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Commentary on The Capital Markets- Category [Health Reform]

How many times will you hear crap coming out of your Tee Vee and various reps and senators before you drop everything you're doing, get off your ass, show up in DC and refuse to leave until everyone involved in this garbage goes to prison?

The EpiPen isn’t new; it has been in use since 1977. Research and development costs were recouped long ago. Nine years ago, it was bought by the pharmaceutical company Mylan, which then began to sell the device. When Mylan bought it, EpiPens cost about $57 each.

Few competitors existed, and for various reasons, that has remained the case. The device actually worked and saved lives. People needed it. Mylan raised the price. It also began to raise awareness.

"Raise the price" is sure a decent description... if you consider a 500% increase a "raise"...

Why?

No competition.

Or is there?

Yes, there is.  You can buy these over the counter virtually anywhere in Europe for about $20 each.  You can buy insulin over the counter in France for about the same price for a month's worth of supply.

And yet if you bring just one of either back over said border with you then you are breaking the law.  Bring a whole suitcase back and you're going to prison.

Yet if you did exactly that, were not put in prison and sold them, how many $600 (for a pack of two) pens would be sold in America?  Zero, because even if you charged $50 each (a $30, or 150% profit) you could make a hell of a business out of flying back and forth between any EU country and the United States doing exactly this.

How long would Mylan sell them for $300 each ($600 for a 2-pack) if you started doing this?  15 seconds, which is how long it would take them to figure out that they'd sell zero of them if they didn't drop the price back to about $50.

Now note very carefully that absent government force it is blatantly illegal under 15 USC, with a ten year per count felony prison term, to attempt to monopolize, restrain trade or price-fix.  Therefore it is only because of the explicit, intentional and outrageous conduct of your own government that you are getting raped like this on a literal daily basis, and this issue, as I've repeatedly pointed out is not limited to EpiPens -- in fact, Mylan has raised prices on dozens of off-patent, generic medications by about the same 500% in the last few years and the only reason they get away with any of it is the above use of government force.

Note that while the law may prohibit you from bringing said things back from Europe under penalty of imprisonment nowhere in that same law does it exempt the makers from 15 United States Code -- in other words, said law and regulation prohibiting your reimportation doesn't grant them an exemption to 15 USC prohibiting restraint of trade or pricing-fixing.  If that law were ever to be enforced those executives would still go to prison and their firms would still be bankrupted by ruinous fines, in short.

That is exactly where they, and all of Congress, damn well ought to be facing right here, right now.

If you want to know why medical care is so expensive and you need the fraud called "insurance", if you want to know why Obamacare was "sold" to people and is now going to collapse, if you want to know why Medicare and Medicaid were sold as "necessary" and yet continue to bankrupt the nation the answer is right here.

You are paying roughly five times what virtually everything ought to cost when it comes to medicine, and the reason you are paying it is because every firm and person in the business either is wantonly violating the law (and nobody ever gets indicted or goes to prison despite doing so) or even worse they've conspired with the government so they can enforce what is an otherwise-illegal act of restraint of trade under penalty of throwing your ass in jail instead of theirs and yet the're still quite-arguably violating the law themselves!

Let me know when you're ready to cut the crap, America, because until you do en-masse and descend on Washington DC to demand and enforce that this garbage stop right here and now, with every one of the co-conspirators drawing 20+ years of hard felony federal time along with each and every one of the involved firms being dismantled from the millions of dollars of fines per count, with each person harmed being a separate count, you deserve to be screwed, blued, tattooed and finally dead as you continue, each and every day, to give your consent to exactly that.

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I tire of people who are too damned ignorant to be bothered with 30 seconds of research.

For example, one of the memes going around is how "evil" Aetna is because their CEO gets paid a lot of money.  The meme, of course, is that Aetna the company (and other health "insurers") is screwing Americans out of huge amounts of money because they are refusing to continue selling "health insurance" at a loss through Obamacare exchanges, and told the government in advance that adverse action by them against a merger they wanted to conduct would lead them to not have the economy of scale required to defray those losses.

The government sued anyway, and Aetna kept their promise.  For this they're evil, you see, as opposed to not telling anyone in advance what their calculations said the only logical decision was should they be sued.

Never mind that "health insurance" is a fraud in the first place since insurance is something you buy to cover you against financial ruin should you suffer an unexpected and unlikely calamity.  If you attempt to buy "fire insurance" while your house is on fire (or deliberately set it on fire) you will find that nobody will sell it to you, and if you deceive an insurer about the pre-existence of the fire or your intentions to set one you go to prison.  Ditto if you buy "auto insurance" while intending to deliberately crash your car or have someone steal it.  Therefore, buying "health insurance" to cover either routine, suspected, expected or already-existing medical needs is in fact not insurance; it is simply a scheme to force someone else to pay some of your ordinary and expected expenses, and for this service the "insurance" company is certainly entitled to some percentage of the money, since nobody works for free.

This, of course, belies the truth behind such "insurance"; nobody would ever sell it or buy it voluntarily since by definition it isn't insurance; it's a cost-shifting scheme in which nobody would participate if they were paying more than they were getting since (1) you wouldn't voluntarily do so unless you were deceived or (2) you were forced at gunpoint by some law.  Therefore, by definition the present "health insurance" system is a fraud and since it is arguably organized for the purpose of theft by either deception or force along with being a fraud it is also quite-arguably an organized criminal enterprise -- that is, racketeering.

But leaving that outright scam of so-called "health insurance" (and the fact that everyone in the industry who uses that term with knowledge of its falsehood ought to be under indictment or in prison) aside the criticism would be fine and it might even be defensible, but for one tiny problem.

Aetna is $61 billion company (in revenue.)

The Federal Government alone, which is about one third of health spending in total, has spent just over $1 trillion dollars (that is, $1,000 billion) thus far this fiscal year, and has three months left to go.  It will thus probably spend somewhere north of $1,300 billion this year, and combined health spending in the nation will be about $4,000 billion this fiscal year.

Humana, by the way (the company they proposed to acquire) has $54 billion in annual revenue; in other words, the two combined would be about a $115 billion company.

Their revenue would amount to about three whole percent of the total, and in fact Humana has about a 1.8% (!!) profit margin and a 4.17 operating margin.  Their gross margin is about 19%.

Aetna has a 5% profit margin and a 27% gross profit margin.  In other words Aetna is the more-efficient company; Humana, the one Aetna wishes to take over, is the worse of the two.

But this belies the real issue because if you took all of Aetna's and Humana's gross profit -- that is, you paid nobody in either company anything nor did you spend anything on investment or even the light bill you'd drop the cost of medical care in the United States by...... about 1%.

Did you get that folks?  All of this strum, furor and hatred if you could completely eliminate these firms "profiteering" from the picture (oh, and they do profiteer!) would result in a cost reduction of...... one percent.

In other words, statistically zero.

But heh, it's popular to bash people like this.

Now tell me why you're not instead advocating for jailing all of the medical industry folks from the local hospital administrator to doctors to pharma companies and more?  It's not like there isn't plenty of existing law to jail them with either, because there is.

See, if you went after all of those folks for what facially appear to be rank violations of 15 USC -- Federal Law that has stood for more than 100 years -- you would drop the cost of health care to somewhere between one tenth and one fifth of what it is now.

Instead of a 1% reduction predicated on completely destroying two companies you'd get an 80% reduction which would eliminate the need for Obamacare and most medical "insurance" entirely, premiums would drop to less than your car insurance payment and thus would require no subsidies at all and federal, state and local government budgetary deficits and funding problems would all disappear.

But to do that you have to think.

It's easier to hate the big executive instead of pointing the finger where it belongs -- at the monopolists who have driven EpiPen prices from $100 to $400 while the actual cost of the drug is literal pennies.  In anything approaching an actual market where competition was both protected and those seeking to block it imprisoned as the law directs those pens would cost $20 and available over the counter.  By the way this applies to doctors, hospitals and medical device makers too including so-called "competitive" areas of the market such as dentistry, all of whom resist mightily the most-simple of requirement for a competitive and fair market (not to mention the basic requirements for a lawful and enforceable contract; offer, acceptance and performance): making it easy or even possible to know what the price will be before goods and services are provided.

PS: Socializing medicine will not fix any of this; it will simply shift all of it to the federal government which will be driven into either fiscal insolvency or cut off services to tens of millions of Americans who will then, as a consequence, die.

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Where are the political candidates on this issue?

After a Virginia toddler was bitten by a copperhead snake in his backyard last week, he was rushed to the hospital for life-saving medication -- but now his parents are facing tens of thousands of dollars in medical bills.

....

At Inova Fairfax, Auden endured 16 vials of anti-venom treatment at $3,000 each -- costing close to $50,000. That sum doesn't include his emergency room visit, medical transfer between hospitals and the three days he spent in the intensive care unit because of an allergic reaction to the treatments.

Three thousand dollars a vial?

Really?

How does something like this wind up costing $3,000?  I'll tell you how: Blatantly anti-competitive behavior that instead of being prosecuted (and is illegal, I remind you, under 15 USC) it is instead not only allowed but encouraged.

If you think this is limited to scorpion antivenom that is billed out at tens of thousands a dose when given in Arizona while the actual factory is in Mexico and it can be bought over-the-counter there for $100, or a case like this, with your excuse being that these sorts of events are "relatively" rare I will point you to this chart.

It's for glucose meters and their required test strips.  If you're diabetic you use the strips multiple times daily -- and there are a hell of a lot of diabetics in this country.

Note something very important: The strip price varies wildly, from about 22 cents/strip to $2 each.

All of these devices are required to meet accuracy requirements in order to be sold in the United States.  So how does the "market" manage to support a price range of 10x from the lower to the upper end when it comes to operating costs, since virtually all of the units themselves are right around $20?

It's not very hard to figure out -- as long as so-called "insurance" is paying for it you don't care about the price of the strips you use and thus whatever your "insurance company" or "doctor" hands you will be what you use.

Of course the manufacturer would like to sell you strips for $2 instead of 22 cents, especially when you're using many of them a day!

But were there no cost-hiding games, no "incentives", and you had to fork it up there would be no $2 strips nor any meters that required them because nobody would buy them.

If we prosecuted all of these anti-competitive acts, which I remind you is something we can do today since there is an entire US Title (15 USC) that bears on same, this area of cost in the medical system just like that when it comes to antivenom and similar would plunge in price to anywhere from 1/4 to 1/9th of what it costs today.

This, and only this, is what is destroying our federal, state, local and pension budgets.  It is the issue that will destroy our nation's way of life and standard of living within the next five years if it is not addressed now.

We were told that Obamacare would "fix" this.  That was a lie; several years into Obamacare Medicare and Medicaid are still expanding at roughly 9% a year while tax receipts government-wide are rising at about 1.7%!

There is exactly zero real policy attention being paid to the issue by any of the current office-holders or announced candidates -- whether they be Democrat, Republican or any other party, including the so-called "Libertarians."

That is occurring because you, dear reader, are not demanding that it change -- here, now, today, and without excuse.

As a consequence please do enjoy the next few years of "relative normalcy" in the United States because that is about to end, and you will not recognize, nor like, what is going to happen as a direct and proximate result of your refusal to focus on the issue that faces us as a nation when it comes to economics, politics and fiscal health.

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Is that the sun I see this morning?

It might be.

Look folks, I don't trust Trump.  Then again I don't trust politicians generally, no matter who they are, simply because they have a proven record of lying and yet while their lies are never punished ours are turned into felonies whenever those they empower are asking the questions -- including themselves!

So here's the challenge before us: As I've pointed out repeatedly in these pages since 2009 when the health care debate came into the forefront of American politics, and turned into Obamacare, we have only two choices fiscally as a nation:

1. Enforce the law against hospitals, doctors, pharmaceutical firms and those running clinics and diagnostic centers.

OR

2. Our nation will be fiscally and, in all probability politically destroyed.

This is not hyperbole.  It is arithmetic.

Anyone denying arithmetic is not only a fool they're both a tyrant and a thief.

To those who claim to be "conservative" yet who have failed to act on this matter for the last three decades: You're liars, thieves, tyrants and unfit to be citizens of this nation -- you most-certainly are not conservative.  Deliberately subverting the rule of law, whether done by action or intentional inaction, disqualifies you on all counts.

To those who claim to be "evangelicals" or "Christians" yet who have failed to act on this matter for the last three decades: You are not Christian; no person who is can permit the sort of ravenous theft and fraud that has driven the expansion of this racket to nearly a full 20% of our economy.  You are Satanists to an individual and that's a fact. Either repent here and now or own and be proud of your serpent behavior.

The laws in question are very clear.  15 USC (collectively), otherwise known as the Sherman, Clayton and Robinson-Patman acts declare that attempting to restrain trade or fix prices is felonious at a federal level.  Further laws at the state level typically declare that it is a criminal act to, through any means, deceive people as to the cost of a good or service or bill them at a rate exceeding that quoted without their affirmative and prior consent.

There are other laws that also bear on this matter, including laws prohibiting extortion (the obtaining of something, particularly money, through threats or force) which facially appear to be violated thousands of times on a daily basis by the medical and insurance industries. Then there are laws that prohibit discriminatory pricing; the usual means of getting around this is to claim that the "chargemaster" price is the actual price but that then turns the so-called "negotiated price" on your EOB from the insurance company into a kickback to the insurance firm which is also prohibited in many cases and in those where it's not that's taxable income to the insurance company as debt forgiveness yet they have never been prosecuted for the outrageous level of tax evasion -- to the tune of over a trillion dollars of undeclared and untaxed income a year -- that such a scheme involves.

Hillary Clinton, should she win the Presidency, will not only refuse to address this problem she'll make it worse.  We know this because she, along with her husband Bill, tried to cram down our throat what is now Obamacare when Bill was in office -- an attempt to take a set of facially unlawful acts by an industry and compel compliance through the use of government force.

Trump has hinted at dismantling this scheme, but he hasn't come out with a full-throated intent to do so.

He needs to, and he needs to do it now, explaining why it has to happen and what will come if we both do and don't take that path.

To be clear, doing it will not be painless.  There will be an industry that is turned on its head and, for a short time, a nasty recession.  We must accept this, because in doing so we will take roughly 15% of the cost structure out of not only your personal life but also that of every business in America.

This will not end drug R&D in the United States or anywhere else.  It will cause prices to go up elsewhere in the world, in some cases by a lot, but it will also cause them to come down here in America by as much as 85%.

It will render paying cash for medical care, even fairly complex care, practical for most Americans.  For those events where it is not it will turn the cost of insurance into a bill similar to that which is paid for homeowners insurance on a modest home -- a reasonable and routine expense, since with the cost of care coming down by 85% so will the cost of insurance similarly fall.

It will permanently resolve not only the Federal Deficit and, over 30 or so years, the entirety of the federal debt, it will also permanently resolve the financial problems our state and local governments face -- threats that if not addressed will cause property and other taxes to rise to unpayable levels for most Americans.

By replacing the federal deficit with a 30-year unbroken records of surpluses it will also take the current ~2% loss of real purchasing power that you have suffered every year for the last 30 and turn it into a 2% compounded annual gain over the same amount of time.  You may not get a raise but you don't need one when you are gaining 2% in real purchasing power each and every year; over 30 years this will almost double your real buying power without a single penny of increase in your wages.

And finally the dramatic reduction in business cost will mean that firms will flock to both manufacture here and run their offices and administrative functions in the United States, freed from what is currently certain fiscal disaster that any reasonably-competent CEO can and has foreseen and thus is trying, in today's business climate, to avoid.

Will Trump do any of the above?

Maybe.  Or maybe not.

But unlike the other candidates he has hinted at it, and he knows where the problem is, because he's lived with it through the 1990s forward, as have I.  As a former CEO myself this was the issue I identified while running MCSNet that was guaranteed to destroy my company financially given sufficient time if it was not addressed.

Competitive pressures are always present in any business; they're a function of the market and part of the job is navigating them.  Arithmetic is not something you can navigate; you must face it and, if you cannot convince the political powers that be to change the underlying facts that lead to these disasters you have no choice but to move as much of your operations as possible away from the jurisdictions where these disasters will take place, lest your company be destroyed.

We have a choice in this country and the time to choose is now.  In 2009 my best estimate was that we had 10 years left before the fiscal pressures reached the point of doing critical and possibly irreversible damage.

It is now 2016, and that means we have less than four years remaining.

We either act now or we fail to act at all, and our decision determines whether the light that I see this morning is in fact the dawn of a new and better day..... or an oncoming train.

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This is an interesting piece, but not because of the root numbers in it.

In 1940, entitlement payments, which include everything from disability payments to Social Security to Medicare, amounted to just over 20% of annual government spending in the United States.

Today, entitlement spending has swelled to nearly 70% of the annual federal budget.

Things are about to get a whole lot more complicated. The 20-year baby boom that took place after World War II is now beginning to result in a retiree boom.

For context, Druckenmiller points out that in 2030, the average age of an American citizen will be older than the average age of a resident of Florida today.

This demographic trend is going to create an entitlement spending catastrophe.

It doesn't have to, and the root of it isn't "entitlement spending", in the main.

Let's think this one through.

Social Security is funded by a "one in 8" tax, basically.  That is, about one dollar of every $8 you earn up to a given cap is confiscated before you ever see it.  You think it's half that, but it's not because the other half is paid "by your employer" and this fiction is maintained so you don't revolt.

However, your offered wage is reduced by that amount -- guaranteed.

So let's assume that we have a 2.5:1 ratio as is put forward.  That sounds horrifying, except that it's a temporary problem (it lasts 20 years, roughly), and then everyone involved in "causing" it is dead.  Further, there will be some that will "file late" for Social Security in an attempt to get more -- a strategy that only works if you live a very long time in terms of total funds, and lose their bet because they will die before the break-even is reached.  In fact, actuaries don't care if you make this bet because they know that on balance while some will win, some will also lose and it will all even out.

No, the problem here is not the "one in 7.5" tax for Social Security.  It is the one in 34 rate assessed for Medicare.

To put not too fine a point on it, Medicare and Medicaid (combined) are roughly double the outlay of Social Security and yet they are funded at a rate of less than 1/4 that of Social Security via taxation.

Further, Social Security outlays are indexed to alleged inflation, which is intentionally machined to show smaller than real figures, and thus there is a built in depression of Social Security obligations in real terms, especially over long (20, 30, 40+ year) timeframes.

Social Security itself is unlikely to go broke.  If it does "run out of money" 30 years hence there will be some reduction in benefits, but remember that even a 1% inflation "miss" against reality over 30 years turns into a 35% reduction in real expense.  In other words the "you'll only get 70% of your promised amounts" out of Social Security claims are probably dead wrong; you'll get the entire amount but it will be short in purchasing power by 30%.

The disability fund is another matter; that's bankrupt now and politicians have been stealing from the retirement fund for a while to cover it up.

On the other hand Medicare and Medicaid spending is going up at a radical rate compared to inflation, government-stated or not.  How bad is this?

Fiscal Year 2005, for example, spent a total of $652 billion.

Fiscal Year 2015 spent a total of $1,297 billion, or close to a clean double in 10 years.

This was not mostly-centered in Medicare -- that is, retirees.  Medicaid went from $182 billion to $349 billion, damn close to a double standing alone.  In other words it was across-the-board in all age groups served.

That's a 7.2% growth rate which far exceeds alleged inflation -- inflation allegedly was up 20% over the same 10 years, or an annual rate of about 1.8%.

In other words that segment of the economy as spent by the government went up at a rate four times that of general prices.

Need I remind you what happens any time two exponential growth curves have a different growth rate?  Go look at Leverage; there's a damn good reason that this is covered in the front of the book because if you don't understand and deal with it nothing else matters.

This, and only this, is the cause of all of the federal debt expansion, pension fund problems both private and public and the detonation that will occur in the federal budget and forward liabilities unless it is stopped and reversed.

Note carefully that we spend as a nation roughly double as a percentage of GDP what other developed, G20 nations spend on health care -- and virtually all of those other nations have socialized medical systems.

Socialism is always less-efficient than capitalism because there is no reward for innovation in a socialist system; you cannot take market share from someone else since market share is not a function of market success or failure.

This, in turn, means we're definitely overpaying by more than twice for medical care; we are in fact probably overpaying by as much as 80% across-the-board.

It is not hard at all to find examples of people being billed 10 or even 100x a price in another nation for a given thing.  It is cheaper for me to fly to Narita, Japan, round-trip, and have an MRI done there by more than 50% than the average amount charged for the same scan here in the United States.

While you can in some cases get that scan done for a few hundred bucks here they're all $200 or so in Japan, and most people grossly overpay here in the US.  Why?  Because of various practices that all amount to consumer deception, extortion, price-fixing or all of the above -- all acts that are supposed to be crimes.

Let's say you go to the ER "in-network" on your alleged health insurance.  While there some doctor sees you.  He isn't in your network and you get a bill for hundreds or thousands from him.  The hospital administrator should be imprisoned for allowing this along with the doctor who did it; you neither consented to such a bill nor in many cases had any ability to refuse, but the administrator could have required that said doctor be "in network" to be there or if not that he take the same reimbursement rate as if he was.  He didn't and thus they both took advantage of your "in extremis" situation to bilk you.  That's supposed to be illegal as a matter of general consumer protection yet not one person has gone to prison for it -- ever -- that I can find a record of.

Drug companies set prices by nation based on various things, including GDP and what they think their drug is "worth" in terms of your life or health.  It's illegal to restrain trade (15 USC, Sherman, Clayton and Robinson-Patman) yet that's exactly what they do, with the help of the Federal Government, in that if you get on a plane and buy a suitcase full of some drug at a much cheaper price to try to bring it back and both make a profit while dropping the cost here in the United States it is you rather than they who will go to prison.

It is virtually impossible to get a binding quote on a procedure from nearly all medical facilities in advance.  The notable exception are places like The Surgery Center of Oklahoma, which posts "all-in" prices.  I note that said prices are typically one third to one fifth of what is charged in hospitals that don't post prices, including hospitals in the same general area of the country.  Gee, I wonder why, and then one wonders why there haven't been thousands of criminal indictments and lawsuits alleging racketeering and extortion filed against the administrators and doctors in all the other hospitals.

Here's the reality folks, and it's a matter of arithmetic, not politics:

If we stop this right now the Federal Government would immediately and permanently run a roughly $400 billion a year surplus.  In other words your purchasing power would go up rather than down every year and the federal debt would slowly be retired at a rate of about a trillion dollars every three years.

In addition the "entitlement bomb" being discussed in the linked article would instantly and permanently disappear.  It simply would not exist; the short-term stress on Social Security would be manageable without material changes to the program due to the inherent understatement of inflation in the CPI used to link benefits and over the longer, indefinite time horizon the program remains stable.

Finally, were we to stop this keeping the Medicare impact on Seniors as it is today would allow Medicare to almost entirely disappear.  The reason is that Medicare is an 80/20 program; if the base cost of medical care decreases by 80% (and if we only equal the socialist nations it would fall by 50%; we can do better than that with capitalism) then exactly zero needs to be spent for the cost to an actual Senior to remain the same.  However, since we did promise such an 80/20 program keeping that promise is not an irrational act and thus some spending (about 1/8th to 1/5th of what it is now) would remain.  Likewise, Medicaid is currently basically-zero cost for beneficiaries; if the cost of care drops by the expected amount we might well be able to get rid of many of the beneficiaries entirely since they would be able to afford to pay cash.

FISCALLY SPEAKING THE ENTIRE PROBLEM RESTS HERE -- AND NOWHERE ELSE.  IF WE FIX THIS WE NOT ONLY ARE OK AS A NATION FROM A FISCAL PERSPECTIVE WE PROSPER.  IF WE DO NOT FIX THIS AS A NATION WE FISCALLY (AND PROBABLY POLITICALLY) DIE.

THIS IS NOT POLITICS, IT IS ARITHMETIC.  ARGUING OVER OTHER MATTERS WHEN IT COMES TO OUR POLITICAL SYSTEM, UNTIL THIS IS ADDRESSED, IS STUPID AND SERVES ONLY TO PROTECT THOSE WHO ARE CURRENTLY ROBBING YOU BLIND -- LITERALLY.

INSTEAD WE SHOULD BE DRAWING UP LISTS OF PEOPLE AND FIRMS TO BE INDICTED AND IMPRISONED.  AFTER JUST THE FIRST FEW WERE SERVED THIS ENTIRE EDIFICE OF FRAUD WOULD COLLAPSE IN UPON ITSELF AND PRICES WOULD FALL LIKE A STONE.

WE EITHER DEMAND AND ENFORCE THIS NOW OR NOTHING ELSE MATTERS.

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