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2023: Fourth Turning Meets Mass Formation Psychosis

2023: Fourth Turning Meets Mass Formation Psychosis

Authored by Jim Quinn via The Burning Platform blog,

“Four things need to exist or…

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2023: Fourth Turning Meets Mass Formation Psychosis

Authored by Jim Quinn via The Burning Platform blog,

“Four things need to exist or need to be in place if you want a large-scale mass phenomenon to emerge. The first thing is that there needs to be a lot of socially isolated people, people who experience a lack of social bonds. The second one is that there needs to be a lot of people who experience a lack of sense-making in life. And the third and the fourth conditions are that there needs to be a lot of free-floating anxiety and a lot of free-floating psychological discontent. So: meaning, anxiety, and discontent that is not connected to a specific representation.

So, it needs to be in the mind without the people being able to connect it to something. If you have these four things—lack of social bonds, lack of sense-making, free-floating anxiety, and free-floating psychological discontent—then society is highly at risk for the emergence of mass phenomenon.”

 – Mattias Desmet – The Psychology of Totalitarianism

“Try to unlearn the obsessive fear of death (and the anxious quest for death avoidance) that pervades linear thinking in nearly every modern society. The ancients knew that, without periodic decay and death, nature cannot complete its full round of biological and social change. Without plant death, weeds would strangle the forest. Without human death, memories would never die, and unbroken habits and customs would strangle civilization. Social institutions require no less. Just as floods replenish soil and fires rejuvenate forests, a Fourth Turning clears out society’s exhausted elements and creates an opportunity.” 

– Strauss & Howe – The Fourth Turning

I recently finished reading Mattias Desmet’s fascinating and illuminating book The Psychology of Totalitarianism, where he examines the mass formation psychosis which swept over the world during the time frame of early 2020 until present day. He explores some of the root causes of this psychological phenomena, comparing it to previous episodes in history, and delving into whether it occurred naturally or was purposely generated in order to implement a Great Reset agenda.

This type of spectacle has happened throughout human history, even documented by Charles Mackay in his 1841 book Extraordinary Popular Delusions and the Madness of Crowds. It is clear to me aspects of mass formation psychosis played a part in the previous two Fourth Turnings, as both sides in the U.S. Civil War displayed characteristics of those being hypnotized by a narrative, and the German people falling under the spell of Hitler and his rhetorical skills.

As the potentially historic year 2023 unfolds before us, we are confronted with a world drowning in unpayable debt; a global recession/depression imminent; raging inflation at twice the level reported by our overlords; real unemployment at four times the level reported by the government apparatchiks; a government completely devoid of honesty, integrity or responsibility to its citizens; a society dictated by corruption, materialism, narcissism, and bereft of civic and personal responsibility; globalist billionaires and their captured organizations (WEF, WHO, NATO, CDC, FDA, FBI, CIA, DOJ, IRS) actively trying to rule the world through technological and biological means; and insane politicians, generals, and bureaucrats pushing the world towards WWIII, using Ukraine and Taiwan as their trigger points.

In the midst of this hellish landscape, we still have an enormous percentage of the U.S. and global population trapped in a mass formation psychosis trance and unable or unwilling to regain their common sense and ability to comprehend they have been duped, used, lied to, and sacrificed at the altar of the Great Reset.

I feel like I’m in a Twilight Zone episode, waiting for the surprise ending, as I continue to go through the motions of life, getting up at the same time every morning, driving the same route to work, doing the same job, going grocery shopping, doing laundry, reading, writing, and waiting for the bottom to drop out. I think I know what is going to happen, but I don’t, and neither does anyone else, no matter how sure they appear and how well compensated they are for providing “expert” opinions.

I’ve been waiting since 2010 for a financial/economic collapse, but the “powers that be” have been able to create a Potemkin façade built upon debt, money printing, propaganda, and market manipulation, much like Madoff juggling balls for decades (never making one actual trade), giving the appearance of stability and success, until he could juggle no more. Then it all collapses suddenly, just as many of the vaxxed thought they were safe, then died suddenly. The Hemingway quote regarding going bankrupt captures our current state of affairs:

“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.” – Ernest Hemingway – The Sun Also Rises

The reason no one is expecting a sudden collapse is because it hardly ever happens. We are trapped in our normalcy bias cocoon. The stock market goes up for a week. The stock market goes down for a week. The “experts” try to interpret the meaning of each word uttered by Powell or one of his Fed cronies. Elections are held to see which group of corrupt politicians will be in control of screwing us. Biden says something stupid. Harris says something stupid. Trump sells NFT trading cards of himself. Twitter files are released. Covidian cultists continue to deny the reality the jabs are killing and maiming millions, while still pushing the toxic injections on our children.

Drag queen shows for children and transgender deviancy are heralded by satanists. We send another $100 billion we don’t have to an actor in Ukraine so more of his people can be slaughtered. Klaus Schwab, Bill Gates, and the rest of the global elite fly in their private jets to Davos to plan their takeover of the world. Climate imbeciles want to ban your gas stove, make you eat bugs, and never venture more than 15 minutes from your hovel. It’s an endless show and we are both the spectators and victims. The daily distractions of life, along with trivialities like social media, sporting events, mass media propaganda, and this government shitshow, keep the masses from seeing the danger dead ahead.

Whenever I’m befuddled by the incontestable idiocy of the willfully ignorant masses, I have to remind myself we are in the midst of a Fourth Turning where reason and critical thinking are far outweighed by emotion and temporary insanity. As a cynical old bastard who hasn’t believed anything a politician, banker or MSM talking head has emitted in decades, it is hard for me to comprehend how the majority are so easily swayed by the web of lies spun by those pulling the strings behind the curtain.

They want to believe “experts” because thinking is hard, and the latest NFL playoff game starts in 30 minutes. We’ve become a nation of unserious, unintelligent, uncurious, unthinking worshippers of technology, entertainment, and infantilism, as described by Neil Postman in his 1985 book comparing Orwell dystopian vision to Huxley’s dystopian vision. It seems we are now caught in a vise between both visualizations of horror.

“When a population becomes distracted by trivia, when cultural life is redefined as a perpetual round of entertainments, when serious public conversation becomes a form of baby-talk, when, in short, a people become an audience, and their public business a vaudeville act, then a nation finds itself at risk; culture-death is a clear possibility.” 

- Neil Postman – Amusing Ourselves to Death: Public Discourse in the Age of Show Business

“Americans no longer talk to each other, they entertain each other. They do not exchange ideas, they exchange images. They do not argue with propositions; they argue with good looks, celebrities, and commercials.” 

- Neil Postman – Amusing Ourselves to Death: Public Discourse in the Age of Show Business

Huxley warned us over 90 years ago, before TV. Postman warned us almost 40 years ago, before the internet, 24-hour cable TV, smart phones, or social media. They were prescient in their warnings, but unheeded. Their prophecies tie in perfectly with Desmet’s theories on why the world has been overcome by this mass formation psychosis. Essentially, Desmet argues our society was sick before the onset of covid. The technological “advancement” of our world has led to people leading meaningless lives and working bullshit jobs.

The rise of the administrative state where hard fulfilling jobs (farmers, craftsmen, builders) have been replaced by finance and administrative paper pushing jobs where human interaction is drastically reduced and their worlds revolve around rules, regulations, and impersonal dogma, has created tens of millions of depressed, anxious, neurotic people seeking something to make their pitiful lives worthwhile. The most meaningless administrative jobs steadily increase and are rewarded more generously, while the hardest workers struggle to put food on the table. Industrialization and specialization may be efficient from a corporate profit standpoint, but it has been dehumanizing from a psychological standpoint.

The Enlightenment brought about a transformation of a world built upon religion, superstition, and small communities into a world built on science, reason, and industrialization. The fear and discomfort, once inflicted by the clergy and nobility, with the dread of judgement day, transformed into a false hope of a scientific created nirvana. As the centuries have progressed the social connectedness of humans has deteriorated, with isolation and lack of social relationships leading to anxiety, depression, and loss of purpose.

Humans used to depend on each other and live for each other, but are now relegated to being nameless, faceless automatons among the masses. Half the workers in America find their jobs meaningless. A 2013 Gallup World Poll found that 63% of workers sleepwalk through their jobs, while another 24% are disengaged, actively demoralizing, and demotivating their coworkers. Only 13% love what they do. Most people just feel like a cog in the machine, as Desmet contemplates.

“The worker became, as they say, a cog in the industrial machine, lubricated only by the thought of wages due. Labor changed from a cumbersome but inherently meaningful existential task into a disembodied utilitarian necessity.” 

- Mattias Desmet, The Psychology of Totalitarianism

As work became nothing more than a means to earn wages, in order to consume and amuse themselves, the rise of mass media has further contributed to the decline in sincere social connections, as TV and the internet have further isolated millions and allowed those constituting the invisible government to propagandize whatever narrative suits their malevolent purposes.

Those in power don’t want neighbors congregating, mates gathering in pubs, joyous festivals of friends, or anyone sitting around kitchen tables figuring out how they’ve been screwed over by those they elect to represent their interests. Their plans depend on a populace living in constant fear of something, or they might inadvertently turn their attention to their looting and pillaging of the world’s wealth. Fear is the basis for the mass formation psychosis currently consuming the world.

Decades of psychological deterioration of the masses due to their pointless occupations, meaningless lives, mass media and government school indoctrination, and feelings of purposelessness, despair, and anxiety set the foundation for the onset of this covid driven mass formation psychosis. The free-floating anxiety infecting hundreds of millions around the globe was seeking a conduit to channel their fears and fantasizing about becoming part of a crusade for the greater good.

All that was needed was a virus with a scary name, a billion-dollar marketing campaign, a narrative spun by a well-compensated media, corrupt politicians and Deep State actors seeking to depose a president, and a plethora of unethical “experts” willing to sell their souls to Big Pharma. Once the covid narrative was connected to their free-floating anxiety a global swindle was born.

“Free-floating anxiety is the most painful psychological phenomenon someone can experience. It’s extremely painful. It leads up to panic attacks, to all kinds of extremely painful psychological experiences. What people want in this situation is something to connect their anxiety to. They’re looking for an explanation for the anxiety. And now, if this free-floating anxiety is highly present in a population, and the media provide a narrative, which indicates an object of anxiety, and at the same time, describe a strategy to deal with this object of anxiety, then all the anxiety connects to this object and people are willing to follow the strategy to deal with this object, no matter what the cost is. That is what happens in the beginning of mass formation.” 

- Mattias Desmet – The Psychology of Totalitarianism

Fear and anxiety are the lifeblood of a mass hysteria event. An already psychologically damaged populace was primed to react insanely to an entirely overblown “crisis”, spurred on by bad actors who sought riches, notoriety, acclaim, and the ability to impose authoritarian measures on the masses as proof of their power and supremacy. This unjustified fear about a flu virus has resulted in far greater problems which should really be feared. The onset of this psychological tsunami of fear has resulted in the rise of a dictatorial state, with presidents, governors, mayors, and lower-level tin pot totalitarians issuing decrees, mandates, and commands with the threat of imprisonment, loss of jobs, fines, or beatings as the immediate consequence for not obeying.

This absurd terrified reaction by the masses has destroyed millions of small businesses; severed the bonds between family, friends, and neighbors; wrecked our economy; handed unlimited power to corrupt malicious politicians; provoked societal chaos; empowered deviants to gain cultural traction; destroyed the health of millions through the collapse of immune systems; and will trigger both civil and global warfare in the immediate future.

The truth is mental health has been declining for decades, as meaningless jobs, government school indoctrination and dumbing down of the populace, technology creating generations of socially awkward shut-ins, cultural decay, corporatism, and the ineptitude and corruption of political leadership, have created an atmosphere of hopelessness and angst. Depression, anxiety, suicides, drug addiction, and a slew of psychological disorders infected the world before this virus ever appeared.

Over 13% of adults take anti-depressants, with almost 25% of women over 60. The results are similar for Europe. A general malaise had settled across the world as we entered 2020. The latent fear and anxiety in society, combined with little knowledge of viruses and inadequate critical thinking skills, created a perfect storm of social panic and a willingness to believe whatever they were told by people who proclaimed to know the answers and pretended to be experts. The covid cause provided the fearful with meaning in their otherwise woeful lives.

The covid narrative gave frightened people purpose to their existence. They became mentally intoxicated they were part of an army, fighting to defeat this evil virus for the greater good of humanity. Once this belief took hold, the central mechanism of mass formation was firmly in control, and they would believe whatever they were instructed to believe. They became myopically focused on their imminent deaths, unless they masked, social distanced, locked down, and obeyed every dictate of their covidian savior – Saint Anthony Fauci, a petty life-long government bureaucrat playing out his totalitarian Napoleon complex fantasies, while reaping Big Pharma riches and Big Media accolades.

Once the covidian cult was formed, it no longer mattered whether the narrative was blatantly wrong. It didn’t matter that masks didn’t work, social distancing was a farce, lockdowns were worthless, ivermectin worked, ventilators and Remdesivir killed people, or the survival rate for anyone under 70 years old was 99.9%. It wasn’t about facts and reason. The covidian cult had a purpose and they didn’t want to go back to their wretched pointless lives. Desmet describes this process of mass formation psychosis.

“This process yields a psychological gain. Firstly, the anxiety that previously roamed through society as a tenebrous fog is now linked to a specific cause and can be mentally controlled via the strategy put forward in the story. Secondly, through a common struggle with “the enemy,” the disintegrating society regains its coherence, energy, and rudimentary meaning. For this reason, the fight against the object of anxiety then becomes a mission, laden with pathos and group heroism. Thirdly, in this fight all latent brewing frustration and aggression is taken out, especially on the group that refuses to go along with the story and the mass formation. This brings an enormous release and satisfaction to the masses, which they will not let go of easily.” 

- Mattias Desmet – The Psychology of Totalitarianism

Desmet believes the masses and the leaders they choose to follow are spellbound by the ideologically produced storyline, both under a form of hypnosis which is exceedingly difficult to interrupt. The hypnosis is deepened and fostered by the relentless mass media propaganda spewed across the airwaves and internet by organizations benefiting from the panic and fear.

The Deep State corporatocracy which has replaced our Constitutional Republic takes advantage of every fabricated “crisis” by expanding their wealth, power, and control over a populace which has been indoctrinated to believe the lies, misinformation, and propaganda pronounced by the overlords they are told to worship and obey. I think Desmet accurately assess the percentage of people enthralled by the narrative and completely under the spell of the false plot. Approximately 30% of people are completely hypnotized, with 40% to 60% not hypnotized but choosing to go along with the crowd, and a minority of 10% to 30% who resist the narrative and actively push back.

Considering only 30% of the adult population didn’t let themselves be injected with the untested, experimental, Big Pharma enriching gene therapy, which was guaranteed to keep you from catching covid according to Fauci, Walensky, Biden and numerous other “experts”, it seems like Desmet’s estimates are pretty accurate. Only 10% have been vocal dissenters. These were the people fired from their jobs, censored on social media, and canceled by friends and family. The mass formation A team were the 30% posting selfies of themselves with masks, shields, vaccine cards, and any other virtue signaling BS showing they were part of the cult, saving the world from this evil virus.

They were also the Karens berating the unmasked, screaming at people closer than six feet, turning in neighbors for breaking the rules, and wishing death upon all the unvaxxed. The cowardice of middle 40% has been the most disappointing aspect of this overhyped flu faux pandemic, as they dutifully submitted to the whims of the cultists – wearing their masks, locking down, avoiding human contact, obeying the totalitarian dictates of politicians, believing absurdities spouted by blustering bureaucrats, complying with un-Constitutional mandates, and sheepishly lining up for jabs that didn’t keep them from catching covid, spreading covid, being hospitalized with covid, or dying from covid. These sheepish followers are the pitiful descendants of the German prison guards who claimed they were only following orders during WWII.

In Part 2 of this article I will attempt to relate this mass formation psychosis phenomenon to the waning years of this Fourth Turning, and how they will intertwine and impact the final outcome of this crisis.

*  *  *

It is Jim's sincere desire to provide readers of The Burning Platform with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit Jim's site, he asks that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. He needs your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. 

Tyler Durden Mon, 01/23/2023 - 17:00

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Week Ahead Alchemy: Can Powell Turn a Quarter-Point Move into a Hawkish Hike?

The new year is still young, but the week ahead may be one of the most important weeks of the year. The divergence that the market has been anticipating…

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The new year is still young, but the week ahead may be one of the most important weeks of the year. The divergence that the market has been anticipating will materialize. The Federal Reserve will most likely hike by 25 bp on Wednesday, followed by half-point moves by the European Central Bank and the Bank of England the following day. On Friday, February 3, the US will report its January employment situation. It could be the slowest job creation since the end of 2020. The Bureau of Labor Statistics also will release the preliminary estimate of its annual benchmark revisions. 

The markets' reaction may be less a function of what is done than what is communicated. The challenge for Fed Chair Powell is to slow the pace of hiking while pushing against the premature easing of financial conditions. In December, ECB President Lagarde pre-committed to a 50 bp hike in February and hinted that another half-point move was possible in March. With the hawks showing their talons in recent days, will she pre-commit again? Amid a historic cost-of-living squeeze that has already kneecapped households, can Bank of England Governor Bailey deliver another 50 bp rate hike and sell the idea that it is for the good of Britain, for which the central bank does not expect growth to return until next year?

United States: The Federal Reserve has a nuanced message to convey. It wants to slow the pace of hikes, as even the hawkish Governor Waller endorsed, but at the same time, persuade the market that tighter financial conditions are necessary to ensure a times convergence of price pressures to the target. Indeed, Fed Chair Powell may warn investors that if it continues to undo the Fed's work, more tightening may be necessary. The market has heard this essentially before and is not impressed. Financial conditions have eased. Consider that the 2-year yield is down 20 bp this year, and the 10-year yield has fallen twice as much. The trade-weighted dollar is off by more than 1.5%. The S&P 500 is up 4.6% after a 7% rally in Q4 22. The Russell 200 has gained nearly 7% this month, on top of the 5.8% in the last three months of 2022.  

Last year, Powell drew attention to the 18-month forward of the three-month T-bill yield compared to the cash 3-month bill as a recession tell. It has been inverted for over two months and traded below -100 bp last week, the most inverted since the tech bubble popped over two decades ago. The market seems more convinced that inflation will fall sharply in the coming months. The monetary variables and real economy data, including retail sales, industrial production, and the leading economic indicators, suggest a dramatic weakening of the economy. Yet just like most looked through the contraction in H1 22, seeing it as primarily a quirk of inventory and trade, the 2.9% growth reported in Q4 22 does not change many minds that the US economy is still headed for weaker growth, leaving aside the fuzzy definition of a recession.

The median forecast in Bloomberg's survey is for a 188k rise in January nonfarm payrolls. If accurate, it would be seen as concrete evidence that the jobs market is slowing. This is also clear by looking at averages for this volatile series. For example, in the last three months of 2022, the US created an average of 247k jobs a month. In the first nine months of the year, nonfarm payrolls rose by an average of 418k a month. Average hourly earnings growth also is moderating. A 0.3% rise on the month will see the year-over-year pace slow to 4.3%. That matches the slowest since June 2021. The decline in the work week in December to 34.3 hours spurred narratives about how businesses, hoarding labor, would cut hours before headcount. Yet, we suspect it was partly weather-related, and that the average work week returned to 34.4 hours, which is around where it was pre-Covid. 

Benchmark revisions are usually of more interest to economists than the market, but last month's report by the Philadelphia Fed raised the stakes.  It looked more closely at the April-June 2022 jobs data. After adjusting for updated data from the Quarterly Census on Employment and Wages, it concluded that job growth was nearly flat in Q2 22. It estimated that only 10,500 net new jobs were created, a far cry from the 1.05 mln jobs estimated by the Bureau of Labor Statistics. The Business Employment Dynamics Summary (released last week) was starker still. It points to a job loss of nearly 290k. Lastly, we note that US auto sales are expected to have recovered from the unexpected almost 6% decline (SAAR) in December. However, the 14.1 mln unit pace would still represent a 6% decline from January 2022, when sales spiked to 15.04 mln.  

The Dollar Index continues to hover around 102, corresponding to the (50%) retracement of the rally recorded from January 2021 through September 2022. It has not closed above the 20-day moving average (now ~102.80) since January 3. It remains in the range set on January 18, when it was reported that December retail sales and manufacturing output fell by more than 1%. That range was about 101.50-102.90. Although we are more inclined to see it as a base, the prolonged sideways movement last month saw new lows this month. That said, the next retracement target (61.8%) is near 99.00.

Eurozone:  The ECB rarely pre-commits to a policy move, precisely what ECB President Lagarde did last month. Apparently, as part of the compromise with members who at first advocated another 75 bp hike in December, an agreement to raise rates by 50 bp was accompanied by an agreement to hike by another 50 on February 2 and explicitly not rule out another half-point move in March. There was a weak effort to soften the March forward guidance, but the hawks pushed back firmly. The swaps market has about a 70% chance of a 50 bp hike in March rather than a 25 bp move. 

The ECB's deposit rate stands at 2.00%, and the swaps market is pricing 125 bp of hikes in the first half of the year. In contrast, the Fed is expected to raise the Fed funds target range by 50 bp. This has been reflected in the two-year interest rate differential between the US and Germany, falling from about 275 bp last August to around 160 bp now. We had anticipated the US premium would peak before the dollar, and there is a lag of almost two months. The direction and change of the interest rate differential often seem more important than the level. In late 2019, before Covid struck, the US premium was near 220 bp, and the euro was a little below $1.12.

There has been a significant shift in sentiment toward the eurozone. The downside risks that seemed so dominant have been reduced. A milder-than-anticipated winter, the drop in natural gas prices, and successful conservation and conversion (to other energy sources) lifted the outlook. Some hopeful economists now think that the recession that seemed inevitable may be avoided. The preliminary January CPI will be published a day before the ECB meets. The monthly pace fell in both November and December. The year-over-year rate is expected to ease to 5.1% from 5.2%, while the core rate slips to 5.1% from 5.2%. The base effect suggests a sharp decline is likely here in Q1, but divergences may become more evident in the euro area. This could see a reversal of the narrowing of core-periphery interest rate spreads. 

The EU's ban on refined Russian oil products (e.g., diesel and fuel oil) will be implemented on February 5. It is considering imposing a price cap as it did with crude oil. Diesel trades at a premium to crude, while fuel oil sells at a discount. There have been reports of European utilities boosting purchases from Russia ahead of the embargo. Separately, reports suggest that the EU was still the largest importer of Russian oil in December when pipeline and oil products were included. However, at the end of December, Germany stopped importing Russia's oil delivered through pipelines. This does not count oil and refined producers that first go to a third country, such as India, before being shipped to Europe.  

Pullbacks in the euro have been shallow and brief. Most pullbacks since the low was recorded last September, except the first, have mostly been less than two cents. That would suggest a pullback toward the $1.0730 area, but buyers may re-emerge in front of that, maybe around $1.0775. On the top side, the $1.0940 is the (50%) retracement of the euro's losses since January 2021. The euro rose marginally last week, even though it slipped by around 0.2% in the last two session. It has risen in eight of the past 10 weeks.   

UK: Without some forward guidance that stopped short of a pre-commitment, the market is nearly as confident that the Bank of England will deliver another half-point hike in the cycle to lift the base rate to 4.0%. The BOE was among the first of the G10 countries to begin the interest rate normalization process and raised the base rate in December 2021 from the 0.10% it had been reduced to during the pandemic. The swaps market projects the peak between 4.25% and 4.50%, with the lower rate seen as slightly more likely.

High inflation readings and strong wage growth appear to outweigh the economic slump. The BOE's forecasts see the economy contracting 1.5% year-over-year this year and output falling another 1% in 2024. The market is not as pessimistic. The monthly Bloomberg survey (51 economists) founds a median forecast for a 0.9% contraction this year and an expansion of the same magnitude next year. The survey now sees only a 0.2% quarterly contraction in Q4 22 rather than -0.4% in the previous survey. The median forecast for the current quarter was unchanged at -0.4%. 

Sterling continues to encounter resistance in front of $1.2450, which it first approached in mid-December. Although marginal new highs have been recorded, like the euro, it has been mainly confined to the range set on January 18 (~$1.2255-$1.2435). We are inclined to see this sideways movement as a topping pattern rather than a base, but it likely requires a break of the 1.2225 area to confirm.

Japan:  After contracting in Q3 22, the Japanese economy is expected to have rebounded in Q4 (~3.0% annualized pace). Reports on last month's labor market, retail sales, and industrial production will help fine-tune expectations. This month's rise in the flash composite PMI moved back above 50, pointing to some momentum. Still, Tokyo's higher-than-expected January CPI warns of upside risk to the national figure due offers good insight into the national figure, which may draw the most attention. We expect Japanese inflation to peak soon. The combination of government subsidies, the decline in energy prices, including the natural gas it gets from Russia, and the stronger yen (which bottomed in October) will help dampen price pressures. We look for a peak here in Q1 23. 

Last week, the dollar moved broadly sideways against the yen as it continued to straddle the JPY130 area. It repeatedly toyed with the 20-day moving average (~130.40) last week but has yet to close above this moving average for more than two months. Rising US and European yields may encourage the market to challenge the 50 bp cap on Japan's 10-year bond. A break of the JPY128.80 area may spur a test on the JPY128.00 area. However, the market seems to lack near-term conviction.

China:   Mainland markets re-open after the week-long Lunar New Year holiday. There may be two drivers. The first is catch-up. Equity markets in the region rose. The MSCI Asia Pacific Index rose every session last week and moved higher for the fifth consecutive week. The JP Morgan Emerging Market Currency Index rose about 0.40% last week and is trading near its best level since mid-2022. The euro and yen were little changed last week (+/- <0.20%). The second driver is new news--about Covid and holiday consumption. The PMI is due on January 31, and the median forecast in the Bloomberg survey is for improvement. It has the manufacturing PMI rising to 49.9 from 47.0 and the service PMI jumping to 51.5 from 41.6.  The offshore yuan edged up 0.3% last week, suggesting an upside bias to the onshore yuan, against which the dollar settled at CNY6.7845 ahead of the holiday. 

Canada:  After the Bank of Canada's decision last week, the FOMC meeting, and US employment data in the days ahead, Canada is out of the limelight. It reports November GDP figures and the January manufacturing PMI. Neither are likely to be market movers. The Bank of Canada is the first of the G7 central banks to announce a pause (conditional on the economy evolving like the central bank anticipates) with a target rate of 4.50%. The central bank sees the economy expanding by 1% this year and 1.8% next. It suggests that the underlying inflation rate has peaked and, by the end of the year, may slow to around 2.6%. The swaps market has 50 bp of cut discounted in the second half of the year. 

The Canadian dollar held its own last week, rising by about 0.5%, which was second only to the high-flying Australian dollar. The greenback approached CAD1.3300, its lowest level since last November when it traded around CAD1.3225. Quietly, the Canadian dollar has strung together a six-week advance, and since its start in mid-December, it has been the third-best performer in the G10 behind the yen (~6.2%) and the Australian dollar (~6.1%). We are more inclined to see the greenback bounce toward CAD1.3400 before those November lows are re-tested. 

Australia:  The market's optimism about China recovering from the Covid surge, with the help of government support and attempts to help the property market, has been reflected in the strength of the Australian dollar, which leads the G10 currencies with around a 4.4% gain this year. Yet, changes in the exchange rate and Chinese stocks are not highly correlated in the short- or medium-term. The surge of inflation at the end of last year, reported last week, lent greater credence to our view that the Reserve Bank of Australia will lift the cash target rate by 25 bp when it meets on February 7. In the week ahead, Australia reports December retail sales, private sector credit, and some housing sector data, along with the final PMI readings. The momentum indicators are stretched after a 2.5-cent rally from the low on January 19. It is at risk of a pullback and suggests a break of $0.7080 may be the first indication that it is at hand. We see potential initially toward $0.7000-$0.7040.

Mexico:  After falling by nearly 5.25% in the first part of the month against the Mexican peso, the dollar is consolidating. The underlying case for peso exposure remains, but there are two mitigating conditions. First, surveys of real money accounts suggest many are already overweight. Second, the dollar met key target levels in it late-2019 (~MXN18.80), even if not to the February 2020 low (slightly below MXN18.53). On January 31, Mexico reports Q4 GDP. The economy is expected to have expanded by 0.5% after 0.9% quarter-over-quarter growth in Q3 22. Growth is expected to slow further in Q1 23 before grinding to a halt in the middle two quarters. The following day, Mexico reports December worker remittances. These have been a strong source of capital inflows in Mexico. Remittances have a strong seasonal pattern of rising in December from November, which sees remittances slow. However, after surging for the last couple of years, they appear to have begun stabilizing. Also, the optimism around China is understood to be more supportive of Brazil and Chile, for example, than Mexico.  

We do not have a very satisfying explanation for the two-day jump in the dollar from about MXN18.5670 to MXN19.11 (January 18-19) outside of market positioning and the possibility of some large hedge working its way through. Still, it seemed like a transaction-related flow rather than a change in the underlying situation. The greenback has trended lower since then and has fallen in five of the last six sessions. It fell to nearly MXN18.7165 ahead of the weekend. Latam currencies, in general, did well, with the top two emerging market currencies coming from there (Brazil and Chile). The Mexican peso rose about 0.4% last week.   Last week, the Argentine peso's loss of almost 1.2% gave it the dubious honor of the worst performer among emerging market currencies. It is now off nearly 4.6% for this month. Mexican stocks and bonds extended their rallies. A firmer dollar ahead of the February 1 conclusion of the FOMC meeting may see the peso consolidate its recent gains.

 


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How far could UK property prices drop and should investors be concerned?

The more pessimistic analysts believe that UK house prices could drop by as much as 30% over the next couple of years.…
The post How far could UK property…

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The more pessimistic analysts believe that UK house prices could drop by as much as 30% over the next couple of years. Property prices leapt alongside most other asset classes over the long bull market that ran relatively uninterrupted over the 13 year period from the start of the recovery from the international financial crisis in 2009 and last year.

Average prices across the country almost doubled from £154,500 in March 2009 to just under £296,000 in October last year, when the market hit its most recent record high. Global stock markets had been in a downward spiral for almost a year while property prices kept climbing.

Source: PropertyData

However, a combination of rising interest rates, up from 0.1% in late 2021 to 3.5% in January 2023 and further hikes expected this year, soaring inflation putting pressure on household budgets and nerves around a recession has seen house prices ease. There still not far off their record highs of late 2022 but the trend is downward.

chart

Source: BankofEngland

The big question for homeowners and property investors is just how far could UK residential property prices drop over the next couple of years? How long prices might take to recover from a drop is another important unknown.

First time buyers struggling to get onto the property ladder may welcome a significant drop in UK house prices. Even if higher interest rates mean monthly mortgage costs don’t change much, lower sales prices should reduce the minimum deposits required to secure a mortgage.

However, for anyone who currently owns a home, especially if purchased in the past couple of years towards the top of the market, a significant drop in valuation would be extremely unwelcome. That is particularly the case for home owners at risk of falling into negative equity, which means the market value of their property is lower than the outstanding sum due on the mortgage.

Falling house prices, if the decline is steep, could also create a wider economic crisis and spill over into other parts of the economy and financial markets.

But not everyone agrees UK house prices will drop by anywhere near 30%. Let’s explore the factors that would affect the residential property market over 2023 and beyond and different opinions on how serious a market slump could be. As well as the wider potential consequences that could result if the dive in home valuations turns out to be in line with more negative forecasts.

How much will UK house prices fall by?

The short answer to that question is that we don’t know but the most pessimistic outlook is for drops of up to 30% over the next couple of years. However, there are a number of factors that mean there is a high chance valuations will slide by less. But let’s look at the negative scenario first.

A 30% drop in home valuations sounds like a lot and it is. However, against the backdrop of the last couple of years that kind of fall looks a little less extreme. Prices are up 28% since April 2019 and a 30% fall would take the average price of a home in the UK to around £210,000, where it was in 2016. A less severe 20% drop in prices would see the average price settle at around £235,000, where it was just before the onset of the Covid-19 pandemic and the Bank of England dropping interest rates to just 0.1%.

Mid-term interest rates are likely to have the biggest influence on house prices. At the BoE’s current 3.5% base rate, the best mortgage deals available are 2 years fixed at 4.8% compared to 1% deals available until recently. At an LTV of 60% on a £400,000 mortgage, that would push the monthly rate up to £2300 a month from £1500 a month.

For some borrowers, that is likely to prove problematic. It is also likely to mean lower demand for properties from buyers who might have otherwise decided to move up the property ladder and first time buyers. A drop in demand at higher price brackets due to affordability thresholds being passed will see property prices fall.

Will demand drop enough to lead to a 30% fall? That depends on factors that are currently unknown. How high interest rates go will have a huge influence and that will depend on inflation. There are signs inflation is easing and today the Fed’s preferred gauge for inflation, the personal consumption expenditures (PCE) price index, rose 5.0% in December from a year earlier. That was slower than the 5.5% 12-month gain as of November and the lowest level since September 2021.

In the UK, inflation has also eased from 11.1% year-on-year in October to 10.5% in December. It’s still much higher than in the USA but will hopefully now maintain a consistent downward trend helped by easing energy prices.

There are hopes the Fed will pull back on further interest rate rises from March and that would set a tone that the Bank of England may well follow with a slight delay. The Fed’s base rate is also already higher than in the UK at 4.25% to 4.5%.

If interest rates and, more importantly, mortgage rates do not rise by more than 1% from where they are today it is unlikely valuation drops of as much as 30% eventuate. But if they did what would the consequences be?

What happens if UK house prices fall 30%?

The good news is that even a house price fall as extreme as 30% would be unlikely to lead to systematic issues in the UK’s financial services sector. More people own their homes outright than have a mortgage – 8.8 million to 6.8 million homes. Lloyds Bank, one of the UK’s biggest mortgage lenders recently reported the average LTV of its mortgage portfolio is just 40%.

Even if average LTV is a little higher for other banks, a wave of defaults is unlikely to threaten their stability and infect other areas of financial markets or the wider economy. Mortgage lenders are also reluctant to repossess homes they’ve lent against as it’s an expensive process for them. They will do as much as they can to work with borrowers who are struggling to meet increased mortgage payments.

What does falling property prices mean for investors?

For property investors, it’s really a case of if rental income will continue to cover mortgage payments, or get close enough to mean the investment still adds up. If mortgage payments are likely to exceed realistic rental income over the next few years investors may consider selling up. Unless the property was purchased in the last 2-3 years, that could still mean walking away with a reasonable return.

For investors in the wider financial markets, it seems unlikely that falling property prices, even if up to 30% is knocked off valuations, will see serious contagion spread and spark a crisis.

It’s not impossible that UK property prices could fall by as much as 30% over the next couple of years as a result of higher interest rates and tighter household budgets but the likelihood is the average drop will be less. And in the worst case scenario, wider fallout should be limited. A repeat of the systemic crash that led to the 2008 financial crisis does not seem like a real prospect. Lenders are well capitalised and the system looks strong enough to cope.

The post How far could UK property prices drop and should investors be concerned? first appeared on Trading and Investment News.

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Visualizing Remittance Flows & GDP Impact By Country

Visualizing Remittance Flows &amp; GDP Impact By Country

The COVID-19 pandemic slowed down the flow of global immigration by 27%.

And,…

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Visualizing Remittance Flows & GDP Impact By Country

The COVID-19 pandemic slowed down the flow of global immigration by 27%.

And, as Visual Capitalist's Richie Lionell details below, alongside it, travel restrictions, job losses, and mounting health concerns meant that many migrant workers couldn’t send money in the form of remittances back to families in their home countries.

This flow of remittances received by countries dropped by 1.5% to $711 billion globally in 2020. But over the next two years, things quickly turned back around.

As visa approvals restarted and international borders opened, so did international migration and global remittance flows.

In 2021, total global remittances were estimated at $781 billion and have further risen to $794 billion in 2022.

In these images, Richie Lionell uses the World Bank’s KNOMAD data to visualize this increasing flow of money across international borders in 176 countries.

Why Do Remittances Matter?

Remittances contribute to the economy of nations worldwide, especially low and middle-income countries (LMICs). 

They have been shown to help alleviate poverty, improve nutrition, and even increase school enrollment rates in these nations. Research has also found that these inflows of income can help recipient households become resilient, especially in the face of disasters.

At the same time, it’s worth noting that these transfers aren’t a silver bullet for recipient nations. In fact, some research shows that overreliance on remittances can cause a vicious cycle that doesn’t translate to consistent economic growth over time.

Countries Receiving the Highest Remittances

For the past 15 years, India has consistently topped the chart of the largest remittance beneficiaries.

With an estimated $100 billion in remittances received, India is said to have reached an all-time high in 2022.

This increasing flow of remittances can be partially attributed to migrant Indians switching to high-skilled jobs in high-income countries—including the U.S., the UK, and Singapore—from low-skilled and low-paying jobs in Gulf countries.

Rank Remittance Inflows by Country 2022 (USD)
1 India

$100,000M

2 Mexico $60,300M
3 China $51,000M
4 Philippines $38,000M
5 Egypt, Arab Rep. $32,337M
6 Pakistan $29,000M
7 France $28,520M
8 Bangladesh $21,000M
9 Nigeria $20,945M
10 Vietnam $19,000M
11 Ukraine $18,421M
12 Guatemala $18,112M
13 Germany $18,000M
14 Belgium $13,500M
15 Uzbekistan $13,500M
16 Morocco $11,401M
17 Romania $11,064M
18 Dominican Republic $9,920M
19 Indonesia $9,700M
20 Thailand $9,500M
21 Colombia $9,133M
22 Italy $9,000M
23 Nepal $8,500M
24 Spain $8,500M
25 Honduras $8,284M
26 Poland $8,000M
27 Korea, Rep. $7,877M
28 El Salvador $7,620M
29 Lebanon $6,841M
30 Israel $6,143M
31 United States $6,097M
32 Russian Federation $6,000M
33 Serbia $5,400M
34 Brazil $5,045M
35 Japan $5,000M
36 Portugal $4,694M
37 Ghana $4,664M
38 Jordan $4,646M
39 Czech Republic $4,539M
40 Haiti $4,532M
41 Ecuador $4,468M
42 Georgia $4,100M
43 Kenya $4,091M
44 Croatia $3,701M
45 Peru $3,699M
46 Sri Lanka $3,600M
47 West Bank and Gaza $3,495M
48 Jamaica $3,419M
49 Armenia $3,350M
50 Tajikistan $3,200M
51 Nicaragua $3,126M
52 Kyrgyz Republic $3,050M
53 Senegal $2,711M
54 Austria $2,700M
55 Switzerland $2,631M
56 Sweden $2,565M
57 United Kingdom $2,501M
58 Hungary $2,404M
59 Bosnia and Herzegovina $2,400M
60 Slovak Republic $2,300M
61 Moldova $2,170M
62 Azerbaijan $2,150M
63 Tunisia $2,085M
64 Zimbabwe $2,047M
65 Luxembourg $2,000M
66 Netherlands $2,000M
67 Myanmar $1,900M
68 Algeria $1,829M
69 Albania $1,800M
70 Somalia $1735M
71 Congo, Dem. Rep. $1,664M
72 Malaysia $1,620M
73 Kosovo $1,600M
74 Denmark $1,517M
75 Latvia $1,500M
76 Bolivia $1,403M
77 Belarus $1,350M
78 Cambodia $1,250M
79 Bermuda $1,200M
80 South Sudan $1,187M
81 Uganda $1,131M
82 Mali $1,094M
83 South Africa $1,019M
84 Sudan $1,013M
85 Argentina $966M
86 Montenegro $920M
87 Finland $880M
88 Bulgaria $850M
89 Slovenia $800M
90 Australia $737M
91 Madagascar $718M
92 Turkey $710M
93 Canada $700M
94 Lithuania $700M
95 Togo $668M
96 Greece $665M
97 Costa Rica $654M
98 Estonia $626M
99 Qatar $624M
100 Iraq $624M
101 Gambia, The $615M
102 Tanzania $609M
103 Norway $600M
104 Panama $596M
105 Burkina Faso $589M
106 Hong Kong SAR, China $571M
107 Paraguay $554M
108 Mozambique $545M
109 Niger $534M
110 Cyprus $527M
111 Lesotho $527M
112 Mongolia $500M
113 Rwanda $469M
114 Fiji $450M
115 North Macedonia $450M
116 Guyana $400M
117 Cabo Verde $375M
118 Kazakhstan $370M
119 Cameroon $365M
120 Cote d'Ivoire $360M
121 Liberia $351M
122 Afghanistan $350M
123 Ethiopia $327M
124 Samoa $280M
125 Mauritius $279M
126 Saudi Arabia $273M
127 Malta $271M
128 Malawi $267M
129 Zambia $260M
130 Tonga $250M
131 Comoros $250M
132 Ireland $249M
133 Suriname $221M
134 Benin $209M
135 Lao PDR $200M
136 Timor-Leste $185M
137 Sierra Leone $179M
138 Guinea-Bissau $178M
139 Trinidad and Tobago $172M
140 Mauritania $168M
141 Iceland $164M
142 Eswatini $148M
143 Belize $142M
144 Curacao $131M
145 Uruguay $127M
146 Chile $78M
147 Vanuatu $75M
148 St. Vincent and the Grenadines $70M
149 Grenada $69M
150 Botswana $56M
151 St. Lucia $55M
152 Bhutan $55M
153 Djibouti $55M
154 Dominica $52M
155 Burundi $50M
156 Aruba $44M
157 Namibia $44M
158 Guinea $41M
159 Solomon Islands $40M
160 Oman $39M
161 Antigua and Barbuda $35M
162 St. Kitts and Nevis $33M
163 Marshall Islands $30M
164 Kuwait $27M
165 New Zealand $25M
166 Macao SAR, China $17M
167 Angola $16M
168 Kiribati $15M
169 Cayman Islands $14M
170 Sao Tome and Principe $10M
171 Seychelles $9M
172 Maldives $5M
173 Gabon $4M
174 Palau $2M
175 Papua New Guinea $2M
176 Turkmenistan $1M
Total World $794,059M

Mexico and China round out the top three remittance-receiving nations, with estimated inbound transfers of $60 billion and $51 billion respectively in 2022.

Impact on National GDP

While India tops the list of countries benefitting from remittances, its $100 billion received amounts to only 2.9% of its 2022 GDP.

Meanwhile, low and middle-income countries around the world heavily rely on this source of income to boost their economies in a more substantive way. In 2022, for example, remittances accounted for over 15% of the GDP of 25 countries.

Rank Remittance Inflows by Country % of GDP (2022)
1 Tonga 49.9%
2 Lebanon 37.8%
3 Samoa 33.7%
4 Tajikistan 32.0%
5 Kyrgyz Republic 31.2%
6 Gambia, The 28.3%
7 Honduras 27.1%
8 South Sudan 24.8%
9 El Salvador 23.8%
10 Haiti 22.4%
11 Nepal 21.7%
12 Jamaica 21.2%
13 Lesotho 21.0%
14 Somalia 20.6%
15 Comoros 20.1%
16 Nicaragua 19.9%
17 Guatemala 19.8%
18 Armenia 18.9%
19 West Bank and Gaza 18.5%
20 Cabo Verde 18.2%
21 Kosovo 17.3%
22 Uzbekistan 17.0%
23 Georgia 16.2%
24 Moldova 15.4%
25 Montenegro 15.0%
26 Ukraine 13.8%
27 Marshall Islands 11.0%
28 Guinea-Bissau 10.9%
29 Bosnia and Herzegovina 10.1%
30 Albania 9.8%
31 Senegal 9.8%
32 Jordan 9.6%
33 Philippines 9.4%
34 Fiji 9.2%
35 Liberia 9.0%
36 Dominican Republic 8.8%
37 Dominica 8.6%
38 Serbia 8.6%
39 Togo 7.9%
40 Morocco 7.9%
41 Pakistan 7.7%
42 Vanuatu 7.6%
43 Timor-Leste 7.5%
44 Suriname 7.3%
45 St. Vincent and the Grenadines 7.3%
46 Kiribati 7.2%
47 Egypt, Arab Rep. 6.8%
48 Ghana 6.1%
49 Mali 5.9%
50 Grenada 5.8%
51 Zimbabwe 5.3%
52 Croatia 5.3%
53 Belize 5.3%
54 Sri Lanka 4.8%
55 Madagascar 4.7%
56 Vietnam 4.5%
57 Bangladesh 4.5%
58 Tunisia 4.5%
59 Cambodia 4.4%
60 Sierra Leone 4.3%
61 Mexico 4.2%
62 Nigeria 4.1%
63 Rwanda 3.8%
64 Ecuador 3.8%
65 Latvia 3.6%
66 Romania 3.6%
67 Niger 3.6%
68 Kenya 3.5%
69 Bolivia 3.2%
70 Burkina Faso 3.2%
71 Myanmar 3.1%
72 North Macedonia 3.1%
73 Mongolia 3.1%
74 Eswatini 3.1%
75 Azerbaijan 3.0%
76 Mozambique 3.0%
77 St. Kitts and Nevis 2.9%
78 India 2.8%
79 St. Lucia 2.7%
80 Guyana 2.6%
81 Colombia 2.6%
82 Congo, Dem. Rep. 2.6%
83 Solomon Islands 2.4%
84 Luxembourg 2.4%
85 Mauritius 2.4%
86 Sudan 2.3%
87 Uganda 2.3%
88 Malawi 2.3%
89 Belgium 2.2%
90 Sao Tome and Principe 2.0%
91 Afghanistan 2.0%
92 Slovak Republic 2.0%
93 Antigua and Barbuda 2.0%
94 Bhutan 2.0%
95 Cyprus 1.9%
96 Portugal 1.8%
97 Thailand 1.7%
98 Belarus 1.6%
99 Mauritania 1.6%
100 Estonia 1.6%
101 Malta 1.5%
102 Peru 1.5%
103 Czech Republic 1.5%
104 Djibouti 1.4%
105 Burundi 1.3%
106 Paraguay 1.3%
107 Hungary 1.3%
108 Slovenia 1.2%
109 Aruba 1.2%
110 Lao PDR 1.2%
111 Benin 1.1%
112 Israel 1.1%
113 Poland 1.1%
114 Lithuania 1.0%
115 France 1.0%
116 Bulgaria 0.9%
117 Algeria 0.9%
118 Zambia 0.9%
119 Costa Rica 0.9%
120 Palau 0.8%
121 Panama 0.8%
122 Cameroon 0.8%
123 Tanzania 0.7%
124 Indonesia 0.7%
125 Spain 0.6%
126 Iceland 0.5%
127 Trinidad and Tobago 0.5%
128 Austria 0.5%
129 Cote d'Ivoire 0.5%
130 Seychelles 0.4%
131 Korea, Rep. 0.4%
132 Italy 0.4%
133 Germany 0.4%
134 Sweden 0.4%
135 Denmark 0.3%
136 Malaysia 0.3%
137 Namibia 0.3%
138 Switzerland 0.3%
139 Finland 0.3%
140 Botswana 0.3%
141 Greece 0.2%
142 Ethiopia 0.2%
143 Qatar 0.2%
144 Russian Federation 0.2%
145 Brazil 0.2%
146 China 0.2%
147 South Africa 0.2%
148 Iraq 0.2%
149 Guinea 0.2%
150 Netherlands 0.2%
151 Uruguay 0.1%
152 Kazakhstan 0.1%
153 Hong Kong SAR, China 0.1%
154 Argentina 0.1%
155 Norway 0.1%
156 Japan 0.1%
157 Maldives 0.08%
158 Turkey 0.08%
159 United Kingdom 0.07%
160 Macao SAR, China 0.07%
161 Ireland 0.05%
162 Australia 0.04%
163 Oman 0.04%
164 Saudi Arabia 0.03%
165 Chile 0.02%
166 United States 0.02%
167 Gabon 0.02%
168 Kuwait 0.01%
169 Angola 0.01%
170 New Zealand 0.01%
171 Papua New Guinea 0.01%
172 Turkmenistan 0.001%

Known primarily as a tourist destination, the Polynesian country of Tonga banks on remittance inflows to support its economy. In 2022, the country’s incoming remittance flows were equal to almost 50% of its GDP.

Next on this list is Lebanon. The country received $6.8 billion in remittances in 2022, estimated to equal almost 38% of its GDP and making it a key support to the nation’s shrinking economy.

Tyler Durden Fri, 01/27/2023 - 23:25

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