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2025-03-27 07:00 by Karl Denninger
in Federal Government , 430 references
[Comments enabled]  

Oh boy....

President Donald Trump revealed that a staffer with national security advisor Mike Waltz's office included the editor-in-chief of the Atlantic in a Signal group chat with senior Trump officials who were discussing plans for an upcoming strike on Houthi rebels in Yemen.

"It was one of Michael’s people on the phone. A staffer had his number on there," Trump told NBC in a phone interview when asked how Jeffrey Goldberg, the Atlantic's editor-in-chief, was added to the high-profile chat.

Who was the person with zero IT security expertise that had people in the DOD and NatSec part of the government using anything other than their own infrastructure for such things?

There's utterly no reason to ever trust any external system for sensitive information internal to the government.

Ever.

Let's say, for example, I send you an email.  I typically "sign" them.  By doing this the email has included both an attestation that it has not been altered, as otherwise the signature will not validate, and my public key.

Now if your computer has a trust chain to verify that -- and I publish that, by the way (so it can validate that public key is good) then you can now send me an encrypted message.  Once you do so not even you can read it -- only I can, because I'm the only one with the other half of the key.

With me so far?

Now let's say we start up a conversation and we have ten people in there.  I send an encrypted message to all ten. What I actually send is ten messages because each person's public key is different and again, each of them are the only people with the other half of it.  So far so good.  They each get it, they can decode it, but not the copy sent to anyone else -- and since I signed it if that signature verifies they know it hasn't been tampered with in transit.

But in this case, since you care about the integrity of who can be a part of conversations generally, all transmissions go through the government's infrastructure.  The government, incidentally, already has the PKI infrastructure (issuing certificates, attesting to them, etc. -- this is part of, but not all of, how a CAC card works) to do all this.

Thus when you send the message the server -- which is a DOD/NatSec server -- is the machine that processes it.  Because a public key is in fact public it knows who the message is going to (all of the recipients) and whether the DOD/NatSec servers issued the certificates involved and to whom.

The server cannot see the unencrypted contents of the message as only the recipient of each transmission has the private key required to decode it -- but it knows who its going to and their public certificate.  This means it can be set up to look at same and refuse to deliver a message if it is to someone who doesn't have a DOD-issued certificate and, for example, the other people in the communication do; it could either embargo it (after all, there might be circumstances where this is legitimate) or alert someone that something hinky may be going on, throw it in the trash summarily, or some combination.

It can't see the contents, but it can interdict the message before it ever leaves the DOD and identify who transmitted it because the machine that sent it is known.

In other words if you set things up properly, and run them properly, what happened can't happen and if it is attempted, either by accident or malice, not only does it not work the person who did it gets busted if the transmission was not legitimate.

Yeah.

That.

Security of communications is supposed to be important.... right?

So why did CISA, which is an official government agency, recommend Signal specifically when it has no nexus within the government and thus, while it may be end-to-end encrypted (and not full of holes, which I can't speak to since I've never looked at it in sufficient detail to have a valid opinion) it has no means of controlling who is in a chat nor to prevent anyone who might, whether through accident or malice, add someone unauthorized to a new or existing one and there is no means for the participants or organization to which they belong to vet who is in said chat.

You can have the best encryption on the planet -- absolutely impossible to break -- but if there is either someone foolish or malicious it is meaningless exactly as while you can have a fortified home or business if you leave the front door unlocked it matters not.

The entire reason you use a chain of trust and only allow entities known to have been authorized through that chain to be included in any sort of access regime is precisely this.  Humans are both fallible and, from time to time, corrupt.

Either is fatal to a security scheme and thus you must design in and insist on a control process to mitigate that risk.

We do not, at present, know if the breach here was due to stupidity (accident counts) or malice but what we do know is that CISA -- an official government source -- made a recommendation during the last Administration (so no, you can't lay this one on Trump) to use infrastructure for allegedly "secure" communications that lacked any measure of control over human accident or malice in terms of recipient (and group) management.

This incident, beyond the actual person who added (or changed) the recipient so that reporter was in the list, is directly chargeable against CISA and their recommendation.  Since it is their job to put forward such standards for the government this is a fatal failure and every individual involved in that process, no matter how small their involvement, must be both publicly identified and expelled.  As there was apparently no classified data breached as a result of this criminal sanction is not appropriate -- but permanent severance from any government employment now and in the future, along with summary and permanent revocation of any clearance held by said persons is not just advisable -- it is mandatory.

Security is a process, not a product.

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He has to act now -- and so must Congress.

$296 billion in all revenues and $603 billion spent last month; all of which was with President Trump in office.

This, while Speaker Johnson (and Trump) both want to continue this insane level of spending beyond revenues -- more than a 50% deficit last month -- until the end of September.

This is, on an average basis, worse than Joe Biden's last months in office (October - January) as the total across October to present is $1,147 billion -- or, if you prefer to be fair, equally bad since January is typically 1120 payments month and thus usually has a large amount of received corporate taxes, and it did this year as is usually the case.

Note that Social Security, which people will try to lump in, is not the problem.  It takes in a huge amount of tax (and pays out a huge amount); in contrast Health and Human Services spent $145 billion last month which is more than all income tax receipts deposited from individuals and more than 14 TIMES that deposited from corporations and yet the total deposited from Medicare tax was $28 billion -- or just nineteen percent of what was spent.

For rather-obvious reasons you can't cut CMS program benefits by 80%.

But you can cause costs to fall by close to that amount if you go after cost, and the Executive has the means to do that as I've pointed out through using 15 USC Chapter 1 and the two standing Supreme Court decisions backing its applicability to medical, pharmaceutical and health-insurance related businesses, including of course those involved in Medicare Advantage.

In total CMS has spent $1,030 billion thus far this year or one third of the total $3,039 billion spent by the Federal Government and yet it has received only $164 billion in taxes against that, or sixteen percent of what it has spent.

In addition prescription drug spend in Medicare has risen a stunning 80% over last year's run rate -- that currently stands at $74 billion against $41 billion this time last year while the entire last year spend was just over $100 billion.

Hospital payments are up 20% over last year and physicians payments are up 31%.

There is no way to tax out of this nor any other way to stop this runaway train other than by taking a meat axe to costs and it is clear that there is no way this sort of increase in spend comports with inflation or anything associated with it.  15 USC Chapter 1 is clear and again, the Supreme Court has ruled twice that actions taken by these industries are not exempt from that criminal law.

The full plan I put forward back when I wrote Leverage and then added detail to it as Obamacare came into focus is still where I believe long-term this must go but that requires Congress to act -- and without a threat to veto literally everything until they do it they won't.  However, directing every hospital in America, every medical provider, every drug company and every other entity within the medical field to post one single price for each procedure or item that every person will and does pay with all such charges and costs advised in advance, publicly available and easily searchable with no game-playing, and further require that affirmative, written consent be collected in advance of action taken or thing provided except in emergencies where consent is physically impossible, nor can you bill for anything you cause (such as an infection you GIVE the patient), with any attempt to game or otherwise obfuscate this order resulting in a Racketeering indictment with the predicate act being criminal extortion ("buy insurance or get a 10x bill up your back door"), thereby  immediately breaking any and all collusion between insurance companies, PBMs, pharmacies, drug companies, doctors, clinics and hospitals, which will restore competition immediately, and further make clear that any provider or pharmaceutical company that does not do this will be prosecuted under 15 USC Chapter 1, fined to the maximum extent of the law corporately which each person differentially charged a separate and distinct offense AND all of their executives will be criminally indicted, tried and upon conviction they will do 10 years in federal prison.

This can be done right here, right now, entirely within the Executive between the FBI and DOJ and Congress neither has to pass anything nor can Congress prevent or halt it.

Insurance company agreements to pay rest with their customer, the insured.  They must not ever do what they do now, which is to make both health and billing decisions in the middle and thus forcibly impose cost-shifting and ratchet prices which inures directly to their benefit and screws both Americans generally and the government as their operating margin is fixed by law.  There is of course much more and the link above explains it all -- but in the immediate time frame we must focus on what the Executive can do as Congress clearly will not until and unless they're forced to by their constituents.

If this is done at the Executive level prices will collapse immediately -- and, along with it, all the convoluted billing and insurance schemes, and their employees, will disappear.  Yes, that will be extremely disruptive to those employed in such pursuits and produce an immediate and deep recession.

We have no choice and it has to happen right now.

It is not possible to stop this in-process trainwreck now without serious disruption to our economy -- that is simply not avoidable and the option to do so all the way back to when Obama was in office, and I put forward a plan to do so which would have had much less disruption and evaded this entire fiscal mess, was ignored.

If we do not stop it now the consequences literally grow by the day and risk fiscal and possibly even civil collapse.

Trump does not have six months to sit on this until the new fiscal year and Speaker Johnson has repeatedly lied about "this will be the last CR" so there is no reason to believe any such thing will be forthcoming -- not that it matters because if not dealt with now the probability of a market crash into the fall and winter followed by a long economic malaise that will not clear in time for the elections is nearly-certain.

Politically the hit has to be taken right now because the economic impact will be severe and of course the current Administration will be blamed for it -- and yes, they're partly responsible not only for attempting to play games with the current CR but in point of fact Trump was President four years ago too, before Biden -- and did nothing to stop it then despite, I remind you, multiple campaign platform planks in 2016 that would have largely done so.  But no matter the apportionment of blame across parties and Administrations and sessions of Congress the hit has to be taken now and this foolery must be stopped with finality so that NEVER AGAIN can a federal department find itself collecting only sixteen percent of its spend in taxes and being a full THIRD of every dollar the government spends; there is no way we will get through the next couple of years without this blowing up the economy and the mid-term elections will begin to be contested next spring.

By next summer we have to be on the path of recovery; there is no avoiding the very large economic hit, so the choice is to either do it now -- not an empty promise (that will once again prove to be a lie) for the fall but right now -- or have it happen into the maw of the election in which case the GOP loses both House and Senate and that is if the bond market allows this "oh we'll work on it" charade to continue for that long.  It might not, and if it doesn't all assets will collapse in price, rates will soar irrespective of The Fed cutting off essentially consumer and corporate borrowing and unemployment will shoot the moon concurrent with real shortages and perhaps worse.

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2025-03-08 10:24 by Karl Denninger
in Federal Government , 143 references
[Comments enabled]  

Trump's Administration has finally taken notice of Rule 65(c) when it comes to Federal Courts.

(c) Security. The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. The United States, its officers, and its agencies are not required to give security.

This is not discretionary and the court cannot assess a "de-minimus" security amount either; it must be defensible predicated on the costs and damages that the other party may or will suffer with the evidence of same in the order itself if the injunction or TRO issues until disposition of the case and the posting of said security has to be completed before the TRO or injunction is valid.

If, for example, you demand a payment that was frozen be unfrozen and the reason for allegedly freezing it is either executive discretion or suspected fraud you have to post up both the other side's projected legal bill and the full amount of the payment because if the injunction issues and in the fullness of time it is proved either fraudulent or within executive discretion to withhold odds are extremely high that said funds will be entirely unrecoverable.

Further, that security (either cash or a surety bond) is partially or entirely forfeit if the moving party drops the case; in that circumstance the enjoined party then files a motion laying out their costs and harms which is certainly subject to rebuttal and decision but the funds are impounded already to pay same so any release of that security is subject to those claims.

I pointed this out as soon as the suits commenced against the Trump Administration actions.

Anyone who has contemplated (say much less actually litigated) suing in federal court knows about this as his or her attorney has so-advised, and counsel that practices in the federal system are all very aware of this.  It is one of the reasons that injunctions are, relatively-speaking, somewhat rarely sought in federal court: If you seek one you're going to have to post up the potential harm to the other side when you do so and that is usually pretty darn expensive because in addition to the damage you get tagged, in every case, for the other side's legal fees if you lose.

Injunctions and TROs are frequently abused in the state courts and the reason is that in most states the requirement for an injunction bond is discretionaryFor example Illinois' statutes state:

Sec. 11-103. Bond. The court in its discretion, may before entering a restraining order or a preliminary injunction, require the applicant to give bond in such sum, upon such condition and with such security as may be deemed proper by the court, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.

No such bond shall be required of any governmental office or agency.

Note the difference; this is why TROs and injunctions are very common, even ex-parte, in (for example) divorce cases.  Throwing someone out of their house, for example, on an ex-parte basis absolutely causes damage (they must pay for substitute housing) and causes them to incur significant legal expenses.  In federal court if you demand such a remedy you must post up security in case you ultimately lose but in state court the judge has discretion and does not need to do so and if he doesn't, and you drop the TRO or injunction when challenged on it you aren't forced to cover the other side's damages and legal costs.

In state courts such filings are thus routinely used to "tilt the playing field" or "establish a pattern" that a judge is then reticent to change, especially if there is no judicial record ever established that the person who did it had ill intent -- and if when challenged they drop the injunction there's no judicial record of what it was done originally.  You might say that doing so implies ill intent and you might even be right but there's no proof, the movant will always state they had "information and belief" sufficient to do so originally and thus the practice continues.

Parties have made a mockery of Rule 65(c) in the federal courts over the last couple of decades when it comes to demanding injunctions against federal actions, especially when they demand and get national-scope injunctions that go beyond the federal district in question.

Consider a federal suit to block, for example, a pipeline with a demanded TRO and/or injunction.  The moving party, if they have to post up the hundreds of millions or even billions of costs and damages that will be incurred if they lose will cause them to think twice about how strong their case actually is.  If you win then you get your security back, but if you dismiss the complaint or lose you're hosed and the security you put up is gone in whole or part, subject only to the damaged party's capacity to prove up the injury.

The federal court system has long been thought of as the "more reasonable" from a civil perspective in that you are an idiot to bring questionable claims, especially if you try to obtain injunctive relief.  It is one thing to sue and lose as in both cases fees and costs, whether federal or state, are speculative and not commonly awarded but an injunction has a requirement at the federal level that the moving party post up all of the reasonably-foreseeable costs and damages as security, in advance, if they lose.

Thus where is Pam Bondi with immediate emergency filings against all of the existing injunctions already issued demanding that security be posted up and computed in said public filing and, if there is any delay or refusal by the judges involved to do so taking an immediate emergency appeal as far as necessary including to the Supreme Court which, given the actual language in the Rules of Civil Procedure is a slam-dunk and immediate win?  No, demanding this only on a forward basis for future filings is not enough -- force the movants in all the existing injunctions to either post up security or dissolve the injunctions and TROs.

If our government expects we, the ordinary civilians, to adhere to and comply with the law they had better do so themselves especially when various parts of the government go to war legally with each other.

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2019-02-13 14:50 by Karl Denninger
in Federal Government , 449 references
[Comments enabled]  

There's simply no other way to express this....

 

These numbers are for only three months, so for the full year multiply by four.

Again, the total "social insurance and retirement" tax grab is $274 billion.  Social Security is a 12.3% tax (up to the cap) and Medicare is 2.9% (no cap.)  The split is thus roughly-speaking ~19% Medicare, the rest (81%) Social Security.

If you want to get down into the detailed numbers they don't "quite" add there because there is both spending and tax revenue that gets bucketed in each from the various line items.  But it's not off by much; the "line item" (without the bucketing) comes up as 74/26 -- not materially different.

81% of $274 billion is $222 billion.  Social Security spent $251 billion.  That's a ~29 billion shortfall.  Not good but there are a lot of Treasuries held against that requirement, and by 2026 the budget impact as a percentage starts to fall because the boomers start to die, statistically speaking.  In other words Social Security had a ~12% shortfall over the first three months, indistinguishable from my last look (12% .vs. 13%.)  This is easily fixable on a forward basis without much economic pain.

Medicare, on the other hand, spent $153 billion but took in just $52 billion.  That's a shortfall of 66%; that is, two thirds of it is unfunded.  You would have to more than triple the Medicare Tax Rate in order to bring it to parity.

That's an "improvement" over the nearly 75% deficit in the first month but we are in fact talking about bleeding out in two minutes rather than three; the outcome does not change.

Add to that "Health" (Medicaid, mostly) and it's much worse; now you take in $52 billion but pay out nearly $300 billion.

Note that the deficit thus far is $319 billion.  If you were to get rid of the deficit between Medicare and Medicaid .vs. tax receipts you would almost close the deficit to zero.  If you also increased the FICA tax rate by 13% (to just under 7% for "each half"), increased the income cap where it stops being collected or some combination that wounds up in the same place as well the deficit would be effectively zero.

$319 billion over three months equals roughly $1,300 billion, or close to $1.3 trillion in deficit for the entire fiscal year.  The only good news is that April is usually a strongly positive month (as a result of taxes being due) but either way the deficit is almost-certain to be in the neighborhood of $1.1 trillion this year.

You cannot fix this with either taxation or cost-shifting. It is mathematically impossible to do so.

For example you'd have to nearly double the individual income tax rate on everyone, including the middle class; to close the gap by increasing the corporate tax rate you would have to raise it by more than an insane and utterly impossible 600%.  Any claim that we can solve this by making people pay "their fair share" is a flat-out lie.

You cannot get there by "cutting spending" on other than these programs either; if you cut all "other spending" to zero along with transportation and education you'd only cover 30% of the deficit.  Cutting military spending to zero (which is obviously impossible) wouldn't get there either.

There is only one way to solve this problem and that is to collapse Medicare and Health spending by 80%.  You can only resolve the problem by collapsing the medical and health insurance monopoliesforcing everyone to publish a price for everything and charge everyone the same price, where said price must be handed out before service is provided, along with telling everyone involved that for any and all conditions in which a lifestyle change will remove the need for treatment government will pay zero unless the person in question makes that change.

The trend is not improving and it is not "The Next Generation" that will have to deal with this.

This has to stop right damn now or it will blow up before we get through the next Presidential term -- and no, you cannot tax your way out of it either.  The people in Washington DC -- Congress and the President -- must be held personally and politically responsible for their refusal to deal with the only way to put a stop to it, which is to destroy the medical monopolists using existing, 100+ year old law, and to do it right damn now.

And if they refuse we the people must enforce our demand for them to do so.  They will refuse, I remind you, unless forced by the people -- and there are peaceful and lawful means to do exactly that (e.g. a general strike.)

Nothing less than the literal existence of this nation as a Constitutional Republic is at stake.

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2019-01-25 07:00 by Karl Denninger
in Federal Government , 146 references
[Comments enabled]  

Yes, we need a wall.  Why?  Because bad people sneak in without one.

They do with one too, but it's harder and thus there are fewer attempts, and even fewer successes.  That's good, not bad.

You have to want more illegal invaders to refuse physical barriers.  Just as locking your car or house does not make it impossible to steal from either, it increases the difficulty and thus makes it less-likely.  $5 billion in the context of the federal budget is just over one tenth of one percent of spending.  Any gain in security is worth that amount of money.

But if you want to stop the insanity generally you have to force Congress to keep the promise it made when Reagan gave amnesty to illegals: You must stop the handouts.

Reagan was promised wide-scale immigration reform to end the enticement to come illegally, on a permanent basis, in return for amnesty for illegals already here.  He gave Congress the amnesty.  He never got the elimination of the enticements and it was the Democrats that didn't give it to him.

This is the same political party refusing now and it does not matter that most of those reps and senators are no longer serving; the party itself is the same.

Trump therefore should demand, before any further negotiation, that the past promise be fulfilled.

It's not that hard to do:

  • 100% E-Verify, under criminal felony penalty for failures to do so and business seizure for a second offense.  No exceptions.  This is trivially enforceable; employers already have to file 941s to report withholding taxes.  Add one field for each employee that must contain the E-Verify control number on each report.  Change the law so that non-reporting or false reporting on a 941 is a felony criminal offense with a statutory penalty of $5,000 per employee, per month not reported or falsified and that all directors, officers and employees involved in producing said false report are subject to a year in prison, consecutively, for each employee not reported.   This instantly ends employment capability for illegal invaders.

  • No welfare or other government program of any kind that is in whole or part funded by the Federal Government (specifically: Medicare, Medicaid, Section 8, Food Stamps, WIC, S-CHIP, Education, etc) may be provided to any household unless all residing there are verified US Citizens or permanent residents.  Require prosecution for lies on said forms verifying eligibility and require that any such lie is a felony.

  • No medical treatment without proof of payment is required of any facility except as pure charity care to any person who is not a lawful permanent resident or citizen.  All such care amounts, if provided without payment, must be publicly disclosed no less often than quarterly in aggregate along with the total amount of actual collected payments for services by all medical facilities (in other words if they're going to try to make you pay for it under the table they have to disclose it.)

  • No remittances may be sent out out of the country without positive identification and proof of lawful residency or citizenship from the person doing the sending.  Period.

  • No birthright citizenship.  Come here and crap out a baby, it's a citizen of whatever nation you are but isn't an American citizen.  You must be a citizen to confer citizenship at birth.  Period.

  • Unlawful entry must be defined as a criminal felony and permanent bar to future entry for any reason.  If you wish to claim asylum, come to the border and lawfully request it.  If you wish to visit, come to the border and lawfully request entry.  If you cheat from this day forward no matter how or why you are permanently barred from ever entering the United States.

  • Those nations which border ours must be held responsible for any person who is on their soil and makes an attempt at unlawful entry, or who is turned away or deferred during an asylum request until their case is heard.  If you are our neighbor and call yourself "friend" and "trading partner" then start acting like one.  If someone illegally enters from your nation you have a responsibility to take them back when we catch them.  If someone comes into your nation with the purpose of requesting asylum in our nation and you allow them to do that's fine, but that person's safety and place to live is on you until their claim is adjudicated.  What you do from there and whether you let the people in to make said claims in the first place is your business.  Any nation that refuses, even once, to take back an illegal invader caught after unlawful entry from their nation, or a person with a deferred or refused asylum request that presents at our shared border has all trade and border crossing closed until it accepts back the person or persons it allowed to attempt to invade our nation from their land.

For those already here who, the claim is, we should "take care of" (e.g. Dreamers, etc)

  • If you came here as a child and are now an adult you must have graduated High School and demonstrate proficiency at a minimum standardized testing level in all applicable subject matter, including the English language, to qualify for further deferment.  While there are some "Dreamers" who are college students or even graduates at this point virtually all covered by this program are now adults.  ROUGHLY HALF have failed to graduate High School, demonstrate functional literacy in English or both.  These are not "Dreamers", they are public charges and must not be given anything beyond the theft they've already accumulated.  That one in ten -- or one in 100 -- is a high-achieving college graduate or student does not in any way extend to those who are either slugs or thugs.

  • If you came here as a child and still are one you must complete your education and become proficient in English. Drop out or get kicked out and you both lose your eligibility and are immediately deported.

  • You must have an executed Affidavit of Responsibility as for any other legal immigrant by an existing citizen who is responsible for you.  In other words you must have a citizen sponsor who both can and will take financial responsibility to prevent you from being a public charge.  This is required of legal immigrants and it damn well needs to be required here too.

  • You must not have a criminal record of any sort more-serious than a routine traffic violation.  Any conviction for an offense against the public peace including robbery, DUI, drug dealing, shoplifting and of course more-serious criminal activity, whether by conviction or plea, is an automatic disqualifying event, without exception.

  • You must document that you have either received all of your support from your sponsor or have lawfully worked and paid taxes in full.  This includes educational, medical and other government-funded expenses; if you received public education you or your sponsor must repay the fully-laden per-pupil cost of same.  If you received medical care under Medicaid or similar you must reimburse the full amount spent on your care by the government.  If you worked under the table you must demonstrate that you personally paid all the taxes otherwise due including both halves of FICA.  If you haven't done so up until now as a result of intentional conduct (e.g. working for cash under the table) you may be excused from criminal liability for your intentional conduct but you must report and pay all such tax arrears anyway, including interest and penalties as with any other intentional underpayment and you must begin to do so immediately and on an agreed payment plan without exception, or your sponsor must do so, until it is all paid off.

  • Assuming the above is met you may have a provisional green card however you still go to the back of the line and are subject to all of the above until your turn comes up in our normal, legal immigration proceeding.  Once your turn does come up you may have full permanent residency and ultimately apply for naturalization as may any other lawful permanent resident.

That's the minimum opening requirement.

If we do not shut off the welfare state for illegal invaders we will never solve the problem.

Leave the government shut down until this is passed first.

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