Why Are You Buying Apple (And Other Chinese) Products?
The Market Ticker ® - Commentary on The Capital Markets
Posted 2012-01-25 23:40
by Karl Denninger
in Consumer
Ignore this thread
Why Are You Buying Apple (And Other Chinese) Products?
 

No, people argue, it's not a problem, right?  "Those people" are less human than you are here in America, yes?

This system may not be pretty, they argue, but a radical overhaul would slow innovation. Customers want amazing new electronics delivered every year.

“We’ve known about labor abuses in some factories for four years, and they’re still going on,” said one former Apple executive who, like others, spoke on the condition of anonymity because of confidentiality agreements. “Why? Because the system works for us. Suppliers would change everything tomorrow if Apple told them they didn’t have another choice.”

Pretty?  Let's just pull a few instances of "not pretty" from that source article.

Apple’s supplier code of conduct dictates that, except in unusual circumstances, employees are not supposed to work more than 60 hours a week. But at Foxconn, some worked more, according to interviews, workers’ pay stubs and surveys by outside groups. Mr. Lai was soon spending 12 hours a day, six days a week inside the factory, according to his paychecks.

That's 72 hours, incidentally.  Rather more than 60.

....the company’s dorms, where 70,000 Foxconn workers lived, at times stuffed 20 people to a three-room apartment, employees said. Last year, a dispute over paychecks set off a riot in one of the dormitories, and workers started throwing bottles, trash cans and flaming paper from their windows, according to witnesses.

Sounds like sardines.  Let's see, 3-room apartment eh?  One to do things like cook, two to sleep in.  Figure what -- 10x12 sleeping rooms, so exactly how many square feet does a person have?  Uh huh.  Why do I have imagery of a submarine at war with sailors bunking over the torpedoes?

And then, of course, after such glorious treatment, you die -- due to unsafe working conditions.

Just two weeks before the explosion, an advocacy group in Hong Kong published a report warning of unsafe conditions at the Chengdu plant, including problems with aluminum dust. The group, Students and Scholars Against Corporate Misbehavior, or Sacom, had videotaped workers covered with tiny aluminum particles. “Occupational health and safety issues in Chengdu are alarming,” the report read. “Workers also highlight the problem of poor ventilation and inadequate personal protective equipment.”

Aluminum dust I know something about.  See, it's an ingredient in commercial and amateur rocket fuel.  Really.  It's explosive, in fact, if fine enough.  It just needs the right concentration and an ignition source and boom.

It did exactly that.

Mr. Lai died, along with others.

The problem with this industrial "accident" -- and the second one that occurred 7 months later -- is that both were due to gross negligence.  This risk has been known for decades and was solved 100 years ago.  You just have to give a damn.  You judge if they did.

Incidentally, if you remember my previous article on this issue Apple's complaint was that America doesn't produce the quality of workers it needs.  Indeed, this was the quote:

“We shouldn’t be criticized for using Chinese workers,” a current Apple executive said. “The U.S. has stopped producing people with the skills we need.”

Well, now we know what the quality of worker is that Apple wants, and what they're willing to pay for that worker.

See, Mr. Lai had a College Diploma.  You know, what our students pay $40,000, $50,000, even $100,000 -- often much of it in debt -- to obtain?  Yes, that degree.  The status of accomplishment.

What was Mr. Lai's rate of pay?

The story tells us -- he was paid $22 a day.

So now we have our answer, don't we?  Apple wants college-educated workers, but the pay it offers for that college education is $22 a day, and that included overtime.  That's about $2.20 an hour, assuming that Mr. Lai worked a six day, 60 hour week -- and the story says he often worked more.

This makes rather clear the truth of the matter about these jobs and what the companies are paying for that labor, doesn't it?  Apple and others manufacturing in China aren't interested in American workers for two reasons:

  • We won't work for $22/day with a college degree -- in fact, such a wage is illegal in the United States.  Grossly so at that, especially considering overtime pay requirements for more than 40 hours in a work week.

  • We won't allow a company to have two industrial dust explosions in less than a year without someone winding up in serious trouble -- and perhaps in prison -- over the incidents.  In China they just go round up some more "college graduates" to stuff into the meat grinder.

Never mind pictures like this and stores such as the recent one run in IBTimes that show exactly what sort of environmental arbitrage that is routine in China -- and is used to further drive down manufacturing costs for products exported to the United States.

You can't do that over here either; you must instead properly capture and dispose of your industrial wastes instead of dumping them into the nearest river.

So I have two questions for you, dear reader:

First, Apple and Foxconn are both members of EICC, which has a code of conduct.  Given what the NY Times has apparently documented, that is continuing violations (not a one-off here and there) can someone explain why they remain members in good standing?

Oh, among the requirements in the EICC code of conduct is respect for the right of Freedom of Association, including but not limited to the right to associate freely, join or not join labor unions, seek representation and join workers' counsels in accordance with local laws.  Where, in China, can the workers in a plant organize?

Is that some sort of bad joke?

Second, why are we, the people of America, willing to put up with this crap?  Is the literal poisoning and blowing up of people in another land, along with the raw exploitation that is taking place, something you're willing to overlook when you buy your latest gadget?  Do you believe that the Chinese are subhuman animals

If you don't why are you buying these products?  And no, Apple is not alone in this.  Not by any stretch of the imagination.  The NY Times just happens to have their laser beam focused on them right now, but you can bet that with the suppliers of various components all being common this crap is going on nearly everywhere among Chinese manufacturers.

I think it's time to stop this abuse by any means necessary and possible, and since it's obvious after years that the companies involved won't stop, and these abuses have caused severe damage to our labor pool in the United States, there is only one lawful and peaceful solution left.

Tariffs, and lots of them, right here, right now.

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User Info Why Are You Buying Apple (And Other Chinese) Products? in forum [Market-Ticker]
Mortgageguymn
Posts: 1562
Incept: 2009-03-09
Green
North Coast
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Ending wage & environmental arbitrage is right up there with sealing the southern border as jobs 1 & 2. What does Bill Still think of the call for tariffs? In the unlikely event that a major party presidential candidate called for tariffs against China, would that cause you to consider supporting that candidate?
Fisticuffs
Posts: 1085
Incept: 2007-07-28

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Consider the early 1900s and the labor movement. Horrible working conditions evolved and employees began to earn a decent wage, have safe working environments, standard hours, etc. Bring up the current issue of unions and pensions to many who label themselves liberal or progressive and they will rail on and on about how unfair it would be to take away such things. Yet, interestingly, they don't put 2 and 2 together to realize that "evil corporations" have reverted back to the old ways using human beings in China and elsewhere while citizens of this country find themselves without a labor environment of any kind because they don't have a job!

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B(ern)ank(e)
Themortgagedude
Posts: 8843
Incept: 2007-12-17
Green
saint louis
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I think it's ez nuff. They pay minimum wage or they don't come in. In addition slap a 20 percent tariff on them for environmental damages.

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I'm already visualizing you with duct tape over your mouth.
Lowbeyond
Posts: 16866
Incept: 2008-02-11
Green A True American Patriot!
CO aka West NJ/East CA
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Dood I need my ipad so I can facebook about how terrible labor explotation is! Duh-uh!

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Maybe it was a birdy bread-bomber from the future?!
Tristan
Posts: 572
Incept: 2009-04-08
Green
Spirit of '76
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I'm thrilled with the sudden availability of U.S. made products in the past year. Last year, I refused to buy anyone anything for Christmas that wasn't made here. It was tough, to say the least, and dictated what kind of things I could even consider. Rarely were products labeled online with their origin. Now, even ****ty stores like Bed Bath & Beyond have Made in U.S.A. sections on their sites. Not that I really want to buy much, but when I do, there is suddenly VARIETY! Even furniture at affordable middle class prices... Not great stuff, but decent and not imported. Very cool to see this happening.
Shortwaveuv
Posts: 313
Incept: 2011-07-12
Silver
Fort Worth, TX
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Low, you forgot the part where the slacktivist changes their profile picture to something with slanty eyes to support the protest.
Michelj
Posts: 26
Incept: 2009-12-02

Netherlands
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Stop selling treasuries to the Chinese, or any foreign entity for that matter and this game is over.
Andysvw
Posts: 1721
Incept: 2010-06-26
Green
Tujunga Ca
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Ban all products made by slaves. Sharing in the profits is EVIL too. Tariffs are just that. Tariffs for pollution yes. But taking 1 penny from the slave trade knowingly, I have a problem with. Slavery is not legal here its fruits should not be either. Dont be a party to it. JMO
Darth
Posts: 2182
Incept: 2009-07-07

SWVA - US
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What I find to be so funny(well not really) is how when you see one of those Apple stores. They look like the metro-sexual/feminine wet dream. I wonder how the shoppers at those stores would feel if they knew the people making their 'pretty' gadgets slaved in a virtual dungeon.

This entire issue is making the thought of buying anything electronic repulsive to me. The bastards either need to make the stuff here, from where they earn their profits, or they pay tariffs.

Our country was FAR better off when the stuff that people bought here was made here, by people that are working here. This whole 'globalism'/service economy thing has FAILED us.
Scottbeard
Posts: 31
Incept: 2010-01-05

UK
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No I don't agree with their working conditions.

If there was a choice between locally-made iPods and Chinese iPods I would have a choice.

But my choice is either (1) a Chinese-made iPod or (2) no iPod.

So I chose (1), and will then have to admit to being part of the problem. :-(


Mannfm11
Posts: 3535
Incept: 2009-02-28
Gold
DFW, Tx
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You hit it Karl. The skills AAPL and Fox are looking to find are people with the skills to live on $20 a day.

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The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith
Poid
Posts: 610
Incept: 2010-03-08

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" I wonder how the shoppers at those stores would feel if they knew the people making their 'pretty' gadgets slaved in a virtual dungeon."

they dont give a ****...all those people are just posers, they only pipe up when it is an "issue" where any kind of action only affects others, not them.

I find that those on the moral high-horse have far worse morals than the "greedy capitalists" they continually criticise.
John2k
Posts: 34
Incept: 2010-12-21

NJ
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Karl, you mentioned minimum wages in your article and it's something I wanted to respond to. When the government mandates minimum wages what it really seems to be doing is telling people that if they are not qualified or capable of providing more than a minimum of value to a company then they are not allowed to work. The government is also telling companies that they are not allowed to create jobs for people who are unable to provide value to the company in excess of a certain amount.

Sadly, I know one person for sure who would gladly work, in the U.S., for the $2.20 per hour that Mr. Lai was earning in China. However, the government won't allow it. This person has had the worst time trying to get a job. The measly $20 or so that she would earn per day seriously would help her a lot. But, no, not ok to employ her in the good ole USA.

About people not caring, come one Karl, the superbowl is sometime in the next few weeks, do you really think the masses are thinking about anything else? All those iPhones are drastically needed so that they can tweet during the game. Who cares what happens elsewhere. In fact, the majority of people wouldn't care if that mess in China was going on here in the US. It's sad but true. People like you, me and the others who take the time to read your article + comments are in the minority of the population. It's the exact reason why there are not more people supporting Ron Paul or political third parties. They get their news spoon fed to them. The mainstream media pretends as though Ron Paul doesn't exist, they report more on candidates who get fewer votes than he does, they report that previously significant events are no longer significant when he wins their straw polls (CPAC). It's even worse for the third parties, they get barely any coverage at all. Most people have no clue and could really care less just as long as they get their widescreen TVs & iPhones made in China for them in time for the superbowl.

Why do the people in China stand for such treatment and work such hours? Could it simply be a matter of survival for them? Could it simply be a choice between eating and not eating? Between having a place to live and having no place to live?

Over the past few years I've read so many of your articles stating how our economy and the world economy will blow up in our faces in the future. You're probably right. I agree that we haven't experienced the worst of it yet. But what does that say about the workers in China? They are working their tails off while our people become couch potatoes. When the government runs out of resources and is no longer capable of taking care of everyone with other people's money, people will be begging for those $2.20 per hour jobs here in the US when they don't know where their next meal will be coming from. Heck, we already have tent cities and people begging in the streets for change so they can eat.

The work and conditions in China surely stink, but the people who choose to work those jobs are probably grateful to have the opportunity, as bad as it is, instead of the alternative.

I'm not saying that I like or agree with any of it, though. It simply is what it is, people trying their best to survive in this world.
Morla
Posts: 815
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So Obama "talked tough" on China huh? Did he promise to DO anything? Guess not. What an ass. Oh, he created a new meaningless bureaucracy? What an ass.

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Fear of govt IS the government.. Statism is a pack of unbacked threats; If govt gets out of control, ignore it and go about life as you see fit. Where's your crown, King Nothing?
Duc888
Posts: 7368
Incept: 2008-11-06
Gold
CT, the UNconstitution State
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Try a little of this on for size.....


http://www.chinahush.com/2009/10/21/amaz....

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...burp
Bertdilbert
Posts: 2655
Incept: 2008-12-22
Gold
CA
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I go into a Chinese restaurant a few times a month, mostly near closing time. The owner and I chat a bit whenever I go in. He works 7 days a week and from lunch till closing, probably 12 hours a day. About three weeks ago while having a bowl of won ton soup, I discovered a fairly large piece of a stainless steel pot scrubber in my soup... After lengthy apologies, we sat together and talked for about a half hour.

He is originally from the Macao area, which he said is close to Hong Kong. He came to the US about 20 years ago. He said he would never go back. His brother still lives in mainland China and they talk on a regular basis. We had a discussion on China. The first topic of conversation was the current price of pork in China. He said it was like the equivalent of $35 a lb for the Chinese worker verses wages and this was a huge complaint right now.

So we discussed pork for a bit. He said that if you had a pig or a cow, you could not slaughter it and eat it yourself, that you could only sell it and then you had to buy pork or beef to eat. He said that you were allowed to kill and eat your own lamb. He complained that when you took your pig in to sell it that they would always find something wrong with the pig to cheat you on the price.

So I asked him about working on the farm.. It was almost like a look of pain came over his face and he went on about how hard the work was. I asked him about factory jobs in China and then his face lit up, and he talked about how factory is good money for the Chinese and it is way easier and better money than working on the farm. We talked about the property bubble a bit, but the topic of pollution or worker safety never came up. What struck me the most of our conversation was the pain/joy expressed when discussing farming verses factory.

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Dear Euroland: Relax, Germany has a plan for your money!

Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
Killben
Posts: 205
Incept: 2009-12-07

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Karl,

Did you notice Obama in his State of Union Address said he wanted America to have more Steve Jobs? Do you really tariffs will happen? Even if it happens will tariff alone do?

Sardines are probably less closely packed than these employees. The problem is the employees do not mind .. they want to work there.

Is there a way to make Apple responsible for the safety at its vendor's place. Punitive damages etc.
Is there a way to make Apple responsible for working conditions at its suppliers

Apple appears to have taken a leaf out of Nike' books it appears.


Splashdown
Posts: 556
Incept: 2010-04-05
Green
Central Illinois
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Tariffs worked for Brazil....

Quote:
High import taxes on foreign-made goods have prevented Apple from making significant inroads in Brazil, with iPad pricing currently starting at the equivalent of US$925 for the 16 GB Wi-Fi iPad 2. With Foxconn moving iPad production to Brazil under the new tax incentives, Apple should be able to offer more competitive pricing on the device as production ramps up. Photos of a Brazilian-made 8 GB iPhone 4 showed up in late November, suggesting that Foxconn is also ramping up domestic production of new iPhone devices for Brazilian customers.


http://www.macrumors.com/2012/01/25/braz....
Neildavis2002
Posts: 6
Incept: 2011-12-12

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Karl et al,

Are these chinese workers not allowed to quit? What happens to them if they quit? Do they get thrown in jail for quitting?

Remorhaz
Posts: 5
Incept: 2012-01-11

China
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I agree that the Chinese do treat their workers pretty badly but there it isn't like America is doing much better in the worker treatment department? How can I say that?!?! Why we have OSHA! and overtime! and mandatory minimum wages! and, and, and, and,... not in prison we don't and since we have the largest prison population on the planet the utilization of slave labor is getting quite popular. Buy American! I remember when we used to criticize China for the same thing but since we do it we can safely change USA! USA! USA! Oh and this isn't Hannibal Lechter breaking rocks - these programs are only staffed by "non-violent" offenders - read: Child support 'deadbeats' who lost their jobs and were never graced with a jury trial or even a real judge much of the time. At least the workers at Foxconn could, you know, *walk away* if they get too fed up.

http://www.avoiceformen.com/feminism/gov....

Cheers
Rvacha
Posts: 8295
Incept: 2008-10-03
Gold
Cleveland
Online
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FWIW I think most if not all Samsung tabs and smartphones are made in Korea and most if not all HTC products are made in Taiwan. I HATE AAPL but I don't get too emotional about it knowing there are such superior products made in relatively nice places

Add: Nobody seems to know for sure but the going suspicion is that Samsung's Galaxy processors (as well as Apple's Cortex A5) are fabricated in TX

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"I suggest you panic." - Hugh Hendry

Northeaster
Posts: 68
Incept: 2011-05-13

Massachusetts
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Just sent a nasty email to Apple. Won't do much, but I feel better (I do not own Apple anything).
12bolt
Posts: 159
Incept: 2009-08-24

Blueridge
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Comment from the front lines on the home front:

I work for a garment mfr that manufactured clothing in the US for over 80 years. In 2000 they moved their garment production to a leased facility in SE China. Now all of our high end clothing is made there by Chinese workers.

I am trying to get out of this company as I see how things are, but in this rural area full of empty factories, jobs aren't exactly growing on trees.

Luckily a very large social website company has data center hereabouts, and they have reached out to me. I go over there today for a facility tour and possibly, maybe, a chance at employment with them.

At the last employee survey (anonymous) I wrote on the form that we were exploiting the Chinese, which is wrong on many levels, and that we should move the mfr'ing back to the empty buildings here.

I figured my honesty would get me fired. Instead, I got promoted.

But working there and knowing what's going on eats at me every day. I have a mortgage, a wife and 2 kids to support and freelancing won't cut it even though I have no debt but my mortgage (which is <2x my income).

I am in Industrial Engineer by training. Graduated college in 1992. When I started that program in 1988 I was told that demand for IE's exceeded supply and that jobs were plentiful and well paying. When I graduated not 1 company interviewed IEs through my school's career center; there were about 50 people in my graduating class who also bought that line of bs.

9 months later I got my first IE job at a sewing factory in rural Louisiana. By July 1994, that plant got re-located to Mexico, because "we can make these clothes for less than half the price in Mexico" and I lost my job along with about 600 others.

I went into IT soon after and never looked back.

I think free trade in its current form is an abomination. I refuse to buy Apple products, though many of my IT colleagues are completely enamored with them and are always pre-ordering the newest Icrap.

They think I'm weird (not denying that); and when I bring up manufacturing practice and how harmful the relocation of manufacturing to China is to this country and this local area, they brush it off. After all, they still have their jobs. Never mind the 500 or so people who lost good manufacturing jobs.

Reminds me of this quote from Martin Niemöller:

Quote:
First they came for the communists,
and I didn't speak out because I wasn't a communist.

Then they came for the trade unionists,
and I didn't speak out because I wasn't a trade unionist.

Then they came for the Jews,
and I didn't speak out because I wasn't a Jew.

Then they came for the Catholics,
and I didn't speak out because I was Protestant.

Then they came for me
and there was no one left to speak out for me.


The managers above me only seem to care about maximizing their bonus. I'd gladly give up mine to see my company do the right thing. Again, they think I'm weird. :)

Guess what? That's not going to happen. When MFFY is the dominant paradigm things like general welfare of local community sinks to the bottom of peoples' priority list.

I have to find something else before my ethical conflict (support family/exploit Chinese) eats me up.

Bangkokian
Posts: 40
Incept: 2010-09-17

Bangkok
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Karl -- How exactly does stopping purchases of Chinese products help Chinese labor? Because a boycott of Chinese products would put pressure on China to raise the standard of living? Come on.

Have you done the math on that? China, minus cheap exports (enabled entirely by cheap labor) is a significantly poorer nation than it is now. So firewalls against Chinese products are not exactly going to help on a humanist level.

And those vast majority of those Foxconn "slaves" **VOLUNTARILY** left their villages to go work in those factories because the pay was BETTER than working knee deep in water and farming rice. Yes, there are indeed stories of lands lost to local beurocrats in shady transfers of property from private to public and back to private again. And there are stories of lands so polluted that once fertile farmland is now ruined. But those stories are not anywhere close to the majority. I can tell you personal stories about seeing lines of people camped out for *days* outside factory gates looking for the absolute ****tiest jobs -- and place to sleep.

Most of the world is poor. Period. (Desperately poor when compared to cushy America). As communications and supply chain management have improved, the ability to source products and manufacturing from the poorer corners of the world has increased.

You can't roll the clock back on that, Karl. It's done. The manufacturing base of the world is global. Yes, Ricardian comparative advantage is a deeply flawed thesis as it assumes non-competition -- but as you so like to point out: America's lifestyle is unsustainable. So what exactly are we trying to put an end to cheap Chinese imports for? To make the American standard of living sustainable? That math doesn't come close to working. It won't be.

Lets assume for a minute that throwing up tariffs is the right way to go. Cheap asian labor is the only reason that America doesn't have massive price inflation today (or plunging standards of living -- which is the other side of the same coin). What you're advocating would result in a decrease in the standard of living in both China *and* the US. China would lose its export base, and America would lose it's affordable products. But would America gain 'back' those manufacturing jobs as a result? Probably not. The retail pricepoints of products manufactured here would be unsustainable and hence those entire industries would likely collapse -- resulting in massive deflation.

So the human toll on what you're suggesting is massive on both sides of the fence. How is that better than what we have now?







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