Thursday , July 9 2020
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Articles by [email protected] (Cyril Morong)

The Paycheck Protection Program and Type I & Type II Errors

20 hours ago

See The Paycheck Protection Program Is a Mess. Here’s Who Is Benefitting From the Dysfunction by Christian Britschgi of Reason Magazine.I use the book The Economics of Public Issues in my micro
classes. Chapter 1 is called "Death by Bureaucrat." It discusses how the
Food and Drug Administration can make either a Type I error or a Type
II error.Type I error: The FDA approves a drug before enough testing is done and when people take it, there are harmful side effects.Type II error: The FDA tests a drug longer than necessary to stay
on the safe side. But people might suffer because the drug is not yet
available. 80,000 people died waiting for Septra to be approved.The FDA would rather make a Type II error because the public can blame the FDA if a Type I error occurs.Something like this

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Recession Led by Services Sector Is Particularly Painful for Latino Workers

2 days ago

Recovery for in-person occupations heavily populated by Hispanics likely to be slow amid ongoing pandemic, economists sayBy Harriet Torry of The WSJ. Excerpts:
"Prior downturns were largely led by lower spending on such things as
cars, houses, and factories while this one is hitting the service
industries. That change has meant Latino and Hispanic workers are being
particularly hard hit, and economists expect the jobs recovery to be
slow and halting as Covid-19 cases accelerate around the country.""Hispanic or Latino workers last year made up 17.6% of the total workforce but accounted for about half of all maids and housekeeping cleaners, painters and roofers, according to the Labor Department.Services sectors shed jobs in droves in April as coronavirus
quarantine orders shut down

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Developing World Loses Billions in Money From Migrant Workers

3 days ago

An economic pillar of developing economies is crumbling because of coronavirus impacts; ‘I’m scared sick.’By Jon Emont of The WSJ. Excerpts: 
"Migrant workers—from Polish farmhands working the fields of southern
France to Filipino cruise-ship workers in the Caribbean—who lost their
jobs because of the pandemic’s economic impact are running out of cash
to send home, dealing a blow to the fragile economic health of the
developing world.Tens of millions of Indians, Filipinos, Mexicans and others
from developing countries working overseas sent a record $554 billion
back to their home countries last year. That’s an amount greater than
all foreign direct investment in low- and middle-income countries and
more than three times the development aid from foreign governments,
according to

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Some San Antonio hospitals willing to pay more for front line workers amid coronavirus pandemic

4 days ago

By Laura Garcia of The San Antonio Express-News.This is a good example of what economists call a "compensating wage differential." That is when a worker gets paid more for doing unpleasant or dangerous work. That is necessary to get enough people to do those jobs.Excerpts from the article:

"Are hospitals willing to pay nurses more to work during the COVID-19 crisis?

They might not have a choice if the number of hospitalizations continues to rise.

“They
are stretched to the limit,” said Bexar County Judge Nelson Wolff at a
briefing Wednesday. “We think we have maybe two more weeks of this, but
it’s not sustainable.”

 While San Antonio hospital officials would not discuss specific job
offers or pay rates, nearly all hospitals have started to offer
incentive pay for nurses

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The Urgency of Returning to Full Employment: Recessions have contributed to long-run rise in inequality; undoing this one’s effects will be hard

5 days ago

By Greg Ip of The WSJ. Excerpt:
"We now know the business cycle’s influences aren’t purely cyclical: In
the labor market, they cast a long shadow, as a new study convincingly
shows.The study
looks at earnings of prime-aged men (those 25 to 54 years old) since
the early 1970s and finds two distinct trends: a steady rise at the top
relative to the median, and a saw-toothed decline at the bottom, with
all of the decline occurring around recessions.Authors Jonathan Heathcote and Fabrizio Perri of the Federal Reserve
Bank of Minneapolis and Giovanni Violante of Princeton University agree
with the consensus that inequality mainly reflects the long-run rise in
the premium paid to high-skilled workers as technology, automation and
foreign competition encroach on low-skilled work. But

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Ventilators and the law of increasing opportunity cost

6 days ago

See As Coronavirus Hospitalizations Surge, Ventilator Manufacturing Ramps Up—but Not Quickly Enough: Hospitals need the breathing machines for critically ill virus patients but can’t get their hands on the numbers they require by Peter Loftus and Melanie Evans of The WSJ.It reminds me of  The Law of Increasing Opportunity Cost.
That is the idea that as you try to produce more of one good (A), you
have to keep giving up more and more of another good (B), to get 1 more
unit of A. This is because different resources are better suited to
different productive activities.One example I give in class is a of a college needing to teach more math classes. They might first have a physics professor teach a math class. He might need to take just one refresher course. Then you might have an econ

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Colleges Spend Millions to Prepare to Reopen Amid Coronavirus

7 days ago

Schools solicit donations as they order masks, hand sanitizer and thermometers, upgrade heating systemsBy Melissa Korn of The WSJ. Excerpts:
"As colleges around the country map out plans to reopen their campuses
in the fall, they have embarked on some unique and pricey shopping
expeditions: sourcing miles of plexiglass, hundreds of thousands of face
masks and, in the case of the University of Central Florida, trying to
get in an order for 1,200 hand-sanitizer stations before neighboring
theme parks could buy them all up.
Costs for protective gear, cleaning supplies and labor for
employees to take students’ temperatures and conduct hourly wipe-downs
of doorknobs are already running into the millions of dollars."In Florida, one of the first states to reopen for business during the

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World’s oldest writing not poetry but a shopping receipt

8 days ago

By Rym Ghazal. This appeared in 2011 at a new site called "The National" from United Arab Emirates. I saw this recently on Twitter from George Mason University economics professor Alex Tabarrok. Excerpt:
"The neatly drawn lines are marked by impressions and imprints on a clay tablet.The 5,000-year-old receipt for clothing, sent by boat from Ancient
Mesopotamia to Dilmun – what is now Bahrain – represents the oldest
writing in the world."The origin of writing is not very romantic, I am afraid," said Dr
Irving Finkel, curator of the Middle East Department at the British
Museum. "Writing was not invented for poetry and storytelling."Dr Finkel was in Abu Dhabi last night at the Manarat al Saadiyat to
present his work on the "world’s oldest writing" as part of the ongoing
Splendours of

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Gasoline Is Cheap. Americans Can’t Take Advantage.

9 days ago

Inexpensive gasoline normally boosts the economy, but that benefit likely won’t be realized because of the pandemicBy Amrith Ramkumar of The WSJ.This was from last March. It is a little strange to say  "Americans Can’t Take Advantage." The same thing that caused the prices to fall is what is keeping them home.Demand fell because of pandemic. Then price falls. That is the end of the story. Price changing is not a shift factor for demand.Now the article does mention that there was a supply glut. That increase in supply would lower price and, in the absence of any change in demand, would lead to an increase in quantity demanded (or increase in gas purchased).Since less gas was purchased, it seems like the fall in demand outweighed the increase in supply (if it truly increased-what they call

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Pandemics and inequality

10 days ago

See How the Coronavirus Might Reduce Income Inequality: The Black Death and other pandemics pushed wages higher, but the impact will likely be different this time, economists say by Paul Hannon of The WSJ. Excerpts:
"Past pandemics have shifted the balance of bargaining power toward workers and away from owners""Economic historians have long thought that the Black Death, among
other pandemics, had a significant impact on how income is shared
between those who own land and other assets and those who provide the
labor.The most direct and brutal way in which
that impact is felt is a change in the supply of labor. Viruses and
bacteria kill workers, who become less plentiful as a result. For those
who survive, wages rise. At the same time, land and other assets are
unscathed, and the

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Dr. Ericsson, professor of psychology who studied how practice leads to excellence, has died

11 days ago

See
Professor Studied How Elite Performers Reach the Top: Anders Ericsson of Florida State prescribed a long slog of ‘deliberate practice’ by James Hagerty of The WSJ. Excerpts:
"For anyone who ever wanted to win a marathon, master Beethoven’s
“Hammerklavier” on the piano or simply lower a golf handicap, Anders
Ericsson had encouraging news: You don’t need to be born with a gift.Dr. Ericsson, a professor of psychology at Florida State
University, argued that sustained practice was far more important than
any innate advantages in determining who reaches the top in athletic,
artistic and other fields.That practice, however, couldn’t be
mindless repetition. He called for “deliberate practice,” preferably
guided by an expert teacher, focused on identifying and correcting
weaknesses

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Americans Skip Millions of Loan Payments as Coronavirus Takes Economic Toll

12 days ago

In high-cost areas, jobless benefits aren’t enough to help debt-laden borrowers pay down their billsBy AnnaMaria Andriotis of The WSJ. Excerpts:
"Americans have skipped payments on more than 100 million student
loans, auto loans and other forms of debt since the coronavirus hit the
U.S., the latest sign of the toll the pandemic is taking on people’s
finances.The number of accounts that enrolled in deferment, forbearance
or some other type of relief since March 1 and remain in such a state
rose to 106 million at the end of May, triple the number at the end of
April, according to credit-reporting firm

TransUnion.The largest increase occurred for student loans, with 79 million
accounts in deferment or other relief status, up from 18 million a month
earlier. Auto

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How this recession is different from past recessions

20 days ago

Two articles deal with this. It is hurting women more than men. Also, the causes are different and the duration may be shorter than The Great Depression.See Coronavirus Employment Shock Hits Women Harder Than Men: Women are more likely to work in vulnerable sectors like retailing and personal care by Sarah Chaney and Lauren Weber of The WSJ. Excerpts:
"Women usually fare better than men during an economic downturn. Not this time.Growth in service professions has allowed women to overtake men
as a proportion of the U.S. labor force. But it has also made them more
vulnerable to job losses, because sectors with more women, such as
education, leisure and hospitality, have been hardest hit by
social-distancing measures.In April, when the full force of the
coronavirus-related lockdown

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When Workers Can Live Anywhere, Many Ask: Why Do I Live Here?

21 days ago

Coronavirus prompts Americans to reassess the need to reside near hot job marketsBy Rachel Feintzeig and Ben Eisen of The WSJ. Because of remote working, more people are deciding to live farther from work. The internet has basically lowered the price of living farther away from the office. So, ceteris paribus, more people are doing it. Excerpts:
"The coronavirus is challenging the assumption that Americans must
stay physically tethered to traditionally hot job markets—and the high
costs and small spaces that often come with them—to access the best work
opportunities. Three months into the pandemic,
many workers find themselves in jobs that, at least for now, will let
them work anywhere, creating a wave of movement across the country.Recessions tend to damp migration. Americans

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Boats, Pools and Home Furnishings: How the Lockdown Transformed Our Spending Habits

22 days ago

Consumers who held on to jobs or who are getting government benefits have seen bank accounts swell during the coronavirus pandemic because of restrictions on shopping and tourism. Now, they are spending with surprising strength to renovate homes and entertain families.By Matthew Dalton and Suzanne Kapner of The WSJ. Excerpts:
"But many consumers in the U.S. and Europe who have held on to their
jobs or are getting government benefits have seen their bank accounts
swell during lockdowns, according to government data, because of
restrictions on shopping and big-spending activities such as tourism.Consumers with means are driving surprising strength in a
number of sectors. People are flocking to home-improvement stores and
car dealerships. They want to install pools in their backyards

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The Toll That Isolation Takes on Kids During the Coronavirus Era

23 days ago

Playing with peers has important developmental benefits, and doctors worry that children are missing out on them nowBy Andrea Petersen of The WSJ.Government policies can have unwanted and unexpected costs. This might be an example. Excerpts: 
"With many summer camps canceled, many families continuing to practice social distancing and the upcoming school year
a big question mark, pediatricians and psychologists are raising alarms
about the potential impact of prolonged social isolation on children.
Some point to research that has found an array of benefits of positive
peer relationships: Children who have them are more likely to later
develop healthy romantic relationships and be more effective at work.
Good relationships with peers during the teen years are linked to better
health

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Remote work is surprisingly productive (for now, but what about in the long-run?)

24 days ago

See What If Working From Home Goes on … Forever? by Clive Thompson of The NY Times.In the book Economics in One Lesson, Henry Hazlitt said that you can’t judge an economic policy based on how it only affects one group nor in just the short-run and not the long-run.Excerpts from the NY Times article:
"In a May working paper,
Erik Brynjolfsson, a professor in management science at M.I.T., and a
group of academics reported survey results indicating that half of those
who were employed before the pandemic were now working remotely. That’s
a significant increase — pre-Covid-19, the paper estimates, the figure
was about 15 percent. (In 2018, a U.S. Census Bureau survey found that
just 5.3 percent of Americans worked from home full time.)""Employees adapted quickly, he says: “They were

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Fastest-Rising Food Prices in Decades Drive Consumers to Hunt for Value

25 days ago

Food makers, retailers respond by restoring promotions, bundling products to help offset biggest price jump since 1970sAnnie Gasparro and Jaewon Kang. They mention shortages of meat below. But a shortage means that the price is below where supply and demand intersect and the quantity demanded is greater than the quantity supplied. If price goes up because supply decreased there is no shortage. Yes, the equilibrium quantity might be less than it used to be. But that is not a shortage.Excerpts:
"Food makers are designing value packs, and supermarkets are restoring
promotions, aiming to offset disruptions wrought by the coronavirus
pandemic that have led to the fastest rise in food prices in more than
four decades.While food companies and supermarkets say they have reopened plants and

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Fed Report Says Coronavirus Shock Has Hit Low-Wage Workers Hardest

26 days ago

By Nick Timiraos of The WSJ. Excerpts:

"Employment had fallen nearly 35% from February to mid-May for workers
who were previously earning wages in the bottom fourth of wage earners,
the central bank said Friday in its semiannual report to Congress.
Higher-wage earners, by contrast, had seen employment fall by 5% to 15%.Because lower-wage earners are disproportionately
African-American and Hispanic, unemployment has risen more sharply for
those groups.""“As lower-paid workers are disproportionately employed by small
businesses—which typically have fewer financial resources than larger
firms—they may be at heightened risk of seeing their former employers
shut down and hence experiencing the scarring effects of permanent
separations,” the report said."

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Trash Burning Ignites as World’s Waste Swells: The growth of incineration, buoyed by moves against landfills, raises concerns about fumes and impact on recycling efforts

27 days ago

By Saabira Chaudhuri of The WSJ. Seems like when the price of a substitute increases (cost of recycling goes up), the demand for the good in question increases (more incinerators). Excerpts:
"The world is creating more garbage, and it is getting tougher to
dispose of it. That is propelling more cities to send their trash to the
incinerator.Global waste is expected to hit 3.4 billion tons by 2050 from
2.01 billion tons in 2016, according to the World Bank. As recycling
programs encounter challenges and landfills in the U.S. and Europe reach
capacity or face regulations making them more expensive, incinerators
are becoming the most viable option for many municipalities to deal with
much of their garbage.""Local communities and environmental groups have launched strong
opposition to

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For the first time ever, the Core CPI falls for three straight months

28 days ago

See Coronavirus Continues to Weigh on U.S. Consumer Prices: CPI fell 0.1% in May; cost of groceries rose with people staying at home to contain virus by Harriet Torry of The WSJ.In yesterday’s post, I discussed how both supply and demand were decreasing. But with prices still falling, it looks demand is falling a bit more than supply. Since 1957, there have been only twelve months when the Core CPI fell.Excerpts:
"U.S. consumer prices dropped for a third straight month in May as the coronavirus pandemic
kept shoppers and travelers at home, but the rate of decline in
inflation eased as the cost of groceries, rent and medical services
rose.The consumer-price index, which measures what Americans pay for
everything from alcohol to lawn mowers, fell a seasonally adjusted 0.1%
in May after

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The Covid Surcharge: Companies Confront the Unforgiving Economics of Coronavirus

29 days ago

Rising costs, weak demand and customer limits challenge efforts to reopen for businessBy Matt Grossman of The WSJ. This generally makes sense since higher production costs reduce supply which raises the price of the good. But weak demand would tend to lower the price. Maybe the supply effect is stronger. Excerpts:
"Facing higher costs to keep workers and customers safe and an
indefinite period of suppressed demand, businesses are navigating an
ever-narrower path to profitability. To make the math work, some
businesses are cutting services and jobs. Others are raising prices,
including imposing coronavirus-related fees aimed at getting customers
to share some of the expenses.For large companies, the price—and perils—of operating in a pandemic are already coming into focus.Walmart

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National Bureau of Economic Research Says Recession Began in February

June 10, 2020

See Recession in U.S. Began in February, Official Arbiter Says: Start of downturn marks the end of 128-month expansion that began in June 2009 by Kate Davidson of The WSJ.See also US Business Cycle Expansions and Contractions from the NBER to see when other recessions occurred and how long the lasted. It also shows how long each expansion lasted.
Excerpts from The WSJ article:
"The U.S. officially entered a recession in February, marking the end
of the 128-month expansion that was the longest in records reaching back
to 1854.While Monday’s announcement by the National Bureau of Economic
Research didn’t come as a surprise to economists, the group typically
waits until a recession is well under way before declaring it has
started.But this time, the severity and breadth of
the

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Child-Abuse Reports Are Falling, and That’s Bad News for Children: Pediatricians say they are seeing alarming injuries and deaths as the coronavirus pandemic cripples the nation’s early-warning system for child abuse

June 9, 2020

By Deanna Paul and Zusha Elinson of The WSJ. Excerpts:
"Child-abuse specialists are watching a grim scenario unfold since the coronavirus pandemic
and related lockdowns began in mid-March. From San Diego and San
Francisco to New York City and Boston, pediatricians and emergency-room
doctors say they are witnessing an increase, or at least a steady flow,
of severe child abuse and neglect—infants beaten and killed, and
children admitted for drug ingestion or falling out of windows.At the same, there has been a dramatic drop in child-abuse reports as
teachers, day-care workers and others who are required by state law to
notice and flag abuse are no longer routinely around children. Those
workers are trained to spot early stages of abuse and report them,
preventing dangerous

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As Covid-19 Closes Stadiums, Municipalities Struggle With Billions in Debt

June 8, 2020

Pandemic crushes tourism and turns sports venues into a strain on local budgetsBy Sebastian Pellejero and Heather Gillers of The WSJ. Excerpts:
"Two decades of using borrowed money to pay for new stadiums is coming back to haunt many cities across the country.""Coronavirus lockdowns have emptied arenas and stadiums indefinitely, shuttering professional sports and concert tours alike,
and have significantly reduced taxes. When cities issue bonds and use
the proceeds to build stadiums, they pledge to make yearly bond payments
on the debt, often counting on revenue from sales, hotel or rental-car
taxes to cover the payments.Public officials have borrowed billions of dollars to build
stadiums for major teams. Since 2000, more than 40% of almost $17
billion in tax-exempt municipal bonds

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Today is Adam Smith’s Birthday

June 6, 2020

This is a good essay about his ideas. How Adam Smith Showed We Can Do Good By Doing Well: Doing good while doing well proposition does not describe government officials’ actions by T. Norman Van Cott, professor of economics at joining Ball State University.

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‘Everything Is Gone’: Looting Strikes a Second Blow to Reeling Businesses in Minority Neighborhoods

June 5, 2020

Along Philadelphia’s 52nd Street corridor, mom-and-pop stores suffered major damage. Many had been gearing up for revival after weeks of coronavirus shutdowns, and some now face the prospect of months before reopening, if ever. By Scott Calvert and Ruth Simon. Excerpts
"The killing of George Floyd while in Minneapolis police custody last week has set off a wave of protests
in cities from New York to Los Angeles. Mostly peaceful demonstrations
by thousands of people against police abuses are taking place in the
daytime. Many protesters have dispersed after recently imposed curfews.After dark, some people have wrecked and looted businesses,
straining an already fragile U.S. economy. Vandalism and theft at many
large retailers in high-end business districts and at stores ranging
from

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Study by Harvard economics professor found no evidence of bias in police shootings

June 4, 2020

See Good Policing Saves Black Lives
A report by Harvard’s Roland Fryer shows that when the cops pull back, homicides increase by Jason Riley of The WSJ.He discusses research by Roland Fryer. From Wikipedia "In 2011, Fryer was a recipient of a MacArthur Fellowship ($625,000 ), commonly referred to as a "Genius Grant". He is the recipient of the 2015 John Bates Clark Medal,
awarded by the American Economic Association to "that American
economist under the age of forty who is judged to have made the most
significant contribution to economic thought and knowledg.""Excerpts:
"In 2016 Mr. Fryer released a study
of racial differences in police use of deadly force. To the surprise of
the author, as well as many in the media and on the left who take
racist law enforcement as a given, he

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The Hottest Item on Takeout Menus: Leftovers

June 3, 2020

Pandemic prompts customers to place orders that yield more than one meal—and restaurants obligeBy Annie Gasparro and Heather Haddon of The WSJ.It seems like when people are ordering restaurant food to be delivered they are ordering alot. Sort of a way to economize. Get it all at once so they don’t have to keep doing it again.Excerpts:
"The dozens of Chick-fil-A Nuggets, Taco Bell At-Home Taco Bars and
buckets of KFC chicken that Audrey Simes ordered recently have something
in common: The meals are big enough to yield leftovers for her family
of eight.“It’s a huge, huge help to have that extra food on hand,” Ms. Simes said.She is working from her home in suburban
Denver, where she and her husband care for five daughters and her
90-year-old dad. Fast-food leftovers save time and give

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Nobel Prize winner Robert J. Shiller on what might be the lessons from the Spanish flu and the Great Depression

June 2, 2020

See Why We Can’t Foresee the Pandemic’s Long-Term Effects: The Great Depression of the 1930s was an economic downturn that became a prolonged malaise. A Nobel laureate asks whether that pattern might be repeated. Excerpts:
"Big events like a pandemic have the potential to leave behind a trail of
disruption. They can create social discord, reduce people’s willingness
to spend and take risks, destroy business momentum and shake confidence
in the value of investments."
"There was a recession in the United States from August 1918 to March 1919, according to the National Bureau of Economic Research, but not a deep one. Searching the newspapers of the time, one finds surprisingly little concern
about the possible ill effects of the influenza on the economy, perhaps
because the

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