Power & Market

Bylund: Entrepreneurship Involves Uncertainty. Here's How to Deal With It Productively.

8 hours agoPer Bylund

Late South African economist Ludwig Lachmann once wrote, “The future is unknowable, though not unimaginable.”

What he meant is, it's beyond our ability to know what the future will bring. We cannot plan without errors, because we do not actually know anything about the future before it's already reality.

The future is not simply unknown, which suggests a lack of information, but unknowable -- what will be is uncertain. There is no information. We are, in this sense, slaves to destiny.

But while the future is unknowable, this does not mean it is hopeless. Our efforts always aim to create some specific, limited part of the future. Entrepreneurs do this more than others, as entrepreneurship scholar Saras Sarasvathy argues.

They can do this, as Lachmann notes, as the future is imaginable. Because we can imagine different futures, we can act to create the better version. We have the creative ability to draft scenarios and possible outcomes, so we can prepare for what is more likely to be. And attempt to bring it about.

We all differ in our ability to imagine the future that will be. Very often it might simply be luck. But luck is not all, and it certainly isn’t reliable. Some seem to have the ability and willingness to face the unknowable by imagining and attempting to shape it, and they're willing to bet that they’re right and put their money where their mouths are.

Entrepreneurs are in the business of creating big chunks of our future. They bear uncertainty.

Read the full article at Entrepreneur.

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Why $100 Bills Are Now the US Dollar's Most Common Banknote

The “War on Cash” which remained largely under the radar for years with few having noticed this assault on physical currency by governments around the world, other than the libertarian movement. This is no conspiracy theory, it has already occurred to a small extent.

Some prominent economists, including Rogoff and former US Treasury Secretary Lawrence Summers, have advocated phasing out high-denomination paper currency to discourage tax evasion and other forms of corruption. India and euro area countries have done just that in recent years: the Reserve Bank of India withdrew the 500 and 1,000 rupee bills from circulation and stripped them of their status as legal tender in 2016, with disruptive effects, while the European Central Bank stopped producing and issuing the 500 euro note in early 2019.

A recent paper by the International Monetary Fund (IMF) shows how the $100 dollar bill is now the most widely circulated US note. The truth is, 80 percent of $100 bills are held outside the US, and 60 percent of all physical notes are as well. Economist Kenneth Rogoff from Harvard University claims that the major reason for this is criminal activity such as money laundering and human trafficking. But there is something I noticed when reading more about it:

With increasing digitalization of payment systems in recent years, Kyriakos-Saad says, concerns about traceability could be a factor. But it’s incorrect to always associate cash with corruption, he says. “There’s this lingering desire for privacy, and desire for anonymity, which can be entirely legitimate.”And this anonymity is precisely what makes cash usage patterns so challenging to understand.

This seems obvious enough, at least to libertarians. But the report it goes on:

Rogoff adds that there may be another factor at play: “Underground demand for paper currency has been surely rising in part because interest rates and inflation are exceptionally low.”

But why the dollar? Other countries have currencies used abroad. “We think that the significance of foreign demand is unique to the dollar,” Judson said. “Other currencies are also used outside their home countries, but as far as we can tell, the dollar has the largest share of notes held outside the country.”

The dollar’s role as the dominant international reserve currency may be the key, according to Rogoff. “The dollar is now the only global currency; the euro has stalled, and the renminbi is decades away from challenging,” he says.

We look at interest rates as the opportunity cost of holding money in physical form. When interest rates rise, that opportunity cost rises since we can earn a higher return by keeping it in an account at our banks. When interest rates fall, that cost falls as well. This is important because these economists also propose using negative interest rates in the future. So, with both the elimination of cash, particularly large denominations, and negative interest rates, what does this mean for holders of those dollars?

Will they lose out? Or is this an opportunity to actually profit from holding physical currency at a time when our digital dollars held in our bank accounts will be devalued, taxed, and siphoned away with bank fees in which we cannot escape since we cannot withdrawal physical currency by law? And if interest rates are an opportunity cost of holding physical cash, then those who possess these high denominations of dollars will likely have more buying power than those who rely strictly on digital transactions. Perhaps physical dollars and digital dollars will be recognized as two distinct mediums of exchange. If that’s the case, then perhaps there is a great benefit to holding some cash instead of electronic deposits.

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Business Schools Need More Austrian Economics

In a recent tweet, Philip Kotler, author of the most widely used marketing book in graduate business schools worldwide suggested that the government should be doing much more to reduce inequality.

To quote Kotler:

By suggesting that the government should somehow put in place these "solutions," Professor Kotler (a student of Friedman, Samuelson, and Solow with degrees from University of Chicago and MIT), shows an incredible ignorance of some of the most fundamental economic principles that influence his (insightful, and I risk to say, mostly correct) thoughts about marketing and strategy.

Another very respected business school scholar, Henry Mintzberg, has also advocated for "raising the minimum wage, the need for government to act to stop climate change, that the ridesharing apps are making people poor and unhappy."

He even asks, on some occasion, 'how can smart people be so dumb?'

His question forces me to ask my own, "How can people that are so knowledgeable in their areas be so naïve (to say the least) in economics when the discipline is such a fundamental topic for businesses?

This kind of public positioning made by such an influential scholar highlights the importance of promoting Austrian economics in business schools.

The comments from Kotler and Mintzberg remind me of a talk Murray Rothbard’s gave in the early '90s on "The Future of Austrian Economics." Rothbard advocated for Austrian economists to spread their ideas outside academia, identifying business people as a particularly important audience. These are people that actually see the market process unfold and end up understanding that actors and firms all belong to a complex web of interactions.

Particularly now, I think it is important to act upon Rothbard's suggestion, in particular by targeting business schools.

Business students take courses in Strategy and Marketing that are based (although this is hardly mentioned directly) on sound economics principles. For example, people (not collectives) act, preferences are subjective, the market is dynamic, the influence of government policies over businesses exists and is very heavy, markets are interconnected, etc.

Those same students are exposed to various blends of economic thinking that lack much practical use. For example, textbooks by monetarists, Keynesians, and even Marxists are common textbooks all over the globe. Instead, what these future professionals need is a more logical approach to economic thinking.

Fortunately, we are making progress in this area.

The Economics for Entrepreneurs podcast, hosted by Hunter Hastings, melds the sound economic thinking of the Austrian school, with discussions of strategy, marketing, and entrepreneurship, among others. Several scholars associated with the Mises Institute teach at business programs (see for instance Peter Klein, Per Bylund, and Matt McCaffrey.) Social media groups have also arisen, such as "Mises For Business" and “Management Scholars for Free Markets.” There's is also a great number of academic papers being published synthesizing concepts in Austrian economics, management, and business strategy. These are areas that already have a lot in common, and we can build on that.

At the same time, there is still a lot of room to grow.

Apart from Marketing and Strategy, there are many other areas that business schools can learn from studying praxeology and catallactics. Entrepreneurship and innovation are some of the most obvious areas where Austrians can contribute, other topics such as human resources and finance are also very strong candidates for potential research. Accounting is another area where Austrians have also begun to contribute. With a personal background in industrial engineering, I even think fields like operations could gain a lot from the understanding of matters such as the business cycle and especially insights of the structure of capital.

To sum up, there is a lot of misunderstanding and bad economics being taught to business students, forcing many into courses claiming that theory in economics is useless, and that ‘data’ solves it all. In such programs, we are in desperate need for an Austrian revolution.

With the robust understanding of the market process that the Austrians are able to provide, business students, future entrepreneurs, and business professionals will be better prepared to operate their businesses and to better understand their consumers, competitors, and their macro environment. By talking to those people, moreover, we will be able to open the door to the other parts of Austro-libertarian thinking and, as a consequence, to bring more people to believe in individual liberties against central power coercion.

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Endgame for the Fed?

08/14/2019Ron Paul

The Federal Reserve, responding to concerns about the economy and the stock market, and perhaps to criticisms by President Trump, recently changed course on interest rates by cutting its “benchmark” rate from 2.25 percent to two percent. President Trump responded to the cut in already historically-low rates by attacking the Fed for not committing to future rate cuts.

The Fed’s action is an example of a popular definition of insanity: doing the same action over and over again and expecting different results. After the 2008 market meltdown, the Fed launched an unprecedented policy of near-zero interest rates and “quantitative easing.” Both failed to produce real economic growth. The latest rate cut is unlikely to increase growth or avert a major economic crisis.

It is not a coincidence that the Fed’s rate cut came along with Congress passing a two-year budget deal that increases our already 22 trillion dollars national debt and suspends the debt ceiling. The increase in government debt increases the pressure on the Fed to keep interest rates artificially low so the federal government’s interest payments do not increase to unsustainable levels.

President Trump’s tax and regulatory policies have had some positive effects on economic growth and job creation. However, these gains are going to be short-lived because they cannot offset the damage caused by the explosion in deficit spending and the Federal Reserve’s resulting monetization of the debt. President Trump has also endangered the global economy by imposing tariffs on imports from the US’s largest trading partners including China. This has resulted in a trade war that is hurting export-driven industries such as agriculture. President Trump recently imposed more tariffs on Chinese imports, and China responded to the tariffs by devaluing its currency. The devaluation lowers the price consumers pay for Chinese goods, partly offsetting the effect of the tariffs. The US government responded by labeling China a currency manipulator, a charge dripping with hypocrisy since, thanks to the dollar’s world reserve currency status, the US is history’s greatest currency manipulator. Another irony is that China’s action mirrors President Trump’s continuous calls for the Federal Reserve to lower interest rates.

While no one can predict when or how the next economic crisis will occur, we do know the crisis is coming unless, as seems unlikely, the Fed stops distorting the economy by manipulating interest rates (which are the price of money), Congress cuts spending and debt, and President Trump declares a ceasefire in the trade war.

The Federal Reserve’s rate cut failed to stop a drastic fall in the stock market. This is actually good news as it shows that even Wall Street is losing faith in the Federal Reserve’s ability to manage the unmanageable — a monetary system based solely on fiat currency. The erosion of trust in and respect for the Fed is also shown by the interest in cryptocurrency and the momentum behind two initiatives spearheaded by my Campaign for Liberty — passing the Audit the Fed bill and passing state laws re-legalizing gold and silver as legal tender. There is no doubt we are witnessing the last days of not just the Federal Reserve but the entire welfare-warfare system. Those who know the truth must do all they can to ensure that the crisis results in a return to a constitutional republic, true free markets, sound money, and a foreign policy of peace and free trade.

Reprinted with permission.

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Neil Schulman RIP

08/11/2019David Gordon

Neil Schulman, who passed away August 10, was best known as a science fiction writer, and his Alongside Night and The Rainbow Cadenza are libertarian classics. He was one of several brilliant writers and thinkers associated with the great Sam Konkin’s “anarcho—village." I met Neil only a few times, but his commanding presence and vigorous defense of his ideas made an indelible impression on me. He used his immense writing talents in defense of liberty and in opposition to war and the state. Only a few days before he died, he posted on Twitter, “When compared with the typical State assault on innocent civilian populations with deaths in the thousands, hundreds of thousands, or millions, the typical private assault doesn't even register.” He admired Ron Paul greatly, and I last heard his booming voice at a conference in Arizona that featured Dr. Paul. His many friends will miss him.

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Lew Rockwell on Amash, Nationalism, Black Sabbath, and More: An Interview

08/09/2019Ryan McMaken

Atilla Sulker has posted a new interview with Lew Rockwell at LewRockwell.com. My favoire part:

AS: Why do you think people like the Bushes and the McCains, who in many ways can be seen as nationalistic imperialists, denounce Trump’s brand of nationalism? 

LR: I don’t think that imperialism is at all, necessarily connected to nationalism. The good nationalism has nothing to do with imperialism. It should oppose imperialism, because it brings war and destruction to your own people, as well as other people. But I think Bush and McCain, both of course, extremely evil and promoters of world government, are not nationalists at all. Maybe they want to see their own families and their own connections at the height of the global government running everything. But they don’t like Trump, because of what they thought he might turn into, in terms of America first, and no more wars. So that unfortunately hasn’t happened, although he (Trump) hasn’t started any big wars. But he has done terrible things like fund the war in Yemen, by giving or selling weapons, and selling weapons to Saudis. And of course his constant drumbeat of aggression against Iran is horrendous, and he’s strangling those people.

American sanctions are worse than sanctions that the Bushes put on against Iraq before they invaded. In that famous exchange with the Secretary of State (Madeleine Albright), she was asked that apparently 500,000 children and people had died because of sanctions, and she said “we think it’s worth it.” I just heard this recently from Pompeo, but this has been going on for a long time. The reason you have sanctions, according to these people, is to hurt the citizens of the other country, so they will rise up and overthrow their government. I’m not aware of any instances where that has ever happened. In fact, it just makes people more loyal to their own government.

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Gun Laws Create Gun Violence

08/08/2019David Gornoski

Do Leftists believe gun bans will make guns evaporate?

Approximately 5 to 10 million AR-15 style rifles exist in America according to the National Shooting Sports Foundation. If we were to ban these guns outright tomorrow, would they just vanish into thin air? That is what gun law advocates seem to be suggesting by their rhetoric. Whenever we hear reports of a shooting tragedy, the TV, newspapers, and social media PR campaigns fire off in unison for bans on “assault rifles” like the AR-15. We are told that supporters of such bans are doing what is necessary to save innocent lives. But how does a top-down prohibition of a desired object actually work in practice? Violently and disastrously, according to every case example we have.

Leftists seem to understand the inhumane disaster of drug prohibition. Marijuana laws have not ceased desire for the substance. Incarcerating suppliers of marijuana has not made the substance harder to find or prohibitively expensive. Rather, a violent black market has opened up that has enjoyed monopoly-level profit margins thanks to the relatively uncontested market space government bans create. Thankfully, the American people are slowly rejecting the violence of banning an object of desire of like marijuana, but millions of children continue to suffer from lifelong separation from their parents for nonviolent choices. Today, families anguish in communities plagued by contagious spells of reciprocal violence all created by drug control laws.

So why do many believe that a ban on AR-15s would defy the reality of the law of supply and demand? Some have suggested government buy-back programs for citizens to turn in their guns for compensation. However, that will only work for people that want to participate. For many others, a ban on AR-15s will only create more dangerous, unnecessary situations for police and peaceful citizens alike. Far from stopping lone wolves from buying an AR-15, gun bans will only harm children caught in the cross hairs. Like Royal Wilson.

Royal Wilson is an 8-year-old African American boy living in Chicago. As he was sleeping, he became a victim of his city's gun laws. Suddenly, an explosion of flashing lights and bullhorn blasted the air. Royal and his family, including other young siblings, faced 31 police officers armed with assault rifles breaking into their home. The officers were acting on a search warrant based on a tip that there was an assault rifle in the house.

The only gun control Royal Wilson deserved that day was more control over government guns having access to his home for a nonviolent choice. What if Royal or his grandmother had made the wrong move in the chaos and triggered one of the dozens of officers to mistake them for a threat? What if he was playing with a toy mistaken for a gun? Where are the champions of AR-15 bans when it came to the assault rifles pointed by agents ordered to enforce a law against assault rifles?

Some cynical defenders of the status quo will try to redirect these questions to one centered only on race. Others focus on the excessive force Royal and his family faced that day in Chicago, as his 8-year-old frame stood outside his house handcuffed for an hour and a half in 37-degree freezing rain. Perhaps racial bias played a role in this case. There is not enough information available for this author to know. But if that is the only takeaway, then the act of violence against the Wilsons' humanity inherent in gun laws remains untouched.

Royal Wilson and his family were terrorized by government assault rifles for the victimless act of allegedly possessing an assault rifle. After the agents ransacked the house completely, they were unable to find any firearm. But the damage was done. The agents were simply enforcing another bad law voters demanded. Why do busybodies have the right to send police into dangerous situations against families owning guns? What if a family wants to own an AR-15 to protect themselves from the ravages of a drug war-torn Chicago?

No family, no matter their race, income, or zip code, should have to face the violence of government gun bans. Although the irony of government assault rifles facing down children in search of assault rifles speaks for itself, it would be just as immoral if the agents were armed with pistols. Owning an AR-15 in the house does not victimize anyone. Enforcing laws against an AR-15 owning family does.

If gun-ban advocates have their way, guns like AR-15s will not disappear. Violent gangs will just have a new cash cow market to corner. Psychologically disturbed would-be shooters will be able to find their weapon of choice from local black market channels the same way they find their prohibited drugs of choice.

The world would be a better place if everyone melted their guns away, including governments. In reality, guns do not disappear when we stomp our feet and scream “Ban!” They just become profitable products for gangs to sell to lone gunmen. Meanwhile, innocent families like the Wilsons are harmed by the foolish myth that governments have any ability to prohibit objects of desire.

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Debunking Vox's Article on "Debunking Economic Laws"

08/07/2019Per Bylund

Vox is a never-ending fountain of ignorance. Like this piece about four 'laws' of economics that are simply wrong. Some of these claims are indeed wrong, but it's also wrong to claim that economists make them.

Let's look at each one.

1) Going below the natural rate of unemployment could spark an inflationary spiral.

I have no idea how the writer could think this is an "iron law" (his term) yet includes the words "could spark." How is that a law at all?

2) Everybody wins with globalization.

No, economists don't claim this. Globalization is a win, but there are transitional pains and reallocations of resources. Jobs in inefficient industries go away, jobs are created where labor is more valuable.

3) Deep budget deficits will crowd out private investment.

Another strange misrepresentation. Why would anyone think budget deficits crowd out private investment? It's not the deficit doing this, but government investments--whether or not financed by budget deficits.

4) A higher minimum wage will only hurt workers.

Of course the author refers to the one study that found a case where this appears to not have happened. Yet it's still a misunderstanding, because minimum wage laws (set above the market wage) cause fewer jobs than there otherwise would have been. It doesn't mean people will be laid off en masse, only that jobs aren't created in such numbers as would otherwise have happened. You have to be a progressive to not see this. And then, of course, you will refer to (widely criticized) study by Alan Krueger as though there are not hundreds, if not thousands, studies showing exactly what theory tells us: that forcing employers to pay workers more than they contribute to the bottom line means those workers won't get the jobs. (If this logic seems odd, it's because you're not thinking logically.)

Formatted from Twitter @PerBylund
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Mises U: What College Should Be

08/06/2019Jose Orellana

As a student of economics, I was forced to learn the mainstream economics, which means neoclassical and Keynesian economics.

But, after attending Mises University, I have decided I learned more real and sound economics at Mises U than I did in four years of taking economic courses as an undergraduate student. Further, I was glad to see that other students had similar experiences. I was told by numerous students that they were taught that recessions, for example, are brought about by a lack of aggregate demand, which, thereafter, drains out spending from the circular-flow model. And, therefore, the only way for the economy to get out of recession is for the government to step in and stimulate demand to get the economy going again.

From day one at Mises U, though, one learns that money, contrary to conventional wisdom, does not come about through some government social contract. Rather, it comes through the marketplace. We learned that, in addition, economics is not a system of mathematical functions and equations, but is the study of praxeology, human action. We also explored how depressions are not caused by a lack of aggregate demand or so-called “animal spirits,” but, rather, through credit creation, artificially encouraged by government institutions like central banks. Ultimately, and perhaps most importantly, one learns at Mises U that the structure of production is complex and that capital goods are not homogeneous.

But Mises U is more than just taking courses about the Austrian School; it allows students to talk to other like-minded individuals, particularly the Mises faculty. I, along with other students, had the opportunity to pick the minds of numerous Mises faculty. In particular, I had the chance to talk to one of the most influential figures in my academic career, Thomas DiLorenzo. I sat at Dr. DiLorenzo’s lunch table nearly every day and had the chance to ask him questions which ranged from history to economics. Personally, I noted that speaking with Dr. DiLorenzo for, at least, thirty minutes was enough for me to realize that the history I learned from my mainstream classes was pure political correctness, not genuine history.

Mises U is more than a typical economics conference; it is a place for students to seek intellectual honesty in a world where professors are paid push propaganda to students. As the Mises Institute notes, “Mises U is what college should be.”

I am forever grateful for the Mises Institute, especially their student programs. Of course, none of their student programs would be possible without their donors. Attending Mises U in 2018 inspired me to become a donor myself. The Mises Institute, and the work they do for students, is essential for Western Civilization, especially in an academic environment which seeks to destroy it.

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The Myth of Political Inaction on Gun Control

08/05/2019Tho Bishop

One of the many unfortunate consequences of the politicization of America is the natural reaction for political factions to bunker down with dependable talking points in the immediate aftermath of a tragedy. There is perhaps no issue where this is more obvious than gun control, where the political discourse has effectively devolved into sharing mindless memes before even the most basic facts are known. Obviously, the repeated reading of political scripts lends itself to the perpetuation of false conclusions and faulty analysis.

One of the best writers out there correcting the record is our own Ryan McMaken. His work has highlighted there is plenty of evidence that shows that there is simply no correlation between gun ownership rates and gun violence, the misuse of international comparisons to America, and that it’s a general mistake to look at a collective rate of gun violence in the US.

Beyond the issue of gun policy itself, there is another basic fallacy whenever there is a discussion over political solutions to a particular problem — a narrow focus on federal action.

For example, in the aftermath of this weekend’s shootings, there has been a lot of noise regarding the lack of federal responses to past mass shootings. Ignoring the questions of whether any sort of legislative response would be either desirable or constitutional, there is a fundamental problem in viewing the federal government as the only legislative body that creates public policy.

If we consider state governments, for example, we have seen a dramatic rise in gun control measures since the Parkland High School shooting in 2018.

As Pew Research noted in August of last year, 50 different gun-focused bills were signed into law by both Democrat and Republican governors just five months after the tragedy. This trend continued in 2019, with numerous bills working their way across the country, particularly the “red flag” laws that have even won the support of the NRA.

GunControlLineGraph_0.png

Source: Pew Research

(For a handy chart of 2018 legislation passed, click here.)

As one would expect, states have taken dramatically different approaches to the issue, based on their population and ideological bent of the legislature. California, for example, has passed some of the most restrictive laws in the country, including background checks on ammo purchases and a ban on large-capacity magazines that has been the subject of a legal challenge. In contrast, Oklahoma’s governor signed a “Constitutional Carry” bill just this year.

The advantages of this decentralized approach are numerous.

One, there are clear differences in the needs and wishes of a state like California and a place like Wyoming or Montana.

Two, it helps defuse the high-stakes game of political domination that has helped erode American civil society. If half the country views the right to bear arms as a natural right that serves as a vital bulwark against government tyranny, and the other views it as an immoral defense of normalizing weapons of war, there is very little room for compromise. Instead, these political disagreements become a battle of the politically powerful vs. the politically vanquished, with the sides being determined every two years. Control over the senate or the judicial system becomes a matter of self-defense. The result is the saying of “politics as war through other means” taking on a very literal reading.

A third advantage arises when we look at the performance of these state-passed gun laws, allowing the opportunity for unexpected consequences of these policies to play out in real life. 

For example, we have seen how red-light laws in Maryland have led to the death of a man never convicted of a crime. Similarly, we’ve seen county-level nullification of tighter gun control laws in Washington state, with rural county sheriffs refusing to enforce laws promoted by urban politicians that they see as unconstitutional infringements on the second amendment (and an example of political decentralization beyond the state level).

A less obvious consequence is that pushing for legislation at the federal level helps feed the political theater of the absurd. 

For example, if Republican politicians know that gun control is extremely unpopular with their base, but don’t want to be seen as being indifferent to a national tragedy, their response is to find easier targets to hit. This has played out this weekend with many Republican leaders, including the president, returning to the tired old crusade of ranting about video games and social media as the true villains of this weekend's tragedies.

Of course, we should not underestimate a politician's ability to turn obvious absurdity into law. It is easy to foresee there being enough dolts in Congress willing to act on such desperate scapegoating. 

In fact, as some forms of gun control manage to win bipartisan support, the best protection against federal infringement of American gun rights is the very political dysfunction often lamented by the press and other “Serious People.”

Any American that values their gun rights should hope some new twitter spat between Trump and "the Squad" can prevent bipartisan cooperation toward the president's desire to “take the guns first, go through due process second.”

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