Matt Yglesias

Oct 10th, 2008 at 8:56 am

A Canadian Solution?

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As world economic conditions continue to deteriorate, Iceland continues to be the leading edge of collapse. Small countries tend, in the nature of things, to have less-balanced economies than do big ones. And Iceland is a very small country with an economy that revolves more-or-less exclusively around fish, tourism, Bjork, and banking so a banking collapse amidst a global economic slowdown leaves them in bad shape and facing national bankruptcy. There’s some thought that Russia may bail them out. Were there not a million other stories in the news, the thought of a NATO ally that long played host to a strategically important US military base becoming some kind of dependency of Russia would be prompting a lot of alarmed coverage. Thus far, though, not much. But David Hayes in a letter to Canada’s National Post suggests a Canadian solution:

Iceland, in the words of its President, is facing the “very real danger” of national bankruptcy. If the situation deteriorates, Canada should invite the small island nation to join our confederation, just as we did 60 years ago with another island in the Atlantic facing bankruptcy.

The island in question, for those not up on their Canadian history, would be Newfoundland which until 1949 was a politically separate element of Britain’s evolving empire-then-commonwealth. He observes that Iceland is no further from Ottawa than is Vancouver, that Iceland’s population largely speaks English (and one might add that Canada has some experience with bilingualism), that Iceland’s population is comparable in size to Canada’s smaller provinces, and that Canada is already committed to Iceland’s defense through NATO.

Filed under: Canada, Iceland, Russia





77 Responses to “A Canadian Solution?”

  1. Ed Says:

    The only problem I see with this is that Canada already has too many small provinces, that rely on support from the largest province, Ontario, and the wealthiest province, Alberta. Adding one more may break the system.

  2. Rich Says:

    Not as big a deal for Newfoundland, since it had already lost its self-governing status in 1934…basically reverted to being a colony, because it was so much in the hole economically/fiscally. So when Newfoundland joined Canada in 1949 they were in fact gaining rather than losing autonomy–from colony to confederal province. Maybe Iceland should go back to Denmark, which ruled it (more or less) until 1944.

  3. DTM Says:

    I condemn this Canadian aggression, and I know I speak for every American when I say we are all Icelanders now.

  4. David Says:

    Excellent idea!

  5. DTM Says:

    By the way, do you think Canada would be interested in a slightly larger and more contiguous acquisition? Just floating the idea …

  6. Rich Says:

    Fish, baby, fish!

  7. Dan Dickinson Says:

    Another cold island. Awesome. I liked it better when we were talking about inviting Turks & Caicos to the party.

  8. James Robertson Says:

    I suspect that Russia won’t be involved in much bailing, given the collapse of their credit markets. The funny thing about this is how the left seems to believe that this mess is the result of too little regulation. The starting point was government pushing banks to make stupid loans, followed by two things:

    – government pretending that stupid loans were, in fact, sound, and using GSE’s to implicitly back them
    – banks reacting to the stupidity by inventing increasingly exotic instruments to try and manage the risk behind the stupid loans

    The problem wasn’t a lack of regulation so much as an over indulgence in the idea that everyone needed to buy a house, without regard to their ability to pay for it. Politicians of both parties are complicit here, although the original “help the people with bad credit” idea didn’t really originate on the right.

    More regulation isn’t going to be the answer, because it was part of the problem to begin with. But hey – it doesn’t matter. Obama will win the election, and with the help of a large Democratic majority, a new round of state management will be tried out. The thing no one is really considering is this:

    – there are two possible sources of “lenders of last resort” for the feds to turn to – mid-east oil countries and China.

    That means that the money for bailing things out, and for any large spending plans either candidate has will come with strings. The thing to watch for is what those strings will end up being.

    Ultimately, I expect the next President to unwillingly preside over a massive shrinkage of the Federal government, because it simply won’t be affordable. Military bases around the world will be scaled back massively (possibly completely), and domestic welfare spending will have to be massively curtailed. The upshot of that will likely be that Obama will end up being a one term President, for reasons that will be entirely beyond his control.

  9. hermano Says:

    dont forget sigur ros when you talk about bjork!

  10. Pere Ubu Says:

    Cripes, from the comments Gordon Brown’s been making I wouldn’t be surprised if Britain decided to invade to get their citizen’s money back.

    Wars have been started for less, after all.

  11. apikoros Says:

    What I want to know is, “will this require tri-lingual signage?” I can see the Quebecois up in arms already :-)

  12. boilerman10 Says:

    to commentor #2…

    Denmark was a poor administrator of Iceland, damn poor. Joining Canada is silly. Returning to Denmark or Norway is silly. British rumblings are Monty Python-esque.

    Iceland is another victim of a fiscal policy started in Washington that spread all over. We see the failures of the Washington policies right here at home, and Iceland is seeing the failure on the world stage.

    We and Iceland will recover without either of us needing to be colonized by a foreign power probably just as bad off or worse financially, but more diversified and thus able to absorb the impact of the hard landing of fiscal depression.

  13. Neil the Ethical Werewolf Says:

    Yeah, DTM! The new route to single-payer healthcare: We fail too, and get Newfoundlanded in by Canada.

    With luck, they’ll stipulate that we enter as one province. We welcome our new Canadian overlords.

  14. c6Logic Says:

    With all of Iceland’s geothermal energy–I cannot understand why they cannot export electricity–can’t a system of pipes be built to run under water with electrical wires going to the mainland? Doesn’t the world need clean energy? And if THEIR banking system is defuct, what is happening to the Cayman Islands? And Switzerland?

  15. Tyro Says:

    The problem wasn’t a lack of regulation so much as an over indulgence in the idea that everyone needed to buy a house, without regard to their ability to pay for it. Politicians of both parties are complicit here, although the original “help the people with bad credit” idea didn’t really originate on the right.

    As I’ve pointed out time and time again, this is much like blaming the dot.com bubble of the late 90s on programs to help women- and minority-owned businesses.

    I’m not really seeing why overleveraging in the CDO market isn’t being blamed here, but rather why everyone’s first instinct is to illogically blame consumers for the fact that way too much capital was chasing way too few lending opportunities.

  16. DTM Says:

    James Robertson,

    Once again, the proximate cause of the housing bubble wasn’t things like the CRA, but rather the extraordinarly easy monetary policy from 2002 until 2006. It is also a bit silly to blame the mortgage GSEs for subprime mortgages since by definition the mortgage GSEs didn’t participate in the subprime market.

    You are right, however, that the reason the bursting of the U.S. housing bubble has turned into a global financial crisis is the securitization and leveraging of these mortgages. But it baffles me that you don’t see this as a regulatory issue–the propensity of financial institutions to do exceptionally risky things that jeopardize the entire economy is exactly why we regulate financial institutions, and so when it turns out that financial institutions have gotten away with doing exceptionally risky things that have jeopardized the entire economy, that is a failure of regulation.

  17. VA Gal Says:

    Don’t you know, it’s a master plot by the whales to undermine Iceland’s economy!

    Seriously – I was recently at a large event where someone mentioned how spectacular Iceland is. Several people brought up Iceland’s stand on whaling and urged everyone to spend their tourist dollars someplace like Costa Rica.

    Much as I’d love to see Iceland, I’ll wait until they join a full ban on whaling.

  18. Christopher Monnier Says:

    Hey, no fair! Why can’t America get Iceland?

  19. gentry Says:

    Man, Harper is having a tough enough time with French, and now you want him to start learning Icelandic?

  20. jimbo Says:

    c6Logic:

    With all of Iceland’s geothermal energy–I cannot understand why they cannot export electricity–/em>

    Look at a map.

  21. Stefan Says:

    I for one welcome our new Canadian overlords….

  22. LaFollette Progressive Says:

    “I’m not really seeing why overleveraging in the CDO market isn’t being blamed here, but rather why everyone’s first instinct is to illogically blame consumers for the fact that way too much capital was chasing way too few lending opportunities.”

    Because it’s the only remotely plausible way that the people who are actually responsible for the crisis can scapegoat liberals?

    Really, anyone whose head is not firmly lodged in their own colon understands that bad loans made by a few banks would not have brought a healthy financial system to the brink of ruin. The subprime mortgage bust merely tipped over the first domino.

    Regulations were loosened to allow the financial sector to leverage itself to dangerous levels in order to reap windfall profits off of the housing boom. Unregulated markets in collateralized debt swapping were used to pretty up the balance sheets. The Wall Street set skimmed massive amounts off the top for themselves and had no incentive whatsoever to self-regulate, and yet that’s exactly what the Secretary of the Treasury wanted them to do.

    And frankly, if you believe that banks had to be “pushed” by lefty agitators to make risky loans, I’ve got a bridge in Alaska for sale at a reasonable price. Has anyone noticed that our entire economic policy for the past 20 years has been based around using low, low interest rates to boost consumer debt spending? Have you noticed that credit lenders figured out in the 1990s that they could make more money by offering tempting low introductory rates and then putting the squeeze on anyone who borrowed too much money with 29.9% penalty rates and $39 late fees? Sound familiar?

  23. MarkC Says:

    I condemn this Canadian aggression, and I know I speak for every American when I say we are all Icelanders now.

    I want to be in toppling the statue of Stephen Harper when our tanks rumble into Ottawa. I’m trying to Mapquest it, though, and can’t locate the statue. Anyone?

  24. sunsin Says:

    But it baffles me that you don’t see this as a regulatory issue

    He doesn’t see it because he thinks that the banks are innocent victims being raped by those nasty consumers and liberals, ’specially the darkies. Makes perfect sense — if you’re a bank looking for some cover to get away with the loot.

  25. AndreaB Says:

    Bold move, which would have the additional effect of opening Canada to EU membership and markets, protecting them from their dependence of the US (which is currently dragging the otherwise fairly stable Canadian economy down).

    And if Canada joins the EU and the US enters a deep long-term recession, some form of participation in the EU market, if not outright membership, may become an option for the US as well (though the EU may turn them down if the economy and currency are too shaky).

    I don’t think it will happen, but it has some intriguing long-term possibilities.

  26. snoey Says:

    Don’t dismiss the fish economy:

    http://blogs.menupages.com/sanfrancisco/2008/10/holy_mackerel_sf_attorney_on_t.html

  27. Colin Campbell Says:

    Don’t worry Icelanders, we’re very polite conquerors. We’ll bake you beaver tails and even let you have your own NHL team.

    In all seriousness, it’s an intriguing idea, but I don’t think it’s something even being talked about in Ottawa.

  28. gentry Says:

    “I want to be in toppling the statue of Stephen Harper when our tanks rumble into Ottawa. I’m trying to Mapquest it, though, and can’t locate the statue. Anyone?”

    We’ve got a really nice statue of Simon Bolivar in a very prominent spot though. Could you topple that instead?

  29. beowulf Says:

    Your misleading headline left the impression that you had finally solved the Canadian problem. Oh well. I did like C6Logic’s transatlantic electric pipe plan, good stuff.
    http://www.jabootu.com/images/jaws2cable.jpg

  30. joe from Lowell Says:

    I condemn this Canadian aggression, and I know I speak for every American when I say we are all Icelanders now.

    I call on both sides to show restraint.

    Yeah, I know, not exactly reaching for the starts on that one.

  31. gentry Says:

    “Bold move, which would have the additional effect of opening Canada to EU membership and markets, protecting them from their dependence of the US (which is currently dragging the otherwise fairly stable Canadian economy down).”

    Well, Iceland is not in the EU.

    However, next week there is a EU-Canada summit at which a free trade deal is expected to be presented. I don’t think people here appreciate how huge it would be for us to be the only country enjoying free trade with both of the world’s largest trading blocs.

    And do permit me to crow for a second, that apparently our banking system was rated tops by these people and in September we created more jobs than in any month since statistics have been kept. Zut alors!

  32. joe from Lowell Says:

    If pushing banks to make risky loans to low-income people caused the mortgage meltdown, why do banks (which have anti-redlining requirements) have so many less risky loans and such lower rates of default than their non-bank, unregulated competitors?

    Oh, right – because your theory doesn’t make any sense.

  33. DTM Says:

    By the way, I don’t actually see any need to demonize banks. The business they are in is by nature risky, but the role they play is also absolutely vital to a modern economy. Accordingly, we need banks around, and indeed we need them taking risks. But we also need to regulate them closely to make sure they don’t take too many risks and bring the whole economy down when things go sour.

    In that sense, banks are like rivers. Yes, there is an ever-present risk they could flood and create widespread damage, but at the same time you wouldn’t want to actually get rid of rivers. So, you build flood control measures, which is the metaphorical equivalent of banking regulations.

    But come to think of it, I guess people like James Robertson don’t necessarily believe in the importance of flood control measures either.

  34. nobi yuno Says:

    Even with their own crisis to content with, I imagine the Russians would be quite interested in the economic colonization of a NATO state and that it would give them a lot of leverage against us vis-a-vis Georgia, that critically important fetal state we were ready to go to war with Russia over a couple weeks ago but have since forgotten about.

  35. Geoff Says:

    If taken seriously, this idea would be popular in Canada and kryptonite in Iceland. Just speculating.

    No one wants to be another country’s bitch. Newfies still resent it. And Iceland is one of the most culturally protectionist democracies in the world.

    Still, regional bitching is an integral element of the Canadian identity, so I’m all for it.

  36. Aaron S. Veenstra Says:

    I wholeheartedly support this notion. Furthermore, I suggest that Canada annex the upper midwest as well.

  37. rjones2818 Says:

    It’s unfortunate for the capitalists, but the only way for capitalism to work is to have an ever expanding market (whatever type). We’re seeing the failure of capitalism because the financial market had extended itself to the point where there was no more profit to be made. Take derivatives, for example. What I’m reading is that there are $62 trillion in derivatives (World yearly GDP is roughly $50 trillion) and those derivatives have been leveraged out to $625 trillion. It’s Monopoly money, and investors have figured this out. Now our economy goes south while we try to save the banksters.

    As for the rest of us (worldwide), we get to reap what the bosses have sown, as usual.

  38. chelski Says:

    This is all scheming to get Canada into the 2014 World Cup by grabbing Eidur Gudjohnsen and the rest of Iceland’s soccer talent. Any democracy-loving CONCACAF nation should rise up in opposition to this eskimo plot.

  39. ClaudeB Says:

    Seriously, Norway would be a much better candidate for a takeover of Iceland than Canada. Come on guys, this crap has been published in the f***ing National Post, for heaven’s sake!

  40. Kalkin Says:

    @LaFollette Progressive: “scapegoat liberals?”

    No. Don’t get confused. It’s about scapegoating Black and Latino people. Liberals are part of the story, because liberal policy needs to be discredited, but it gets its emotional power, and its plausibility for a certain sort of mind, from racism. In fact, this is pretty much a textbook case of how racism serves the interests of the rich by diverting the anger of poor and middle class whites.

  41. BleuTickDem Says:

    C’mon people, don’t see why this whole problem is the fault of minorities? They’ve taken street-level muggings to the next level. Instead of mugging passersby for chump change, they decided to start mugging banks’ mortgage brokers for no-money-down, way-beyond-their-income, variable-rate mortgages. Don’t you get it? The banks and the mortgage brokers had no other choice but to process and file their applications and notarize the legal paperwork and documents. It was either that or get a knife between their ribs or their heads blown off. You just can’t understand how fast things like this can happen; there’s just no time to be a hero. One minute you’re sitting in your office all calm and relaxed doing your work, and then all of a sudden, out of nowhere, a dark-skinned minority jumps through your doorway with an application demanding a mortgage, or else! What to do? What to do?

  42. Tom Says:

    With all of Iceland’s geothermal energy–I cannot understand why they cannot export electricity–can’t a system of pipes be built to run under water with electrical wires going to the mainland?

    This is ludicrous, but in fact they do export a lot of their energy in the form of aluminum, the raw materials for which are plentiful but which requires a lot of energy to produce. It’s not done great things for their environment, unfortunately.

  43. A Hermit Says:

    I thought we were going to annex the Turks and Caicos Islands first!!! Who wants to sit on a beach in Iceland in january?

  44. ACLS Says:

    Oh god has this era of mergers and consolidation become so severe that not even nations are immune?

    Really though, the line about the distance from Vancouver to Ottawa is nonsense. Plenty of things are closer to Washington DC than Honolulu, including Iceland.

  45. Stefan Says:

    If the situation deteriorates, Canada should invite the small island nation to join our confederation, just as we did 60 years ago with another island in the Atlantic facing bankruptcy.

    Joking aside, Hayes doesn’t know what he’s talking about. Newfoundland faced bankruptcy in the 1930s due to the Depression and was then ruled by the British-accountable Commission of Government) but by the late 1940s, when it rejoined Canada, that was no longer the case. Newfoundland was not “facing bankruptcy” at the time it voted to join Canada.

  46. Stefan Says:

    No one wants to be another country’s bitch. Newfies still resent it.

    “Newfies” also resent being called Newfies by mainlanders. It’s demeaning. If you’re not from there, the word is Newfoundlanders.

  47. Dismayed Liberal Says:

    Thanks Stefan! You’re right on both counts b’y!

  48. Stefan Says:

    No problems, Dismayed Liberal, me ol’ cocky!

  49. KeithM Says:

    Before we’ll accept occupying any or all of the United States, there’s a few our wannabe subjects will have to understand.

    1. You will learn to hum the Hockey Night in Canada theme…whatever it will eventually turn out to be.

    2. You will be required to hate Toronto for no particular reason.

    3. You must come up with an amusing regional stereotype that other Canadians can use to make fun of you.

    4. You will loathe Celine Dion.

    5. Gay military marriages.

    6. You will be required to demonstrate you can locate your new country on a map or a globe.

  50. hopeless pedant Says:

    Newfoundland officials actually approached the US about becoming the (then) 49th state. That was one of the things that increased willingness of Canada to let them join in. (Few Americans understand the fragility of Canada and their understandable and constant fear of being overwhelmed by us).

  51. Em Says:

    So I guess the lunatic fringe has finally given up on Turks & Caicos becoming a Canadian province…

    Do us Canuckleheads a favour, will ya? Next time you read a letter by “Dave from Kitchener”, try not to take it so seriously – especially if it’s written to the National Post.

  52. rockypondgirl Says:

    KeithM, I’d say that most if not all of the US can already pony up on #s 3 & 4, and as to the last item, a goodly percentage of US folks can’t even find their *current* country on a globe. How do ya expect ‘em to find a new one?

    We’re half way there… PLEASE TAKE US WITH YOU!!!

  53. Joel Says:

    There’s the issue of Iceland being essentially an extension of Denmark and having no cultural overlap with Canada. A funny idea, though.

  54. the swede Says:

    Canada to take over Iceland? There are a lot more cultural ties than you think:

    http://en.wikipedia.org/wiki/Gimli_Distillery

  55. Eleanor Says:

    What do you mean, no cultural overlap? What about Icelandic Days in Gimli, Manitoba?

  56. CaptainVideo Says:

    The solution is for Iceland to join the European Union so that it can take advantage of the European Union’s resources.

  57. bartkid Says:

    *cough*, Amerida, *cough*.

  58. Nordy Says:

    Chelski’s got it right. We don’t need Eidur Gudjohnsen in CONCACAF, threatening American hegemony. Don’t even get me started on Heiðar Helguson, although I would gladly welcome his wife.

  59. Erik Says:

    This is especially interesting to me in light of the very close ties between Iceland and one Canadian province in particular, Manitoba, which has a very large community (approx. 100 000 people) of second and third generation Icelandic descendants — a figure about a third the population of Iceland itself. Very active ties indeed, including annual visits from the Icelandic PM.

  60. Mike L Says:

    c6Logic Says:
    With all of Iceland’s geothermal energy–I cannot understand why they cannot export electricity

    Electricity doesn’t work like that. transmission over distance works poorly.
    To “export” the geothermal energy, They would need to use their geothermal energy/electricity to make something else to transport by ship.
    If the Hydrogen economy were here, maybe use Geothermal electricity to produce Hydrogen from water, then load that onto ships. Still way more expensive than producing hydrogen locally. Hydrogen pipeline would be ridiculously expensive.
    Or while we are talking pipe dreams, they could make a pipeline of Air, use geothermal energy to pressurize it, and on the other end the compressed air could turn electric generating turbines. It would be a pipeline and container all in one. Of course the walls of the pipeline would have to be mad thick and expensive.
    I guess they just have to make widgets.

  61. Ian Davis Says:

    Regarding “We’d welcome our new overlords”.

    I am not suggesting that Canada should take over Iceland as Norway or Denmark might. Einar Gudfinnsson (Iceland’s Fishery Minister) has said that Iceland has to consider every option. It is to be hoped if he is indeed considering every option, that the possibility of union with Canada is at least being considered.

    Geographically, and culturally Iceland is far similar to Canada than Europe. As Canada’s 11th province, Iceland could retain its parliament, as all provinces do, protect its own language (as Quebec currently does), employ its own legal system (Quebec uses the Napoleonic code), retain its own religious freedoms, traditions, holidays, etc. I would personally hope that Iceland would insist on the right to manage its own fishery, since this is something Iceland has proved far more capable of doing than our own inept leadership in Ottawa.

    It may be that Iceland is best advised to continue going it alone. It may be that Icelands best interests are served by moving towards much closer integration with Europe. Perhaps Iceland should revert to being a colony of Denmark, or forge new relationships with Norway, or even Russia. I can not speak for Icelanders.

    But I can say that a union of Iceland with Canada would be of enormous long term value to Canada. Iceland potentially is in a strong position to leverage its strategic position with Canada as a very valuable asset to Canada. Canadians respect Icelands achievements, and would I think be proud to include Iceland in our federation. I think Icelanders would find a good home for Iceland in Canada. I grew up in England before emigrating to Canada. I found a good home here.

    At a minimum I think both Icelanders and Canadians should give the idea serious consideration, even if either or both sides eventually reject the idea as being unworkable.

    http://inviteicelandin.blogspot.com

  62. Ian Davis Says:

    By the way, do you think Canada would be interested in a slightly larger and more contiguous acquisition? Just floating the idea …

    It is possible that the successful integration of Iceland into Canada, would encourage Greenland to subsequently also contemplate uniting with Canada. But Greenland is administered by Denmark, and I for one believe strongly in respecting existing borders, and the rules of international law.

    I do not know Greenland well, but doubt whether Greenland with a population of only 56,000 would be in a strong position to be accepted into Canada as a province. If accepted into Canada it would probably be as a new territory, just as Yukon, North West Territories, and Nunavut currently are.

  63. Ian Davis Says:

    I am of course presuming the question meant Greenland and not the USA.

    Regarding the USA, I am strongly in favour of a proposal I read recently. We should send all our conservatives to the US. Since they want to turn Canada into an extension of the US it is fair I think to presume that they’d be much happier in the US. The US should in exchange send us all their liberals. Since they are always bitching about the state of their union, it is fair to imagine they’d be much happier in Canada.

    The biggest impediment to union between Canada and the US is the future of the US dollar. It is one thing for Canada to contemplate inviting 330,000 bankrupt individuals to join Canada. We can turn the lives of 330,000 around with ease. It would arguably be unwise to invite 350,000,000 bankrupt individuals to join us. It is not clear that we could rescue numbers that large from their misfortunes.

    If George Bush is right and “this sucker does go down”, for sure I’d want Canada to do everything it could to help the US, for I’d be friend to the US. But I think it would also be time for Canada to go looking for new friends and new export markets.

  64. Hendrix Says:

    WE WANT ICELAND!
    Welcome to Canada Iceland!

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  69. Icelanderlivingincanada Says:

    Ok, so, Americans, two things: 1)your country is not what it used to be, and no one see’s it as a great powerful place anymore, it is just another country with (sometimes) rather stuck up citizens 2) Canada is doing way better than the US economically, culturally, and politically, so i suggest that the talk of invasion or taking over the Dominion of Canada be stopped, since it is ideology from the 20th century, not the 21st (and that is only the the Americans who mentioned those things, not all Americans

    now, to respond, why all this talk about iceland making huge moves, why doesn’t it just rebuild it’s economy so it will emerge out of this recession (that was caused by over spending American banks) a strong new economy and nation fit for the 21st century with a new, fish based, strong, and pround Icelandic Krona. I think this is the best solution, cause in times like these the economy is slow, so it’s prime time to rebuld and prepare for the end of the recession.

    …i guess my point is Long Live Independant, Proud Iceland and the Icelandic Krona!

    PS: some americans are nice, but ones who make fun of other countries need to be set straight.

  70. TheBrucer Says:

    A quick demographic search does not reveal what I think is true: Icelanders have emigrated to Canada in some numbers and now influence at least part of the culture in northwestern Ontario-Manitoba. On and off, the idea of absorbing some Caribbean island comes up in discussion(bad idea). Iceland, however, would be a natural match and offer both countries an opportunity for growth: economically and politically.

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