that it fits together. My spending is your income. Your spending is my income, so if we all pull back at the same time, we’re in a depression. The way to get out of it is for somebody to spend so that people can pay down their debt, so that we don’t have a depression. So that we have a chance to work out of whatever excesses we had in the past, and that somebody has to be the government.

We ended the Great Depression with a great program of government spending for an unfortunate reason. It was known as World War II…but when the war broke out in Europe, and we began our buildup that Great Depression that had been going on for ten years. People thought it would go on forever. Learned people stroked their chins and said there are no quick answers. In two years, employment rose 20%. That’s the equivalent of 26 million jobs today, the depression was over. We had full employment, and it never came back, or it didn’t come back until 2008, because people managed to pay down those debts, and we had a durable recovery.
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Sunday April 29th, 2012

Every once and awhile I'll be listening to a podcast with one or the other writers specializing on the subject of Peak Oil or collapse and the subject of timetables will come up. When will the collapse finally be here, the callers ask insistently, almost pleadingly, so that they can finally justify their investments in freeze-dried foods, water purification tablets and solid gold coins. Inevitably the guest will demur, and speak more in general terms. But I'm going to be the first pundit to go out on the limb and assign a timeline for the collapse. Spread it far and wide, and let's see just how good my predictive powers are. Are you ready? Here it is:

Right now.

What do they think a collapse is supposed to look like? It seems people just cannot just cannot get past the "Zombie Apocalypse" theory of collapse. They imagine hordes of disease-ridden folks dressed in rags stumbling around and fighting over cans of petrol and stripping cans of food from shelves. That's not what collapse looks like. It never has been. In fact, there's very little evidence that a Zombie Apocalypse style collapse ever occurred in the historical record. Instead we see subtle patterns of abandonment and decay that unfold over long periods of time. Big projects stop. Population thins. Trade routes shrink and people revert to barter. Things get simpler and more local. Culture coarsens. High art stagnates. People disperse. Expectations are adjusted downward. Investments are no longer made in the future and previous investments are cannibalized just to maintain the status quo. Extend and pretend is hardly a recent invention.

No, what happens in a collapse is very much more subtle than a Zombie Apocalypse. Things tend to look pretty normal for the following reasons:

1.) People and Institutions are resistant to change.
2.) The system has a formidable array of resources to preserve the status quo.
3.) Sheer momentum.
4.) Creeping Normalcy
5.) Denial

This is how history says collapses go down, not with a bang, but with a whimper. Based on recent archaeology, it seems this is how the Roman collapse unfolded was well. Although images of pillaging barbarians looting burning cities sticks in people's imaginations when they think of the fall of the Roman Empire, this was not the experience for most people according to recent scholarship. Big events tended to come down to us in the written record, but for ordinary people, it probably seemed much less dramatic. Yes, there were some famines and plagues, as there had always been. The population declined, but there were no apocalyptic battles or mass starvation. Many of the cities appear to have been continually inhabited. There were no mass graves, ruined cities or signs of malnutrition found in excavations. Most people who survived the plagues lived right through the transition from Classical Antiquity to Late Antiquity to the Medieval period with remarkable continuity, just a change of institutions and expectations. But something clearly was happening, because we know it from history. Buildings got plainer. Citizens got poorer. Trade routes shrank. Economies became local. Lawlessness increased. The old Roman Empire had been around since far before anyone could remember, and as it broke down more and more and failed to do things it had once done easily, it must have seen to some people like the world was collapsing in on them. It wasn't, but something was happening. Much depended on who you were, where you were, what your expectations were, and how much you had invested in the status quo, both mentally and in terms of status and resources.

What brought this thought about was reading the heartbreaking article: Suicides in Greece increase 40%

And I remembered a comment I head from Dmitry Orlov in an interview about how much of his high school class were now dead. Yet there were no headlines and there was never any official crisis or emergency. They did not die in gunfights over scraps of food like in The Road. Rather, more quotidian things like alcoholism, unemployment, suicide, homelessness, exposure, lack of medications and ordinary sicknesses like bronchitis and pneumonia took their lives.  Russia's life expectancy fell dramatically. It's birth rate declined. Public health fell apart. Suicide rates went up. The population shrank. Entire towns became abandoned. In post-collapse Russia there was a slow die-off that occurred outside of the daily headlines that no one seemed to notice. They were ground down slowly by day-to-day reduction in the standard of living, a million little tragedies that, like pixels in an image, looked like nothing until the focus was pulled back.

And right now the entire continent of Europe is looking an awful lot like post-collapse Russia:
The savage cuts to Greece's health service budget have led to a sharp rise in HIV/Aids and malaria in the beleaguered nation, said a leading aid organisation on Thursday.

The incidence of HIV/Aids among intravenous drug users in central Athens soared by 1,250% in the first 10 months of 2011 compared with the same period the previous year, according to the head of Médecins sans Frontières Greece, while malaria is becoming endemic in the south for the first time since the rule of the colonels, which ended in the 1970s.

Reveka Papadopoulos said that following health service cuts, including heavy job losses and a 40% reduction in funding for hospitals, Greek social services were "under very severe strain, if not in a state of breakdown. What we are seeing are very clear indicators of a system that cannot cope". The heavy, horizontal and "blind" budget cuts coincided last year with a 24% increase in demand for hospital services, she said, "largely because people could simply no longer afford private healthcare. The entire system is deteriorating".
Greece on the breadline: HIV and malaria make a comeback

Is that not a die-off? What would a collapse look like? What should a collapse look like? Zombies? Mad Max? Or would it look like the following statistics from this article:
In Greece, we now have record unemployment, which includes the majority of young workers. Homelessness is up 20 percent, with soup kitchens in Athens reporting record demand, and the usually low suicide rate having doubled.

Portugal has complied completely with the austerity demands it accepted for its bailout deal, but its debt is growing and its economy is shrinking, its unemployment rate continues to reach new heights, there is a crisis in medical care, and a 40 percent rise in emigration, with the Portuguese government acknowledging its own failure by actually encouraging its citizenry to leave.

In Spain, austerity has  resulted in falling industrial output and deepening debt, with record unemployment and a stunning rate of 50 percent youth unemployment. And the Spanish government's incomprehensible response is to impose even more crushing austerity.

Ireland has fallen back into recession as austerity has led to falling economic output. A better future is being sacrificed, as young workers look for work abroad, "generation emigration" expected to number 75,000 this year.

The success of Italy's wealthy technocrat government was concisely summarized in similar terms:

        Italy's austerity measures are stunting activity in the euro-zone's third-largest economy, recent budget and economic data show, suggesting the steps are backfiring.

Italy's industrial production is falling while its rate of unemployment is at its highest in more than a decade, and its priceless cultural heritage is literally crumbling. But the wealthy technocrats themselves are ensuring that they they don't have to share the suffering.

Even in the Eurozone's stronger economies, such as Holland, austerity is hurting the economy, people, and culture, and risks backfiring even more.

The austerity program of French President Nicolas Sarkozy has led to a stagnant economy, with ten consecutive months of rising unemployment and factory output stalled and business confidence in decline.

Even economic powerhouse Germany, while taking advantage of the new flood of migrant workers fleeing Europe's weaker economies, is facing an austerity backlash.

Outside the Eurozone, the austerity program imposed on Britain by the relentlessly mendacious Cameron government has resulted in an economy that keeps shrinking, with the OECD saying it is back in recession, with unemployment soaring, and the overall brunt being borne by the elderly and minorities and the very young. An additional hundred thousand are predicted to be out of work by autumn.
Greece appears to be just the dress rehearsal for the rest of the world. And Japan has been experiencing diminished expectations, lower wages, deflation and declining birthrates since 1989. And I don't think I need to restate conditions in the United States: municipal bankruptcies, school closings, foreclosures, blackouts, roads being turned back into gravel, etc. And conditions are continuing to deteriorate. See this:
So many corporate-owned politicians in Washington these days seem to be going out of their way to work side by side with the Grim Reaper. They declare unnecessary wars. They tax us (not themselves) right down to the bone. They steal all our safety nets in order to have more money to add to THEIR safety nets. They bust our unions, steal our pension plans, enable Wall Street to invent pyramid schemes that ruin our economy, encourage big health insurance companies to cut us loose just when we need them the most, and allow Monsanto to poison our food, mutilate our seed stock and kill off our bees.

In America, death seems to be coming earlier and earlier to those who vote.

And now GOP presidential candidate Mitt Romney has come up with an even more sure-fire plan to help out his new BFF, the Grim Reaper. Now Romney wants to not only eliminate most U.S. housing subsidies, he wants to eliminate the entire department of Housing and Urban Renewal as well. That will certainly speed up the Grim Reaper’s efforts for sure.

According to Forbes magazine, “In a closed-door Florida fundraiser for donors tonight, Mitt Romney offered a rare glimpse into his policy plans if elected President. And, as NBC reports, he got quite trigger-happy.”

According to TruthOut, “Romney’s plan to eliminate HUD, assuming he didn’t shuffle its programs to other departments, would bring an end to critical programs like Section 8 housing vouchers and community development block grants. And eliminating housing assistance is even more problematic given the disproportionate percentage of veterans in the homeless population.”

But what does Romney’s latest brilliant idea actually mean in terms of you and me? It means once again that the rich continue to get richer and live longer while the rest of us just conveniently die off too soon — because homeless people have a lot shorter life span than folks happily housed in the Hamptons.

You know that senior housing complex in your town where seniors now get a rent break courtesy of HUD? That will be gone. And without HUD, frail and ailing seniors will soon be wandering the streets of your town, dying in alleyways and hogging up all the space in your cemeteries.

You know those low-income “housing projects” on the other side of your town where all the poor people now live? Those will be gone too. Too bad for them. And now desperate poor folks will be wandering around in your part of town, homeless too. And did I already mention that they will be desperate?

And all those homeless vets? There will be a lot more of them now — also wandering around your city or town.

Remember back in the 1970s when Reagan shut down all those mental institutions and suddenly we had all sorts of crazy people wandering around, hopefully taking their meds but probably not? And if Romney’s latest hot new scheme takes hold, even more of them will be back on your streets.

And physically handicapped people will have no place to live either. They too will be wandering around, trying to elude the Grim Reaper.

And the number of homeless children will dramatically increase. A lot more little kids will be living in cars — if they’re lucky.

And all of these homeless people, millions of them, will be pouring into the streets of your city or town, herded in your direction by both corporate-owned politicians in Washington and the Grim Reaper himself — who also will have a sharp eye out for YOU.
Romney’s new housing policy: Offering the Grim Reaper a big helping hand (FireDogLake)

And this: Austerity In America: 22 Signs That It Is Already Here And That It Is Going To Be Very Painful (Economic Collapse Blog)

This is what a collapse really looks like: The poorest and most vulnerable die first, out of sight, and everyone else just does what they can to survive. Peoples' priorities change: they concentrate on getting by from day-to-day rather than planning for the future. They stop getting married. They have less children or none at all. They live for today. They work harder for less. Taxes go up even as basic services are cut. Long term unemployment has been conclusively linked to greater mortality and susceptibility to illness, physical and mental. Would many of these people not still be alive today if were not for austerity measures and declining middle class opportunity?  Isn't that a die-off? It's been said that having children is a referendum on the future. Based on global birth rates, I think the human race is collectively registering a vote of "no confidence."

Picture the ruin porn of decaying Detroit's vacant buildings, empty fields, shuttered factories, abandoned houses, crumbling overpasses, bursting water mains, rusting cars, and encroaching wilderness. Does this not look like collapse to you? If this had happened over a span of one or two years, would we even have any trouble of recognizing it as such? If you asked people twenty or thirty years ago what a global economic collapse would look like, would they not describe something very similar to what we are now witnessing? Why don't we recognize it? Because it is happening too slowly? Because we believe things will "get back to normal?" What are we waiting for, a sign from heaven?

Who you are and where you are effects this dramatically too. Your position on the hierarchy determines how well insulated you are from collapse. Are you poor already? (not middle class, everyone is middle class) Then you probably won't notice as much difference. Are you filthy rich? (if you're reading this, I doubt it) Then you have enough power to preserve you wealth or enhance it for a while (at our expense, of course). If you are in the technocratic caste that serves global corporate interests, have the privilege an advanced education, work in certain select industries, have a vast inheritance, or are just plain lucky, you can probably safely hold on to your lifestyle for a long time to come. Your children won't be so lucky, though. For those people who wonder why they don't feel like they are in a collapse, please consider, have you gotten a raise lately? What's your home worth? Has your rent gone up? Taxes and fees? Some people may answer positively to these questions, of course, but that number has a funny way of shrinking over time.

If you live in a big city it also might be easier to get by. Cities have more diverse industries and higher tax bases,  There is more wealth in cites, more social momentum, and more resources to buffer the negative effects of a downturn. For those with social connections closest to the levers of power and the imperial courts, they can manipulate the system to keep the swag coming from their enclaves in Manhattan, Orange Country, suburban D.C., and the Hamptons. Just as in the Roman collapse where the cities were bulwarks of wealth, culture and commerce while countryside became depopulated, rural areas will be hardest hit. Indeed, rural towns that were dependent upon one major industry like farming or steel manufacturing have already become ghost towns, and much of rural America is already a lawless region with little infrastructure; a battleground for drug gangs dotted with marijuana plantations and meth labs.

We have a hard time imagining that in the midst of a collapse everything would seem so normal. That day-to-day life would go one for most of us, seemingly unaffected, and that only after vast stretches of time had passed would we notice anything different. That many of us could hold on to our modern conveniences and familiar things. That many people wouldn't even notice what's going on at all. Short of a plague situation, there are not usually piles of bodies during a collapse. Most people don't die. Here's what really happens: People move in with relatives. They barter services. They defer health care. They stop going to school. They sell off their possessions. They go on the dole, if they can. They stop caring. You see people happy to have food and warmth rather than the latest consumer toy. You see entire households supported by one breadwinner. You see homeless shelters and soup kitchens fill up and food banks empty out. You see people hanging out on streetcorners during the day and living in tents. That's what a collapse looks like. Sound familiar? In fact, much of the world never moved from this mode of  existence in the first place. Even during the worst historical collapses people still ate good food, listened to music, used the latest technology, and drank beer and wine with friends on warm summer evenings.

So then why is the collapse occurring? Is it all about debt, as we've been led to believe? Or is it about something else?

Imagine if you were the leader of one of the world's major industrial nations, with millions of people, economies worth trillions, and huge armies at your command. Now imagine that your top generals and admirals have briefed you and told you that the fundamental substances underlying modern industrial civilization were running out. That there would be shortages. Scarcity.  Resource wars. Dwindling food supplies. Decreased industrial output. A shrinking tax base. Insurrection. What would you do? Panic? Or would you do exactly what world leaders are doing right now: using economic policies to shrink the economy to a lower level and cause a slow die-off? Claim that "there is no alternative", and that once "confidence" is restored, things will be back to normal? Consider:
Last year two military planning organizations went public with studies predicting that serious consequences from oil depletion will befall us shortly. In the U.S. the Joint Forces Command concluded, without saying how they arrived at their dates, that by 2012 surplus oil production capacity could entirely disappear and that by 2015 the global shortfall in oil production could be as much as 10 million b/d. Later in the year a draft of a German army study, which went into greater detail in analyzing the consequences of peaking world oil production, was leaked to the press. The German study which was released recently is unique for the frankness with which it explores the dire consequences which may be in store for us.
And see this: Energy Security: an annotated military/security bibliography (2010 update) (Energy Bulletin)

Of course, to assuage the public's anger, governments will promise an imminent return to normalcy. What they mean is, slow collapse down to a slow enough pace that it is less noticeable. And they've been saying this for four years already. Want to bet they'll be saying it four years from now? And four years after that?

Once things did "stabilize" everything would return to a sort of normal and you would be considered a hero by the public. And things will look great, because people only judge things in contrast with the immediate past, not decades before. And in relative terms, after years of "austerity", things will be "recovering." Temporarily at least, until the next crisis hits. But by that time you hope there will be another sucker sitting in the White House, or 10 Downing Street, or the Élysée Palace while you spend your retirement skiing in Zurich or sunning yourself in Monaco. And the cycle begins again. Your family members, as "elites," will be unaffected, of course. Debts can be cancelled. It's just the excuse they need.

Really, austerity makes no sense otherwise. As Steve Keen put it in a recent interview, "they think causing an accelerated economic collapse will make it easier to pay their debts." Indeed. Even some of the world's most renowned economists have declared such policies insane. If even Nobel-prize winning economists think it's crazy, then why are governments doing it? But these economists are in the main, ignorant of Peak Oil, willingly or unwillingly. They can only think in terms of reactivating "growth" in a Keynesian sense. But based on the above, it's clear world leaders know that's not going to happen. What other reason could there be? After all, capitalism requires growth, and only after enough is destroyed can growth begin again. Is what we are witnessing now not a slow destruction? Austerity is a wildfire set by the political/banking elite classes to get rid of the underbrush and start anew.

Certainly they could implement more humane options if they so desired. But most of those would require a diminution in the power of corporations and banks. They need not fear socialist revolution as they did generations ago, because everyone knows that socialism has failed and that wealth redistribution makes everyone poorer (right?). Entire populations can now be effectively controlled by the media apparatus, and if all else fails, you can bust out the tear gas and pepper spray. From now on, all we will be permitted is what we can claw from the impersonal and shrinking market. Social Darwinism has finally been given free reign by the powers that be.

Of course they could just as easily come clean with all this and initiate policies that minimize the pain and suffering of the general population. They could implement policies that allow for graceful and gradual decline and stop spending money on malignant things like prisons, security, war, bank bailouts, corporate welfare, and needless consumerism in favor of public health measures, redistributing wealth, work programs, etc. They could cancel the debts. But today's governments are wholly owned subsidiaries of the banking establishments that control national economies, and they will have none of it. Over our dead bodies they say, we prefer your dead bodies. The real purpose of austerity and neoliberal economic doctrine is to get the remaining wealth of industrial society into their bank accounts before the shit hits the fan so they and their ancestors can pick up the pieces in a post oil-crash world. They will continue to have the best of everything. Someone's going to have personalized genetic medicine and android servants, just not you or I. I myself am skeptical, however, that things will go as planned. This is why they need Authoritarian Capitalism.

People often wonder if the Romans knew at the time that their society was collapsing. Even if some  intelligent and literate Romans did recognize it, could they have done anything about it? We who know better at least know that we are on our own to deal with this. You know the truth. You don't have to flee to a bunker, and you don't have to die off either (of course we all will someday, but that's a different story...). Don't wait for politicians to tell you the truth about austerity, because they never will. You can see that this engineered collapse is exactly what we've been fearing all this time. No reason to fear the collapse-look around, you're already living though it even as you read these words, and you're presumably still here. Take a deep breath. Relax. Have a beer. Listen to some music. No Zombies Required.

Posted by escapefromwisconsin at
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By Gaius Publius on 3/27/2012 01:30:00 PM

Via a column by Paul Krugman, we are led by clicks to a number of great ALEC resources. (ALEC background here and here.)

If you're brand new to ALEC, here's a taste from SourceWatch.org (my emphasis and paragraphing):

ALEC is not a lobby; it is not a front group. It is much more powerful than that.

Through ALEC, behind closed doors, corporations hand state legislators the changes to the law they desire that directly benefit their bottom line. Along with legislators, corporations have membership in ALEC. Corporations sit on all nine ALEC task forces and vote with legislators to approve “model” bills.

They have their own corporate governing board which meets jointly with the legislative board. (ALEC says that corporations do not vote on the board.)

[Corporations] fund almost all of ALEC's operations. Participating legislators, overwhelmingly conservative Republicans, then bring those proposals home and introduce them in statehouses across the land as their own brilliant ideas and important public policy innovations—without disclosing that corporations crafted and voted on the bills.

ALEC boasts that it has over 1,000 of these bills introduced by legislative members every year, with one in every five of them enacted into law. ALEC describes itself as a “unique,” “unparalleled” and “unmatched” organization. It might be right. It is as if a state legislature had been reconstituted, yet corporations had pushed the people out the door.

Learn more at ALECexposed.org.
This is how the Movement Conservative project has gained control of many state legislatures. Think of it — over 1000 ALEC-authored bills introduced in the states each year. Who else has that kind of power?

So let's look at a few lists.

■ The following names the 23 corporations on ALEC's corporate board. These are the Daddy Dinos, the Bigs; the other corporations (below) are just associate predators.

Listed with the names are the company's total lobbying expenditures, not just via ALEC, but its entire reach. (Note that the 2011 totals are through June only — just a half-year's worth of politician-purchases).

Organization200920102011
Altria Group12,770,000$10,360,000$5,480,000
American Bail Coalition$0$80,000$35,000
AT&T Inc.$14,729,673$15,395,078$11,690,000
Bayer AG$8,478,512$4,903,640$3,380,000
Coca-Cola Co.$9,390,000$7,352,795$3,450,000
Diageo PLC$2,250,000$2,620,000$1,100,000
Energy Future Holdings Corp.$3,974,014$4,731,228$2,770,000
Exxon Mobil$27,430,000$12,450,000$6,820,000
GlaxoSmithKline$8,760,000$6,070,000$2,650,000
Intuit Inc.$2,142,000$2,249,000$1,589,000
Johnson & Johnson$6,560,000$6,700,000$3,106,000
Koch Industries$12,450,000$8,070,000$4,060,000
Kraft Foods$3,390,000$3,000,000$1,450,000
Peabody Energy$5,835,000$6,591,000$3,727,000
Pfizer Inc.$25,819,268$13,380,000$7,440,000
PhRMA$26,150,520$21,740,000$9,290,000
Reed Elsevier Inc.$2,130,000$1,670,000$810,000
Reynolds American$4,556,215$4,323,293$1,728,305
Salt River Project$1,170,000$870,000$370,000
State Farm Insurance$3,420,000$3,620,000$1,540,000
United Parcel Service$8,430,526$5,587,349$2,642,399
Wal-Mart Stores$7,390,000$6,160,000$4,070,000

Most of these names should be familiar to you. Koch Industries is obviously the Koch Bros. Wal-Mart is the Walton family. The Kochs and Waltons are two of the eighteen families behind all the "death tax" propaganda.

ALEC also has many for-profit corporations, law firms, governmental groups, and non-profits as members or supporters. Click to see.

The for-profit corp list is huge; your consumer dollars at work. Note the CATO Institute, that "insufficiently hackish" lover of democracy, on the non-profit supporter list.

I offer this list and these links as reference — if the heat on ALEC turns higher, you may be glad to keep it handy, or bookmarked.

What you can do — There are campaigns starting, thanks to the Trayvon killing connection. This is one; I'm sure there are or will be others. Feel free to lend a hand; it's not dark yet....

GP
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By Gaius Publius on 3/11/2012 09:15:00 AM

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Paul Krugman has a nice column on Republican attitudes on education, contrasting "social conservative" Santorum's approach with "economic conservative" Romney's. I'll let you go read; it's excellent.

But I want to point out the following (my emphasis):

But what about people like Mr. Romney? Don’t they have a stake in America’s future economic success, which is endangered by the crusade against education? Maybe not as much as you think.

After all, over the past 30 years, there has been a stunning disconnect between huge income gains at the top and the struggles of ordinary workers. You can make the case that the self-interest of America’s elite is best served by making sure that this disconnect continues, which means keeping taxes on high incomes low at all costs, never mind the consequences in terms of poor infrastructure and an undertrained work force. ...

So whenever you hear Republicans say that they are the party of traditional values, bear in mind that they have actually made a radical break with America’s tradition of valuing education. And they have made this break because they believe that what you don’t know can’t hurt them.
I've asked many times — Do the rich really need the rest of us?
So which is it? Have the super-rich decided they don't need America any more? Or are they just so in love with Supply Side Jesus that they don't know they're burning the house down with them inside?

In other words, when this country becomes a faltering second-world economy with a useful first-world military, have the super-rich prepared their financial escape? Do the rich really need the rest of us?
I'm not alone. Over at Digby's joint, David Atkins wonders much the same thing (emphasis added):
The underinvestment in public education is very intentional. Thanks largely to Grover Norquist and his buddies, it now costs more to attend a public university in California than it does to attend Harvard. The elites don't really need that many skilled workers in America. They need some, but not that many. A lot of the needed skilled workers can come from overseas immigration. The vast bulk of the American population is much more useful to them as desperate, unskilled labor.
I don't think they think we're needed. As the Brazilian and Indian and Chinese (etc.) consumer class comes online, consumers in America (our only value to them) can be retired. At that point, we're very Old World, serving the new.

I hope hope hope I'm wrong. But if I'm not, welcome to the backside of history, my fellow Americans. Brought to you by the very very rich and the politicians who serve them.

If it's any consolation, the Brits who emerged from the Great War and saw a new American world, they preceded you. The Romans of the fourth century weren't as lucky — they didn't speak Goth.

GP
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Quote of The Day

"Near the end of a society or civilization, they typically become very corrupt. Either the government runs the businesses or the businesses run the government." ~Marc Faber [Source]

tags: mass democracy has failed, the corporate state, the collapse of the republic
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Welcome visitors, members one and all! I hope you find this community as informative, useful and entertaining as we do!

If you haven't done so already, please take a moment to review the couple of guidelines we have in place by clicking on the community profile. From the main profile page you can also familiarize yourself with the many websites and resources members have recommended since this community started. Some of our personal favorites include Calculated Risk, Economic Cycle Research Institute & Jeffrey Frankel's Blog.

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As the economies around the world teeter once again, with many already having slipped into "Growth Recession" if not outright technical recession, and with many more looking at the real possibility of outright recession in 2012 and 2013, "the recession" in 2011 was seeming mild by way of comparison to what could be lurking just around the corner.

Will "Recession 2012" look as bad as "The Great Recession" of 2007-2009? Could we skirt by this time without a full-on economic death spiral? Will the economy get better by election day? Or will Obama lose the election for economic reasons? (Presidential elections are usually won or lost for base economic reasons in this country, after all).

Stay tuned. I think it's fair to say that it is going to continue to be a pretty wild ride for the world economy for some time to come. Recession 2013? Recession 2014? Did the Great Recession ever really end in the first place? Many think not!









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What is the
definition of recession?


According to the laypress, and even many economists, a recession is defined as two consecutive quarters of negative GDP (Gross Domestic Product). While this very simple definition is usually the case during recessions, it is not always so.

Most experts now acknowledge that GDP alone is an insufficient determinant of recession.

For one, GDP is often revised several quarters - even years - later, as more complete information becomes available that changes the components of the earlier, initial GDP estimates in what can be very substantial ways.

For another, not all serious downturns exact as serious a toll on GDP. Often, the decline is much more pronounced in GDI (Gross Domestic Income) and/or employment. If the income or employment of a nation is undergoing a pronounced, pervasive and prolonged decline even if for whatever various reasons its GDP may be holding up, is it not foolish to deny that a recession is underway?

For these reasons and others, the NBER (National Bureau of Economic Research), the official arbiter of recessions and expansions in the United States, determines whether or not the US has fallen into recession using a much more holistic approach.

As the NBER explains it:
Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that relate to the NBER's recession dating procedure?

A:
Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. In 2001, for example, the recession did not include two consecutive quarters of decline in real GDP. In the recession beginning in December 2007 and ending in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first quarter of 2009. The committee places real Gross Domestic Income on an equal footing with real GDP; real GDI declined for six consecutive quarters in the recent recession.

Q: Why doesn't the committee accept the two-quarter definition?

A:
The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in activity." Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in the recessions of 2001 and 2007-2009.

Q: How does the committee weight employment in determining the dates of peaks and troughs?

A.
In the 2007-2009 recession, the central indicators–real GDP and real GDI–gave mixed signals about the peak date and a clear signal about the trough date. The peak date at the end of 2007 coincided with the peak in employment. We designated June 2009 as the trough, six months before the trough in employment, which is consistent with earlier trough dates in the NBER business-cycle chronology. In the 2001 recession, we found a clear signal in employment and a mixed one in the various measures of output. Consequently, we picked the peak month based on the clear signal in employment, as well as our consideration of output and other measures. In that cycle, as well, the dating of the trough relied primarily on output measures.

Q: Isn't a recession a period of diminished economic activity?

A:
It's more accurate to say that a recession–the way we use the word–is a period of diminishing activity rather than diminished activity. We identify a month when the economy reached a peak of activity and a later month when the economy reached a trough. The time in between is a recession, a period when economic activity is contracting. The following period is an expansion. As of September 2010, when we decided that a trough had occurred in June 2009, the economy was still weak, with lingering high unemployment, but had expanded considerably from its trough 15 months earlier.









What is a
"Double Dip Recession"?


In the most general sense a Double Dip Recession occurs when an economy falls back into contraction for at least a couple of months (usually at least six) after a relatively brief expansion.

By this definition, the recession of 1981-82 which followed a year-long expansion after the very short, two quarter's long 1980 recession, seems to qualify. Also by this broad definition, the 1937 recession that occurred four years after the end of the 1929-1933 recession also qualifies. While each of those were technically "new" recessions, they happened so soon after their predecessors that many people tend to think of the separate 1980 & 1981-82 recessions as one nasty, long recession. Similarly, most people think of the 1929-1933 & 1937 recessions as encompassing "The Great Depression."

Another definition of a "Double Dip Recession" would be that of a recession which technically has not ended, and was only punctuated by a quarter or twos worth of head-fake rise in GDP. Many recessions throughout history have had such false hopes, only to swoon back down into contraction, until they finally came to an end.


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List of Recessions:
Post-1900 US Recessions

Mo/Yr Started Duration
Sep 1902 - 23 Months
May 1907 - 13 Months
Jan 1910 - 24 Months
Jan 1913 - 23 Months
Aug 1918 - 7 Months
Jan 1920 - 18 Months
May 1923 - 14 Months
Oct 1926 - 13 Months
Aug 1929 - 43 Months
May 1937 - 13 Months
Feb 1945 - 8 Months
Nov 1948 - 11 Months
Jul 1953 - 10 Months
Aug 1957 - 8 Months
Apr 1960 - 10 Months
Dec 1969 - 11 Months
Nov 1973 - 16 Months
Jan 1980 - 6 Months
Jul 1981 - 16 Months
Jul 1990 - 8 Months
Mar 2001 - 8 Months
Dec 2007 - 18 Months


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What is
Gross National Happiness (GNH)?


An alternate measure of a nation's wealth was conceptualized several decades ago as a means of cutting through the overemphasis on materialism of traditional wealth measures, and seeing the bigger picture.

According to GNHUSA.Org

  Gross National Happiness (GNH) is an indicator developed in Bhutan in the Himalayas, based on the concept elaborated in 1972 by the then King Jigme Singye Wangchuck. Since then, the kingdom of Bhutan, with the support of UNDP (UN Development Program), began to put this concept into practice, and has attracted the attention of the rest of the world with its new formula to measure the progress of a community or nation.

GNH is based on the premise that the calculation of "wealth" should consider other aspects besides economic development: the preservation of the environment and the quality of life of the people. The goal of a society should be the integration of material development with psychological, cultural, and spiritual aspects - all in harmony with the Earth.

The Four Pillars of GNH

  • the promotion of equitable and sustainable socio-economic development
  • the preservation and promotion of cultural values
  • the conservation of the natural environment, and
  • the establishment of good governance.



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