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What Does Syriza Have a Mandate to Do?

2015 July 10
by Ian Welsh

Syriza’s mandate, given twice, is as follows:

End austerity without leaving the Euro.

This mandate cannot be executed. Without leaving the Euro they can cannot reduce their debt sufficiently, nor avoid imposed austerity from their creditors.

Does that mean they must accept any deal?

If they do, they have violated their mandate as well. They have not left the Euro, sure, but they also haven’t ended austerity.

So, they are forced to choose between two parts of a mandate. They may end austerity. Or they may leave the Euro.

I will suggest that since the austerity is what is killing and impoverishing Greeks that, given a choice between these two opposed goals, they should leave the Euro.

The counter-argument is that leaving the Euro will make things even worse.

This is true. But there is a very strong argument that it will do so only for two to three years and that after that Greece would be better off than it would be still in the Euro, and therefore, still in austerity.

It is insane to say, “This mandate has two parts, we cannot do both, and therefore we must choose the one which will lead to suffering for which we can see no end-date, rather than taking a chance will likely end the suffering sooner, and in the forseeable future.”

Greece did have its own currency, you know. And the economy was better then. It is not like no one still alive remembers a Greek economy outside of the Euro. Acting as if the world will end if it goes back to the Drachma is deranged.

That is all.

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Meanwhile, Some Music!

2015 July 10
by Ian Welsh

I have been listening to what are now oldies, but were the track of my teen years. Lovely as a counterpoint to Greek disaster news.

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New Greek Proposal—Essentially the Same

2015 July 10

So, this is basically the same deal as they refused last time, just a little worse. There is some talk that American pressure has made Merkel decide to consider a debt writedown, which they will do by extending the duration of some of the bonds. It is unclear if this will really happen.

If this deal, or some form of it even with mild debt reduction, is accepted, Greece will remain under austerity and in depression.

Syriza will say they had no mandate to leave the Euro, and it’s true they never asked for one. But they did have a mandate to not accept this bad a deal, I believe.

More to the point, they did have a mandate to end austerity, and they will have failed.

I think part of this is due to clearly delusional thinking: They really did believe that Europe would let them cut a deal which wasn’t harsh austerity.

Much is incompetence: They did not make the necessary preparations for Grexit. They had no BATNA–best alternative to a negotiated agreement. As such, they basically had to accept whatever Europe offered. If it wasn’t for American intervention, I’m not sure they’d have been able to get even what they’ll get after the referendum. (Americans intervened because a Grexit could have been the first move in Greece spiraling towards the Russian orbit.)

The rest is simple spinelessness. Cowardice. Yeah, I’m just going to say it.  This is a cave.

This is a mistake politically as well. Having failed to end austerity, Syriza will not be the next government of Greece. If they had gone to Grexit and the economy had recovered by the next election, they’d be golden and probably a majority party for a generation.

I wrote what I think the consequences of Syriza blinking (I consider this them blinking) yesterday.

Please read that post. It is an important one. This failure will have huge consequences for the future of Greece, Europe, and, indeed, the world.

Enjoy your weekend, and listen to some 80s ballads.

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If Syriza Blinks

2015 July 9

So, the EU wants Greece to sign an even worse deal than the “no” referendum already rejected.

If Syriza accepts such a deal, Greece will stay in depression and, likely, that depression will get worse.

Let me be explicit: This sort of thing will not stand. If the moderate left-wing (not center-left, moderate-left) won’t do the job, then someone else will.

That will mean either the hard-right, or the hard-left. People who can credibly say: “When we say we will end austerity, we mean we will do anything it takes. Anything.”

You have all been warned, repeatedly. French Economy Minister Emmanuel Macron said it, so it’s been said by a “real person”:

“Let’s not re-enact the Treaty of Versailles.”

The hard-right is salivating over what is being done to Greece. LePen in France, the hard-right in Britain, and so on. They know that rage, anger, and hate is building as people are smashed in the face over and over again by neoliberal politics. They are thrilled by Cameron’s smash-mouth budget in England. They love the way the refugee crisis is being bungled.

They know how to use the fear, desperation, and rage. And they will use it. People will become so fed-up with having lousy lives and no hope for the future that they will turn to anyone who looks hard-assed enough to fix it and to break with current power structures, who will get (and deserve) the blame.

This is not a game; this is not consequence free. We are fulfilling all the necessary conditions for an age of war, famine, and revolt. Greece is only one domino, but be clear, it is both a crime and a mistake. No matter what happens, the consequences of all these stupid and cruel decisions will be harsh. They will be harsher if the hard-right are the ones who make the break.

Europe has a chance here to negotiate with people who still believe in the European project and who are essentially moderates (Syriza is hardly left-wing at all in historical context, sorry).

There will come a day when they will meet people, from either the Left or the Right, who have no interest in negotiating. Given an electorate willing to follow me, I can tell you that, even in 2010, I would have had only very brief negotiations with the EU if I ran Greece.

Today, people like me who are willing to break things to make a new world are in the minority.

Today is passing.

Be afraid. Be very afraid.

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Chinese Stock Market Woes and the Pre-War World

2015 July 9


China is bolstering efforts to arrest a selloff that has rippled through risk assets globally, banning major stockholders from selling stakes as more than half the country’s listed companies are suspended from trading.

Expect some ripple effects, given that a LOT of people can’t sell formerly liquid assets—if they need money they will need to sell offshore assets.

As of this writing, the stock market is slightly up–but yeah, that’s with over half the companies frozen and with vast efforts by the government to funnel money into those that aren’t frozen. A ton of investors are still selling what they can.

Let’s talk China for a bit. I’ve long said that China is the place to watch: It is now a larger real economy than America’s, with a larger population, and it is the largest industrial country in the world. Making stuff, real material stuff, still matters. Americans trumpet innovation, but Britain was still producing more patents than America for years after America was the biggest economy in the world; the stuff just wasn’t made in Britain.

Commodity prices have been dropping in virtually every commodity, not just oil. This is driven by, yes, China, and it affects every commodity exporting country in the world.

(Insert ritual cursing out of Canadian Prime Minister Harper for his policy of doubling down on oil and abandoning manufacturing, thus critically damaging a mixed economy policy well over 100 years old.)

China has been vastly overbuilding infrastructure and real-estate for some time. The media is replete with stories of vast tracts of uninhabited high-rises and so on. Much of what has been built is of dubious quality (not necessarily entirely bad, if it has to be rebuilt, from an economic viewpoint, but disastrous from an environmental one). Peasants in China love their lives; workers hate theirs, even though workers have much more money. This is a direct analogue of Western industrialization, by the way, people had to be forced off the land. Early industrialization makes life much worse for most people directly involved.

I can’t speak directly to Chinese leadership, but I’d guess that we’re now reaching the point where the last competent people are near the end of their careers.  Soon the Communist party will be run largely by princelings: entitled, greedy, and short-sighted.

China is a violent nation. Huge industrial protests happen all the time, entire villages fight (and sometimes win) against army units, etc. The violence is often savage—hand-to-hand melee with iron rods and so on.

One wonders why the Communist party keeps cracking down, installing more surveillance, etc, etc. If they lose control, or if they don’t make it to the airport before the mob, they and their entire families will die, and die messily, or worse.

If things go really pear-shaped in China, the Communist party WILL blame foreigners. You can bet every cent you have on it. War is possible. China is making the necessary preparations and pre-war blocs are forming.

Now, this stock market crash isn’t necessarily the precipitating event. I doubt it is, and even if we look back in 20 years, in the midst of the sweet nuclear glow, and conclude it was, we won’t know for some time that it is.

But we are in a world which is a ton more dangerous than most people, many of whom buy into this “the world is getting less violent” stuff, are willing to believe. Yeah, the world is less violent than it was for most of the post-WWII period, but such periods, well, they end, when the conditions which made them possible end.

The Chinese can still print a ton of money. The lesson the elites took from the Financial Crisis has been “just print money if people who matter are hurting.” The Chinese and Westerners put different groups of people into their “who matters” categories, but both are willing to run the virtual printing presses.

What This Means: It’s likely that the situation won’t go really pear-shaped until such time as running the printing presses stops working as a preventative to staving off disaster. Unless until someone gets stupid and doesn’t run the presses when they should because they think the people suffering don’t matter enough to bother with.

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Where Greece Should Go from Here

2015 July 7
by Ian Welsh

Ok. Enough.

I’ve been walking people through what’s happening, what it means, etc. in Greece now for a while, with an able assist from Mandos and commenters.

Let’s cut the crap. Merkel has come back and said that Germany will not allow debt reduction and insists on austerity—and harsh austerity, worse than the last offer. She is backed by most EU members and the European Central Bank, which has put the screws into Greece so hard that imports are piling up on docks because Greece can’t pay for them.


Syriza needs to get its act together. The Euro is a stupid idea, and it always was. It cannot work absent central fiscal policy (aka, national governments reduced to de-facto provinces). It does not allow governments the ability to devalue their currency when they need to increase exports, to print money, and so on.

It cannot work. It never could, as designed. It was always a stupid idea. (And yes, I opposed it from the beginning.)

Oh, it could be fudged. They could forgive Greece’s debt (but then would have been expected to forgive a bunch of other countries some of their debt), and money could be funneled to Greece in various ways and so on. But that can’t be done because of neo-liberal doctrine, which insists that debts are sacred and that creditors must never lose money, which is ludicrous and a direct violation of how capitalism works. People who make bad loans MUST lose their money. Without that, it isn’t capitalism and the virtues of capitalism don’t work.

This is not in question. This distribution of money to people who know how to make a profit and not lose it (and thus make “Productive” use of it), is about three-quarters of the pragmatic argument for capitalism.

Austerity is beyond stupid: In order to fix the economy, you reduce gross expenditures and expect that tax incomes will increase faster than deficits and the economy will grow as a result. It is so dribblingly inane on its own merits that anyone who believes it either hasn’t spent three seconds thinking, is an ideologue incapable of thought, or is on the take, expecting that the benefits of austerity will flow to them.

The Euro is moronic as implemented. Austerity does not do what it is sold to do. And neoliberalism does only one thing more effectively than other forms of capitalism (those which actually work): It transfers money to the rich faster.

Syriza needs to leave the Euro. They are not going to get a good deal, or even a mediocre deal from Europe. They will be better off leaving the Euro. If they do so, they should simply repudiate all debts.

Yes, all of them. Once they leave the Euro, Europe and the neoliberal order will go all out to crush them. It does not matter what they do, they will be target number one.

They should then cut a deal with Russia for oil and a pipeline, and align solidly with Russia and China, asking for aid from those two countries.

They should cease any attempts to stop refugees from flooding out of Greece into the rest of Europe. Heck, put them on buses and ship them to the border.

They should nationalize the distribution of food grown in Greece. Greece grows enough food; just start delivering it to every household. Saddam did this effectively, Greece can too.

That takes care of oil and food (Greece has plenty of refinery capacity).

Medicine is the next issue; Greece will have to arrange to get the meds it needs through Russia and China.

There are other details, but mainly Greece should do everything it can short of leaving the EU (not the Euro, the EU) or going to war to make Europe’s life miserable. Why? Because then they have something to negotiate with.

There are those who will say this escalating, blah, blah, blah.

Yes, it is. The path of capitulation, down which even Syriza was plodding (the deals they were willing to sign were terrible and would have kept Greece in depression for the foreseeable future) did not work. It is time for Greeks take their own future in their hands and be bold.

“Europe” doesn’t want them. Fuck Europe. A Europe which has turned its back on the foremost modern Greek virtue, Democracy, is not a Europe worth bothering with. Greece and the Greeks should regard themselves as what is left of the true Europe (along with Iceland), sneer down their noses at the barbarian Eurpeans and embrace and trust themselves.

Why? Well, because frankly, they don’t have anyone else.

The current world order is breaking up anyway.  Russia, China, and various other nations hate how it is run, and they are moving to destroy the credit/banking gridlock which is the real power of the West. Yes, it would be nice if Greece didn’t have to be one of the first into the breach. But, at this point, every other option is worse.

As for the European leaders insisting on this course of events, and they are insisting, they will be seen as those who destroyed the Euro. Their treatment of Greece is a clear lesson to everyone else in Europe that the Euro does not and cannot work. The moment a country gets into serious trouble (and that time will always come), Europe is not flexible enough to do what needs to be done. The current pols, who are complicit in the crimes of austerity and neoliberalism cannot run against Europe, but they will be replaced, in time, by those who will.

Greece’s situation has been a completely unnecessary mistake and a crime. The amount of money involved is trivial. Simply following basic, capitalist ideology (lenders lose their money if they lend to people who can’t repay) would have solved the situation five years ago. If they’d behaved like slightly decent and competent technocrats, they could have easily solved the crisis and bailed out private investors in any number of ways, while still allowing the Euro and mild austerity to continue.

The leaders of Europe are idiots, as well as being ethical monsters who have impoverished and killed many for an ideology whose sole purpose is to make a small proportion of the population very, very, very rich. This will be seen as the moment when those leaders broke the Euro. Combine this with the US abusing its stranglehold on the financial transfer system to starve countries out, and stupidity like Iraq, and they’ve hastened an end to the American/Western hegemonic period–decades earlier than smart, human policies would have achieved.

A finance system exists, socially, only to direct money to where it is needed to create more social good. It has no purpose otherwise. It is not an end in itself.  Money that is not a useful commodity (a.k.a. food) is not a store of value and never was. It is a fiction used to allow feedback in the system and to act as a distribution mechanism for goods and services based on perceived social utility (a.k.a. people who have more money are assumed to have more social utility).

A society which understands NONE of these points will vastly mis-allocate its productive resources, as, currently, ours is doing. That mis-allocation will, in time, lead to collapse or another disaster (in the much larger picture here, much of the world is now in both a pre-revolutionary state and a pre-war state, though most people won’t believe either until they’re dying).

I have spent my entire life watching these people burn down the house to generate heat and call themselves geniuses. Neoliberalism “works” because it bribes just enough people to maintain enough of a constituency, while piling money into the hands of a very few people who will do anything to keep it going because that’s how they became filthy rich, and virtually any system which cared about the common good would take their money and power away from them.

Neoliberalism works only in the sense that it creates the circumstances for its own continuation. But it is a locust ideology: It cannot last long in historical terms and it will not. That doesn’t mean it will be replaced by something better, the world has often seen centuries to millenia go by with most of the world ruled by nobles, kings, and despots and the majority of populations peasants, serfs, and slaves.

But, be clear: It will end. Be clear: Greece, whether they buckle or fight, is making its end come closer. And be clear: That end will almost certainly result in hundreds of millions to billions of death in war, revolution, famine, and so on.

None of this was necessary. But some people wanted to be really, really rich and many other people were willing to make corrupt deals that cut out most of society from any gains. Most of those people will be dead before the shit hits the fan in any way that would effect them, safe in their core nations. But not all will be dead.

I hope that Juncker, Merkel, and Draghi, among others, live very long lives. Sincerely. I hope they live to be a hundred, with their minds sharp. I hope this devoutly.

Meanwhile, all the stupid options having been exhausted, having a mandate from the population, and with the EU saying “lie down after taking your cup off so we can gather in a circle around you and kick you,” let us hope Syriza does what needs to be done. (They might also wish to just reinstate Varoufakis as Finance Minister. There is no deal to be had, and they’re going to need a competent technocrat to do what needs to be done.)

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ECB Is Trying to Break Greece: Buckle or Leave the Euro

2015 July 6
by Ian Welsh

So: The ECB has both decided not to extend any more money to Greek banks AND appears to have increased the haircut they give on Greek collateral (possibly to 75% from 50%).

I agree with Edward Harrison: This is an attempt by the ECB to force a decision—Greece can deal or leave. And pretty much now. The haircut is particularly brutal, reducing the amount of credit already available.

If the ECB wanted Greece and its creditors to have time to make a deal it could do so. All Tsipras asked for three billion. Pocket change.

This is an abrogation of the ECB’s responsibilities as lender of last resort, and appears to me to be a blatant political act. It will be noticed not just by Greece but by all other countries who use the Euro.

Greece’s one possible fudge is to start producing Euro denominated notes itself. They won’t be worth what the official ECB ones are, but this can buy them some more time to see if a deal with “institutions” is possible.

In other news, Varoufkis stepped down as finance minister at Tsipras’s request because he was hated so much by the negotiators on the other side. If negotiations fall thru, however, Tsipras might want to bring him back.

I may write a bit more on Varoufkis and what his experience tells us about politicians, bureaucrats, and the EU at a later point. In the meantime, understand that the pressure is on and that developments should keep moving fast thanks to the ECB cutting off Greece’s money supply.

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Meanwhile, in China, There’s a Huge Stock Market Crash

2015 July 6
by Ian Welsh

It has dropped about 30 percent in the past three weeks, and today:



And this:

In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company which in turn would be aided by a direct line of liquidity from the central bank.

China has also orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.

Do I need to explain that this is really, really stupid? The Chinext had higher price-to-earnings ratios than Nasdaq when it crashed. These valuations are insane; they do not make sense. This is stock market as ponzi scheme.

Stock markets are socially useful for only three things:

1) IPOs—so that companies can get money unencumbered by debt to undertake large projects. (These days, usually so the founders can cash out, which is at best a limited social good.)

2) Secondary stock offerings; same thing.

3) As Keynes pointed out, to give sociopaths something to do.

There are better ways to deal with these and all of the other supposed advantages of stock markets. (For example, if you want people to be able to share in the success of companies, just tax them and distribute. We would be hard-pressed for a more uneven method than the one we’re using today.)

Stock markets are largely useless to the real economy at this point. But when they go wrong, they can do immense damage to the real economy IF regulators and politicians and central bankers treat them as anything but a game in which money is moved from one set of hands (investors), to another set of hands (brokers, bankers, and since the introduction of stock options as the main way of paying executives, high ranking corporate wankers). Stock markets are snake pits of fraud and conflict of interest and everyone professionally involved in them must be treated as “a criminal the second they can get away with it.”

It’s time to change stock markets entirely so that they are useful again for raising funds for new companies or major new projects without debt and are not so dangerous to the rest of the economy. I suspect the best way to do this is to shut the entire current racket down, mandate dividends and controlled buybacks for all remaining stock companies (public stock companies in the US have dropped by half in the last 20 years anyway), and move to a new model, whatever that will be.

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Consequences of the Greek OXI (No) Vote

2015 July 5

A few points:

  1. This isn’t about soaking bankers. Bankers, with some exceptions, were paid off during the “bailouts.” Right now it is taxpayers who are on the hook. If you wanted this done right (lenders take their losses), it had to be done in 2010.
  2. The immediate question is if ECB will restore “lender of last resort” services. If it doesn’t (a shocking failure in a central bank), then Greece will be forced to issue its own currency. This may mean, initially, bills denominated as equal to Euros. They won’t sell on the market for equal to Euros, though.
  3. Many Greeks who voted “no” seem to think that the vote was a way of giving Syriza a better hand in negotiation (this is what Tsipras said, so it isn’t an irrational belief.) We’ll see whether or not the Troika and the EU are willing to re-start negotiations. If they aren’t, I wonder if Greeks will blame them or Tsipras.
  4. The IMF has called for debt reduction and admitted they got it all wrong. How much that matters, I’m uncertain, but it does give space for a deal. Such a deal would still involve some austerity measures, just not as many or as harsh.

In the short to medium term, this referendum matters more to Greece than Europe. Unless the monetary authorities are completely incompetent, they should be able to contain the shocks. Greece’s economy is small; the amount of debt involved is, actually, small as well.

One should not discount the possibility that the ECB and “Institutions” are incompetent and will screw it up, mind you. Their behaviour thus far hasn’t just been cruel, it has been stunningly stupid from a clean, technocratic POV. Mandos’s article about “How EUians see this” was important, but also necessary to understand that the actual austerity policies followed were delusional if the ECB (or anyone else) thought they would lead to a sustainable debt load for Greece. They could not and did not.

It’s rarely clear in such situations if the people making decisions believe their own propaganda: Did they think it was sustainable and wouldn’t lead to a crisis like this? Did they know it would lead to a crisis and think the Greeks would sit still and take it (not completely unreasonable, actually, given how much pain people have accepted from plutocratic policies in the past).

I don’t know, but I think it’s the winner’s curse: Neoliberalism (and austerity is part of the neoliberal project), has been winning for so long that those who came of age and rose to power during it (essentially all our central bankers, technocrats, and politicians) cannot imagine it would ever lose. The look of incredulity is that of the three hundred pound bully when a 90 pound weakling doesn’t buckle. (Again, this doesn’t mean that the technocrats don’t also think they’re doing the right thing morally.)

If I were them, and by that I mean “not me in their position, but actually them,” I would crush Greece flat and make an example of it. If Greece comes out of this like Iceland, with a healthy economy in three years, then other populist movements (left or right) will receive proof that their policies can work. Democracy, as opposed to technocratic rule, will gain legitimacy, and so on.

This is not a prediction; as Machiavelli observed hundreds of years ago, [people] are generally destroyed because they are unable to be either wholly good or wholly bad. Doing the right thing from day one would have been an excellent policy. Having done the wrong thing, these decision makers’ futures are intertwined with it: They will not keep their positions if Europe turns genuinely populist. Worse, that populism will almost inevitably turn against their masters, the oligarchs.

This is unacceptable. To oligarchs, Europe is one of the few places actually worth living. Yes there are a few American cities, maybe you might want a vacation home in one of the nice Australian or Canadian cities; but that’s about it. Tokyo’s great, but you don’t speak Japanese. Dubai, despite its beauty and being created exactly for oligarchs is too soulless and boring even for oligarchs. Russia or China, well, China’s polluted, and if Putin or the Chinese Communist party says jump you do it, or you get dead or in jail. Oligarchs don’t rule Russia or China, though they hope to in the future.

This is also a significant moment geopolitically. Putin said that he won’t help Greece monetarily as long as it is in the EMU (uses the Euro.)  That’s as good as saying he’s open to helping them if they aren’t. Greece is geographically important, can be used as a pipeline route (or terminus), and could offer Russia a warm water port. There are deals to be made. It’s for this reason that the US Treasury secretary keeps telling the Europeans to cut the debt and make a deal; the US doesn’t give a damn about Greek suffering, but it does care if Greece swings towards Russia.

So the game continues, and it is actually important. Greece is a small country, but it’s not a country whose population is smaller than most cities, like Iceland. Its success or failure at standing up to austerity, neoliberalism and technocratic EUian ideology could make a large difference in whether other, even larger countries, decide to do so. And by “other, even larger countries,” we mean essentially the entire south of the EU: Italy, Portugal, and Spain. Ireland might consider it. Finland should consider it and after a few more years of pain in the Euro straitjacket, may well do so.

These countries subsidize the north, and especially Germany, by keeping the Euro cheaper than it would otherwise be (let alone the value of a reborn German Mark). If they go, Germany’s economy is suddenly going to look a lot less efficient and sell a lot less goods (but, wait, isn’t every advantage the Germans have because they are good people?).

Interesting times, my friends. This is power politics, with huge amounts of real power and massive amounts of money in play– not today, but as consequences of what happens today. The fate of Greece matters, not so much in itself (except to Greeks and kind-hearted souls) but for what it will mean for Europe, NATO, Russia, and every country in Europe. It could be one of the dominoes which leads to the end of the neoliberal era.

You’re watching history: While remaining sympathetic to those being ground to pulp by its wheels (or in between your own screams while caught in said wheels), let me suggest that you enjoy the view.

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Greek Referendum Day

2015 July 5
by Ian Welsh

It’s here. I don’t have much to say about it I haven’t already, but if folks want a thread to discuss it, feel free to do so below. As with most readers, I imagine, I’m cheering for “no.”

Also, take a look at this video (which I can’t figure out how to embed). I can’t think of any other finance minister in the world who would get that reaction from any crowd.

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