NZIER on who should set the cash rate

June 25th, 2013 at 2:00 pm by David Farrar

have published this note:

The ’ idea to use the Board to make might improve decision-making but using a board designed to represent industry, risks compromising the Reserve Bank’s independence and the goals of .

So they’re saying collective decision making may be better, but not if those deciding are not independent.

Responsibility for monetary policy rests solely with the Governor of the Reserve Bank of New Zealand. Twenty-five years ago, monetary policy was tied to the neck of one person to maximise accountability for inflation targeting. Today most countries have adopted inflation targeting but use a board rather than a single person to set interest rates.1

Groups tend to make better decisions than individuals by using a wider range of information. That often leads to less extreme decisions.2 And decision-making by groups is more effective because members of the group contribute a greater variety of perspectives.3

I would note it can lessen accountability though.

Recently the Reserve Bank of New Zealand set-up an internal Governing Committee, comprising the Governor, Deputy Governors and an Assistant Governor, as a group to assist decision-making.

These innovations help the Reserve Bank form better decisions from a wide range of information and perspectives. That means the distinction between a single decision-maker and decision-making by a board is blurred by current Reserve Bank practice. 

So we expect better monetary policy from a board rather than a single person. But given the way policy is currently set these gains are unlikely to be large.4

In other words, the decisions are in practice collective ones.

Moving to a board structure has practical implications. We agree that like elsewhere in the world, releasing the minutes and voting record of the committee improves transparency.

Agreed.

But already New Zealand has a very transparent central bank. According to one measure, New Zealand ranks as the second-most transparent central bank globally.5 Publishing the board minutes is helpful but the Reserve Bank of New Zealand does not have a transparency problem. 

But let’s not pretend there is a huge problem.

It’s not clear what making the decision-making board more representative of the wider economy might achieve.

If the problem is improving decision-making, NZIER’s view is the Reserve Bank already receives considerable input from all parts of the economy as part of its regular information gathering process.

Including exporters and manufacturers on a decision-making board seems targeted towards a solving a different perceived problem: changing the objectives of monetary policy.

But good monetary policy is not about promoting exports: it’s about targeting inflation.
Ultimately, monetary policy is a technical activity. So any decision-making board needs the professional advice and experience of career economists that understand the economy.

Basically the proposal is an attempt to change the purpose of monetary policy by stealth.

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31 Responses to “NZIER on who should set the cash rate”

  1. Ross12 (1,143 comments) says:

    “Basically the proposal is an attempt to change the purpose of monetary policy by stealth.”

    Agreed !!

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  2. david (2,531 comments) says:

    Colour me ignorant if you wish but I’m not aware that we have been plagued by “bad decision-making”. If I’m right then WTF is going on. Nothing stealthy about it dpf, it is a full frontal assault on independance of decision making on monetary policy.

    If it ain’t broke, then green tape is not a fix. Tell them to naff off.

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  3. mandk (816 comments) says:

    @ david,
    I don’t think we have been “plagued” by poor decision-making, but I do think there have been spells when the decision-making has been poor.
    I came to NZ in 2003, and I couldn’t understand why the OCR at that time was being steadily reduced when the economy was growing rapidly and inflation was creeping up.
    It was a mistake which contributed to the house price boom that ended in 2007.

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  4. jaba (2,089 comments) says:

    please don’t the Gweens ANYWHERE near the Govt Coffers

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  5. tas (589 comments) says:

    If it ain’t broke, don’t fix it.

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  6. Tom Jackson (2,458 comments) says:

    A group of unelected suits isn’t any better than one unelected suit.

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  7. Yoza (1,515 comments) says:

    “…but using a board designed to represent industry, risks compromising the Reserve Bank’s independence and the goals of monetary policy.” and “Responsibility for monetary policy rests solely with the Governor of the Reserve Bank of New Zealand.”

    The Reserve Bank is a million miles from being independent. This is just another ‘public’ institutions that reflects the interests and doctrine of predominantly foreign financial corporations. A former Governor, Don Brash, was so extreme in his political beliefs he went on to seize the leadership of the National party and tried to drive that already extreme right party even further right. When that failed he joined a party that was even further right again.

    I am fairly sure, regardless of whether it is a board or single Governor, our foreign corporate overlords will accept anything other than an obedient servant mirroring the Brash exemplar.

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  8. Yoza (1,515 comments) says:

    Tom Jackson (709) Says:
    “A group of unelected suits isn’t any better than one unelected suit.”

    Exactly.

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  9. bhudson (4,734 comments) says:

    @Yoza,

    That would be the Reserve Bank Governor so extreme that the Labour govt were comfortable retaining?

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  10. Yoza (1,515 comments) says:

    “@Yoza,

    That would be the Reserve Bank Governor so extreme that the Labour govt were comfortable retaining?”

    This would be the Labour Party that has neoliberal policies that aren’t that dissimilar to those of the National party, … and you seriously expect me to defend that bunch of sniveling creeps from an accusation of colluding with the incumbent quisling in charge of the Reserve Bank.

    On a different subject- I have a copy of the Chomsky book, Profit Over People (Neoliberalism and the Global Order), which you criticised as being inundated with self referencing footnotes. This is completely untrue, the book is a collection of pieces he has contributed to magazines and transcripts of talks or lectures he has delivered. The first two pieces were taken from magazine articles and had no footnotes accompanying them, the audience being predominantly South American would probably be well aware of the deadly lengths the US is prepared to go to maintain the illegitimate authourity of its clients there – so I imagine footnotes weren’t all that necessary. The next two parts were taken from talks he had delivered and the only self-referential footnotes were there to direct the reader to topics he was discussing in brief but had covered in greater depth in the books he suggested – the same ‘self-referential footnotes’ also contain references to the original source of information. The next part (v , the Zapatiste Uprising) was from an article for Time magazine and contained no footnotes. VI, The Ultimate Weapon, was originally published in Zmagazine only contains one self referencing footnote out of twenty-one, this one footnote suggest the reader also read Glen Burins, Labor Fights Against Fast-Track Trade Measure, article in the Wall Street Journal. VII, Hordes of Vigilantes, has no self referencing footnotes.

    You’ll have to try harder next time you want to make up things about Chomsky there champ.

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  11. bhudson (4,734 comments) says:

    @Yoza,

    You missed the point about Chomsky making all sorts of claims as facts and not citing any references at all (presumably because he feels his word should be accepted as some sort of gospel.) It is that which makes his self-reverential (sorry, referential) citing stand out all the more.

    A very quick count again in that book got to 16 clear self-reverential citings. Plus another 4, at least, citing books specifically on Chomsky (which amounts to the same thing.) As a whole that probably amounts to close to 25% of all references in the book.

    Lets face it, the man has sought to build a literary Jonestown

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  12. Yoza (1,515 comments) says:

    I would be interested in you providing a specific example of the“…sorts of claims as facts…” he has made. After all, if there are soooo many you should have no problem finding at least one example.

    “A very quick count again in that book got to 16 clear self-reverential citings.”

    My copy has a total of 100 footnotes (so less than 1/4), could you supply an example of one of these self-referential footnotes that you consider self indulgent or misleading. Many people, like you, make vague criticisms of Chomsky’s work without actually presenting a specific single fact he has misrepresented.

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  13. bhudson (4,734 comments) says:

    Of my version:

    Page 8: [on neoliberalism] “a marked increase in severe deprivation for the poorest nations… Confronted with these facts..”

    If only we were, in fact, confronted with facts, as opposed to Chomsky’s belief posed as such.

    Page 9: “It is precisely in its oppression of nonmarket forces that we see how neoliberalism operates…”

    Again, no substance to his belief, merely Chomsky’s view presented as fact. With no fact.

    But they are so completely trumped by:

    Page 21: Neoliberalism and Global Order “I am quoting the secret record, available now in principle, though largely unknown to the general public or the intellectual community.”

    Again no cited facts. And with prose like that he might well have at least acknowledged rense.com for the “facts”. Or is it the other way around?

    The entire book resonates with this same polemic. And so thoroughly devoid, of the whole, with any real fact.

    As for the self-referential footnotes:

    Chapter: The Passion for Free Markets, footnote 4 “also Noam Chomsky, Powers and Prospects. And 11 “see Noam Chomsky, Deterring Democracy” and ( same footnote) “Chapter 6; Letters from Lexington”. and also 25 “See Noam Chomsky, Year 501″

    And that is but one chapter.

    You may well agree with him Yoza, but the man not only spouts his own opinion as unassailable and unverified act, on the rare occasions that he does provide his views of references and facts to back up his claims, he cites his own works as providing the facts to back up his positions.

    As I said – a literary Jonestown

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  14. bhudson (4,734 comments) says:

    Whereas for an opinion substantiated with a great number of references (not her own) try “China: Fragile Superpower” by Susan L Shirk.

    Not my general political view (she is a Democrat and an official in the Clinton administration I believe), but without question she has gone to enormous lengths to back up her statements with references. (So many as to make the thing damn near unreadable, but substantiated by others nonetheless.)

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  15. Yoza (1,515 comments) says:

    “Of my version:

    Page 8: [on neoliberalism] “a marked increase in severe deprivation for the poorest nations… Confronted with these facts..”

    If only we were, in fact, confronted with facts, as opposed to Chomsky’s belief posed as such.

    Page 9: “It is precisely in its oppression of nonmarket forces that we see how neoliberalism operates…””

    I don’t have much time right now but, you’re being a dumb arse. Those ‘Chomsky ‘quotes’ are from the introduction – written by Robert W McChesney.

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  16. Albert_Ross (245 comments) says:

    Tom Jackson and Yoza: Is it then your position that decisions about the cash rate should be taken by politicians driven by the need (which will vary according to what the latest polls say) to please voters (whose views as to what’s appropriate will depend on what the latest headlines say) within a time frame which depends on how close we are to election time?

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  17. bhudson (4,734 comments) says:

    @Yoza,

    And page 21?

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  18. Yoza (1,515 comments) says:

    “@Yoza,

    And page 21?”

    It didn’t take much searching. This is one of the reasons Chomsky refers to his own substantial research into the imperial ambitions of the US’s ruling elite. The following document is referred to in ‘Year 501, the Conquest Continues’ and was declassified in 2004: Operations Coordinating Board, Washington D.C.

    Bhudson:“Chapter: The Passion for Free Markets, footnote 4 “also Noam Chomsky, Powers and Prospects.”

    This is a reference from a series of quotes he took out of articles in Observer (London), January 19, January 12, 1997; Independent, November 24, 25, 1996; Guardian Weekly, January 5, 1997; Financial Times, January 17, 1997.
    One of the quotes being, ”…up to 2 million British children are suffering ill_health and stunted growth because of malnutrition…” as a result of ”…poverty on a scale not seen since the 1930s.” -
    These are all mentioned in the footnote 4 and which you have, ‘curiously’, omitted from your pitiful attempt to smear Chomsky. That he also mentions that he has covered this topic with these references in Power and Prospects is not in the least dishonest or ‘self-reverential’.

    Bhudson: ”And 11 “see Noam Chomsky, Deterring Democracy” and ( same footnote) “Chapter 6; Letters from Lexington”.

    Once again you omit the original citation, Ian Williams, Middle East International, March 21, 1997. Referencing the observation that, ”The United States advanced its lead another notch [ referring to the US holding the record of vetoing more UN resolutions than any other country] shortly after this account appeared, casting its seventy-first veto since 1967. When the question (Israeli settlements in Jerusalem) moved to the General Assembly, the United States and Israel stood alone in opposition, again a standard pattern. – That this also gets covered in Deterring Democracy and Letters from Lexington is not in the least bit controversial.

    Bhudson: ”…and also 25 “See Noam Chomsky, Year 501″ “

    The entire reference reads:”Kirkpatrick, op.cit. Joanna Cameron, “The Cuban Democracy Act of 1992: The International Complications,” Fletcher Forum (Winter/Spring 1996). See Noam Chomsky, Year 501 (South Press), Chapter 6, for background and sources.“ and is referring to Clinton’s ramping up the trade embargo on Cuba – specifically of medical supplies. Once again, this form of citation is neither dishonest or controversial.

    The critique you offered is both pitiful and dishonest and really exposes you as a pathetic little insect. I almost feel embarrassed for you.

    I will be bookmarking this exchange for future reference in the unlikely case that you are foolish enough to attempt the same kind of bollocks in future. :)

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  19. bhudson (4,734 comments) says:

    @Yoza,

    Please do. All you have done is say that because Chomsky also referenced other people, then him referencing himself is validated. I disagree.

    As for you point of the reference to secret data being in another of his works, I would have to ask, if that were in fact the case, why then didn’t he reference it? (After all, he’s not too shy to reference himself elsewhere.)

    I won’t bookmark this page. I have no need to – you have confirmed yourself as a slavish adherent for whom Chomsky can do no wrong. It is patently also how Chomsky sees himself.

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  20. bhudson (4,734 comments) says:

    Also Yoza, it was but a tiny sample of that book. His polemic, much without substantiation, runs throughout the book.

    I am not going to suffer myself to go through it a second time however – I have already lost valuable hours of my life which I can never get back when I read if the first time.

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  21. Yoza (1,515 comments) says:

    You are obviously some kind of imbecile if you cannot understand how puerile your attempt at refuting Chomsky was. That ‘…tiny sample…’ exposed you for the fool you are.

    “His polemic, much without substantiation, runs throughout the book.”

    Utter bullshit, as I have clearly demonstrated in my previous post. Keep digging Bhudson, that hole you’re in is getting huge.

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  22. bhudson (4,734 comments) says:

    Utter bullshit, as I have clearly demonstrated in my previous post.

    But you have demonstrated no such thing Yoza. Only your refusal to accept the use of Chomsky’s dodgy claims and referencing of his own material to substantive his own claims.

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  23. Yoza (1,515 comments) says:

    Chomsky does not make dodgy claims. I asked you to provide an at least one example to back up this idiocy. In the first instance you provided a ‘Chomsky’ quote that was from someone completely different – sheer idiocy on your part. Then you provide a series of footnotes that I checked through and used to completely demolish the point you were attempting to make:

    Bhudson:“Chapter: The Passion for Free Markets, footnote 4 “also Noam Chomsky, Powers and Prospects.”

    This is a reference from a series of quotes he took out of articles in Observer (London), January 19, January 12, 1997; Independent, November 24, 25, 1996; Guardian Weekly, January 5, 1997; Financial Times, January 17, 1997.
    One of the quotes being, ”…up to 2 million British children are suffering ill_health and stunted growth because of malnutrition…” as a result of ”…poverty on a scale not seen since the 1930s.” -
    These are all mentioned in the footnote 4 and which you have, ‘curiously’, omitted from your pitiful attempt to smear Chomsky. That he also mentions that he has covered this topic with these references in Power and Prospects is not in the least dishonest or ‘self-reverential’.

    Bhudson: ”And 11 “see Noam Chomsky, Deterring Democracy” and ( same footnote) “Chapter 6; Letters from Lexington”.

    Once again you omit the original citation, Ian Williams, Middle East International, March 21, 1997. Referencing the observation that, ”The United States advanced its lead another notch [ referring to the US holding the record of vetoing more UN resolutions than any other country] shortly after this account appeared, casting its seventy-first veto since 1967. When the question (Israeli settlements in Jerusalem) moved to the General Assembly, the United States and Israel stood alone in opposition, again a standard pattern. – That this also gets covered in Deterring Democracy and Letters from Lexington is not in the least bit controversial.

    Bhudson: ”…and also 25 “See Noam Chomsky, Year 501″ “

    The entire reference reads:”Kirkpatrick, op.cit. Joanna Cameron, “The Cuban Democracy Act of 1992: The International Complications,” Fletcher Forum (Winter/Spring 1996). See Noam Chomsky, Year 501 (South Press), Chapter 6, for background and sources.“ and is referring to Clinton’s ramping up the trade embargo on Cuba – specifically of medical supplies. Once again, this form of citation is neither dishonest or controversial.

    What exactly were the dodgy claims Bhudson?

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  24. bhudson (4,734 comments) says:

    How does Page 21: Neoliberalism and Global Order “I am quoting the secret record, available now in principle, though largely unknown to the general public or the intellectual community” grab you Yoza?

    No reference cited at all.

    You asked for only one – which I am grateful for, else I might have had to spend more time going through the book again. I do accept that, in my haste to not have to spend more than a few short minutes in the book, I picked a couple of examples of unsubstantiated claims that weren’t Chomsky’s, but the real humdinger was the “I am quoting from the secret record…” which of course he couldn’t possibly reference. I guess even he has more self respect than to quote the likes of rense.com.

    I contest your claim that it was x doc above – if that was the case, surely he would have referenced it as such?

    And that is but one sentence in 165-odd pages of Chomsky proselytizing.

    Clearly he is somewhat of a hero to you Yoza. No wonder you can’t help but try to defend him

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  25. Yoza (1,515 comments) says:

    As I pointed out, you pitiful simpleton, the document was referenced in the work Year 501, where Chomsky elaborates in greater depth the point he is making in the work you find so difficult to comprehend. This is yet another example of your astounding failure to demonstrate any of the spurious points you are attempting to defend.

    It took me about 2 minutes, using the material provided in the book you are deriding Profits Over People to produce the document you seem to be claiming does not exist. As Chomsky points out, the one of the people involved in the “secret record” was George Kennan. Google, ‘George Kennan, Chomsky, Year 501′ and the following pops up: (NSC 5432/1, 1954) and “protection of our raw materials” (George Kennan). Referenced in Year 501

    It is a tribute to Chomsky’s resourcefulness that he can produce quotes from the ‘secret record’ in 1993 which do not become declassified until 2004.

    But carry on, I want to see how bigger tit you are prepared to make of yourself for my personal amusement.

    Oh, here is an easier to follow copy of the document you are finding so difficult to discover: Statement of Policy by the National Security Council

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  26. bhudson (4,734 comments) says:

    Yoza,

    So lets get this straight. You think that a footnote from another chapter – which, as you pointed out, was originally from a separate work – is the reference for the secret document mentioned in an earlier chapter, which was not actually referenced against anything at all?

    Or to put it another way, because you found a document that you have decided could back up something in another work (an earlier chapter in this book) that it must be so.

    And Neoliberalism and Global Order was first published in 1996, 3 years after Year 501, so an argument that Year 501 could not be cited is clearly nonsense.

    You’re reaching fellow. For your moob it would seem. Your man’s a cheap phoney.

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  27. Yoza (1,515 comments) says:

    I didn’t say Year 501 couldn’t be cited, originally I said the sentence you quote in the chapter you found so distressing had no footnotes as it was originally written for a South American magazine and the general population of the South American continent do not need it spelled out to them the vicious and bloodthirsty nature of US foreign policy as they have spent over a century being the subjects of US sponsored violence.

    Chomsky does, however, mention one of the architects of the document from which he is quoting, George Kennan. It does not take much reading of the official document I have so helpfully provided, to corroborate the points Chomsky is making in the article that has caused you so much anguish.

    Try again, you silly little man, exactly what has Chomsky said or written that cannot be backed with historical documented fact?

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  28. bhudson (4,734 comments) says:

    the general population of the South American continent do not need it spelled out to them the vicious and bloodthirsty nature of US foreign policy as they have spent over a century being the subjects of US sponsored violence.

    So references are only required if you think your readers don’t already know all they need to?

    Now that is some joke Yoza. Not so good for your credibility though. Nor for Chomsky’s

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  29. Yoza (1,515 comments) says:

    You seem to be implying that all magazine articles should be heavily footnoted. As I have pointed out and as the ‘secret’ NSC document confirms the people of South and Central America have been the subjects of massive human rights abuses sponsored primarily by the US.

    Only the willfully ignorant and cheerleaders for US corporate imperialism deny the existence of US trained death-squads infesting the region and US support for some of histories ugliest fascist regimes. South Americans on both sides of the political divide are only too well aware of who is pulling the strings.

    I am guessing you are one of those pro-US fanatics that has no problem with mass-murder in the interests of furthering the profit agenda of US corporations.

    From the ‘secret’ 1954 document to which Chomsky referred:

    OBJECTIVES

    4. The objectives of the United States with respect to Latin America are:

    a. Hemisphere solidarity in support of our world policies, particularly in the UN and other international organizations.

    Translation: We want obedient subjects who vote with what we demand they vote for in the UN.

    b. An orderly political, military, and economic development in Latin America so that the states in the area will be more effective members of the hemisphere system and increasingly important participants in the affairs of the free world.

    Translation: We need proxies who do what they’re told when we tell thenm to do it.

    c. The safeguarding of the hemisphere, including sea and air approaches, by individual and collective defense measures against external aggression through the development of indigenous military forces and local bases necessary for hemisphere defense.

    Translation: We are going to establish military bases where ever we want.

    d. The reduction and elimination of the menace of internal Communist or other anti-U.S. subversion.

    Translation: Anyone opposed to being subjects of the US empire will be eliminated

    e. Adequate production in Latin America of, and access by the United States to, raw materials essential to U.S. security.

    Translation: Subject populations will not only do what we tell them, they will also allow our corporations to loot their raw resources.

    f. Support by Latin America of collective action in defense of other areas of the free world.

    Translation: Subject nations will participate militarily in the subjugation of disobedient sovereign states.

    g. The ultimate standardization of Latin American military organization, training, doctrine and equipment along U.S. lines.

    Translation: All military in the region will be under the direct command of the US.

    You’re the joke in this thread hudson.

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  30. bhudson (4,734 comments) says:

    Only the willfully ignorant and cheerleaders for US corporate imperialism deny the existence of US trained death-squads infesting the region and US support for some of histories ugliest fascist regimes.

    No Yoza, you exposed who the joke is with those words. Not the fist time you’ve expressed the sentiments either.

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  31. Yoza (1,515 comments) says:

    Don’t tell me you are so stupid or fanatical you are going to deny US sponsorship of the various fascist regimes and their complimentary paramilitary death squad rampaging throughout the region. To do that would be to expose yourself as someone so out of touch with reality that the only plausible explanation is you are completely insane. :)

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