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Save AIG?
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stumblinmike
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Sep 15, 2008, 09:42 PM
 
Should the insurance group AIG be bailed out? I think not! Where will the madness end? And who gets the blame for this latest fiasco? President Bush is asking for calm during this "adjustment", shouldn't he just be quiet?
     
olePigeon
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Sep 16, 2008, 12:58 PM
 
Yeah, let's have the Government bail out yet another private company.
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mduell
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Sep 16, 2008, 02:33 PM
 
Mismanagement -> FAIL.

I wonder who will buy ILFC.
     
Eug
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Sep 16, 2008, 02:58 PM
 
Dammnit. Shoulda shorted Lehman Bros last week.
     
turtle777
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Sep 16, 2008, 03:40 PM
 
AIG is teh dead.

-t
     
tie
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Sep 16, 2008, 05:47 PM
 
I think we should bail them out. They are really just too big to let them fail. My sympathies go out to all of AIG's employees and executives. Sometimes a hurricane just comes along. We'll stand by you!
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ShortcutToMoncton
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Sep 16, 2008, 05:52 PM
 
"I believe in those truly American ideals of limited market regulation and government interference…

…but when that gets me in trouble, goddamn the government better be there for me!"

Booo. Hiss.

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spacefreak
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Sep 16, 2008, 06:31 PM
 
Originally Posted by stumblinmike View Post
President Bush is asking for calm during this "adjustment", shouldn't he just be quiet?
That's pretty much what Dems told him when he proposed new oversight of Freddie Mac and Fannie Mae in 2003.

http://query.nytimes.com/gst/fullpag...=&pagewanted=1

New Agency Proposed to Oversee Freddie Mac and Fannie Mae - Sept. 11, 2003

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.[...]

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.
     
tie
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Sep 16, 2008, 09:07 PM
 
Heh.

Mismanagement -> WIN.
Taxpayers -> FAIL.

Gotta love government by and for the rich.

For release at 9:00 p.m. EDT
The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under Section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.

The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance.

The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy.

The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.

The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.
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selowitch
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Sep 16, 2008, 09:12 PM
 
Yeah, I don't get it -- I thought we were an "ownership society" in which you own your successes and your failures. How come when a business owned by you and me fails, we get left to twist in the wind, but if you're a big, important conglomerate like AIG (and you donate lots of money to, say, the GOP or the Democratic Party), you get a bailout when you're in trouble.

Where exactly does the Constitution authorize this?
     
stumblinmike  (op)
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Sep 16, 2008, 09:23 PM
 
Originally Posted by spacefreak View Post
That's pretty much what Dems told him when he proposed new oversight of Freddie Mac and Fannie Mae in 2003.

http://query.nytimes.com/gst/fullpag...=&pagewanted=1
If only they had listened, this whole mess could have been avoided. That's a shame!
     
ironknee
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Sep 16, 2008, 11:08 PM
 
Feds: 85 billion bailout for aig
small government at work
     
OldManMac
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Sep 16, 2008, 11:29 PM
 
Originally Posted by selowitch View Post
Yeah, I don't get it -- I thought we were an "ownership society" in which you own your successes and your failures. How come when a business owned by you and me fails, we get left to twist in the wind, but if you're a big, important conglomerate like AIG (and you donate lots of money to, say, the GOP or the Democratic Party), you get a bailout when you're in trouble.

Where exactly does the Constitution authorize this?
Stop bringing logic into this "discussion."
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Sayf-Allah
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Sep 17, 2008, 04:41 AM
 
"Bush the Nationalizer".

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Zeeb
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Sep 17, 2008, 08:00 AM
 
This is so wrong on so many levels. Crumbling public schools and people dying because they can't afford medical treatments in this country and suddenly 85 billion flies out of nowhere to bail out this company. Now the executives over at AIG can get a big fat holiday bonus this year at least!

So, its a short term loan but the government might end up owning this company if things don't go right. I suppose in a twisted way the U.S. is turning into a state of government owned financial institutions. Sounds like communism to me!
     
Eug
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Sep 17, 2008, 08:09 AM
 
After hours, the stock continued to drop. Good. Closed at $3.75. Now it's $2.70.

EDIT:

Opened at $2.30. Now at $2.50.
( Last edited by Eug; Sep 17, 2008 at 09:37 AM. )
     
Andrew Stephens
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Sep 17, 2008, 10:49 AM
 
But now the US taxpayer "owns" 80% of AIG.

Don't expect a payout when it's sold back though.

On trans atlantic news good old HBOS staggers into the waiting arms of LloydsTSB. Anyone care to guess how many banks will be left standing by this time next year.
     
Maflynn
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Sep 17, 2008, 10:53 AM
 
The problem is without the bailout this would have negative repercussions within the financial sector. While I don't like seeing us tax payers footing the bill for a bailout, the alternative would be worse.
~Mike
     
tie
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Sep 18, 2008, 01:03 AM
 
The CEO has an $8 million severance package. Is he going to get it? It might cause a ruckus if he does, but then again, next week we'll be bailing out another company and he might be able to slip under the radar.

What do people think about the upcoming auto industry bailout? I think it is an abomination, but both McCain and Obama support it strongly, so it looks like it is a go, too.
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OldManMac
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Sep 18, 2008, 07:01 AM
 
Just more corporate socialism.
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Kerrigan
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Sep 18, 2008, 08:28 AM
 
I feel personally responsible for the credit crunch, seeing as how I recently took out a forty two billion dollar loan to cover some student expenses and pay down my credit card bills. Maybe I should have thought more carefully about the consequences.

Actually, in all seriousness, I know a guy who took out a twenty grand student loan and invested it all in Lehman Brothers. It's this type of financial->FAIL that is getting us into this situation.
( Last edited by Kerrigan; Sep 18, 2008 at 08:34 AM. )
     
Eug
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Sep 18, 2008, 08:32 AM
 
Up to another $247 billion to be injected into the markets today.

Bloomberg
CNN

Yes people, that's a QUARTER OF A TRILLION taxpayers' dollars.
At least the Amraracans can rest easy knowing it's not their tax dollars involved this time.

European Central Bank - $110 billion
Swiss National Bank - $27 billion
Bank of Japan - $60 billion
Bank of England - $40 billion
Bank of Canada - $10 billion

So where is China in all of this?
( Last edited by Eug; Sep 18, 2008 at 08:47 AM. )
     
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Sep 18, 2008, 10:35 AM
 
But, but... isn't that all called socialism? Something only stinking Yurrupeeans do?

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Eug
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Sep 18, 2008, 10:50 AM
 
I find it amusing that the most socialist major country of them all (China) wants nothing to do with all of this.

P.S. Some of that money is being held as a backup. For example the $10 billion from Canada hasn't been injected yet. I will note though that $10 billion if it were taken from the budget directly, would be enough to shift our budget surplus into a debt.

I guess it's worse for the Amraracans though, since they're so bloody deep into deficit already. Hey, what's an extra $85 billion or so? Just add it to the tab.
     
tie
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Sep 18, 2008, 10:50 AM
 
Europeans bail out poor people, which creates moral hazard because then why should anyone work? Americans bail out the rich, who work hard and pay a lot of taxes, so they shouldn't have to bear any risk.
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Sep 18, 2008, 11:12 AM
 
Originally Posted by tie View Post
The CEO has an $8 million severance package. Is he going to get it? It might cause a ruckus if he does, but then again, next week we'll be bailing out another company and he might be able to slip under the radar.

What do people think about the upcoming auto industry bailout? I think it is an abomination, but both McCain and Obama support it strongly, so it looks like it is a go, too.
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Sep 18, 2008, 11:44 AM
 
Not to make it sound like everything is fine and dandy in the finance industry, but some perspective should be maintained when assessing how the economy has held up so far. From the WSJ:

One pleasant mystery is why the crisis hasn't hit the economy harder -- at least so far. "This financial crisis hasn't yet translated into fewer...companies starting up, less research and development, less marketing," Ivan Seidenberg, chief executive of Verizon Communications, said Wednesday. "We haven't seen that yet. I'm sure every company is keeping their eyes on it."

At 6.1%, the unemployment rate remains well below the peak of 7.8% in 1992, amid the S&L crisis.

In part, that's because government has reacted aggressively. The Fed's classic mistake that led to the Great Depression was that it tightened monetary policy when it should have eased. Mr. Bernanke didn't repeat that error. And Congress moved more swiftly to approve fiscal stimulus than most Washington veterans thought possible.

In part, the broader economy has held mostly steady because exports have been so strong at just the right moment, a reminder of the global economy's importance to the U.S. And in part, it's because the U.S. economy is demonstrating impressive resilience, as information technology allows executives to react more quickly to emerging problems and -- to the discomfort of workers -- companies are quicker to adjust wages, hiring and work hours when the economy softens.

[But...]Goldman Sachs economists' optimistic scenario is a couple years of mild recession or painfully slow economy growth.
     
Eug
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Sep 18, 2008, 11:46 AM
 
Don't Worry. Be Happy.

Anyways, I think that is trying a little too hard to find a silver lining in all of this. However, the main point is that US fiscal legislation/policy was royally screwed to begin with. Sure, things have worked out probably a bit better than they might have, but that doesn't mean the economy isn't in bad shape, cuz it is.

The US lucked out to a certain extent... partially due to actions taken after the fact. However, this wouldn't exist in the first place had more responsible lending practices been enforced for example, among other things.
     
Kerrigan
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Sep 18, 2008, 11:51 AM
 
I'm just glad that I've wrapped up my education so I no longer have massive tuition expenses and have already obtained the financing to pursue a substantive post-graduate degree that will assist greatly in employment prospects 3 years from now. Otherwise, if I were just now graduating, I would be pretty anxious.

Regarding the "silver lining", I was just highlighting a portion of a good article that contains facts about the other indicators of our economy, which are not nearly as bad as they could be. That's not to say that they're good, but things could be much, much, worse than they are now. Let's hope it stays that way. Indeed, let's hope that the worst that comes our way is slow growth or slight negative growth, because the economy has the potential to see a deep recession.
     
Eug
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Sep 18, 2008, 11:58 AM
 
Originally Posted by Kerrigan View Post
I'm just glad that I've wrapped up my education so I no longer have massive tuition expenses and have already obtained the financing to pursue a substantive post-graduate degree that will assist greatly in employment prospects 3 years from now. Otherwise, if I were just now graduating, I would be pretty anxious.
Sorry to say it, but if I were looking for employment 3 years from now, I'd still be anxious. Well, maybe "anxious" isn't the word. Perhaps "cautious".

Sure, 3 years from now will probably be better than 1 day from now, but depending upon the field, companies could still be feeling the effects of the downturn. Tightened belts now may take longer than that get loosened again depending on the field.

However, anxious or not, there's not much you can do about it directly. Just be prepared for anything that might happen. Common sense budget planning for the now and the future is always advisable.
     
olePigeon
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Sep 18, 2008, 12:12 PM
 
The irony of this whole situation is palpable.

Hmm, might be a good time to buy AIG stock since I don't have to worry about them ever going bankrupt.
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tie
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Sep 18, 2008, 01:03 PM
 
It sounds like Goldman Sachs and Washington Mutual will be next week's news. Let's hope not.
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Dakar V
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Sep 18, 2008, 01:08 PM
 
Aren't those the last two privately owned companies left?
(My terminology may be incorrect)
     
Dual Porpoise
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Sep 18, 2008, 01:32 PM
 
Where do you think this current wave of nationalization will stop?
     
Kerrigan
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Sep 18, 2008, 04:57 PM
 
Originally Posted by Timothy Ash at the Guardian
Moreover, there may be a larger pattern involved here. The American columnist Michael Kinsley has a characteristically ingenious article at Slate.com which compares a number of economic indicators, including GDP per capita, inflation, unemployment, federal taxes, spending and budget deficit, over Republican and Democrat presidencies since 1959.

The Democrats score better on everything except lower taxes. Above all, the historical evidence suggests that Republican administrations spend more and increase the budget deficit. It's not just Kinsley's figures that point this way. In the past, I have heard one of the US's most celebrated libertarian economists quietly observe that if you really believe in small government, you should vote Democrat.
I will no doubt have to look at these figures before pulling the lever. The language used in the bold statements is a little bit slippery, since saying that "evidence suggests" is not a very solid way to report a fact pattern. But if Republican presidents do in fact preside over greater periods of government expansion, then, all things being equal (ie, taking into account legislative policies) it will be worth considering a small-government vote for Obama.
     
tie
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Sep 19, 2008, 02:30 PM
 
The 4 o'clock train will be a bus.
It will depart at 20 minutes to 5.
     
Sayf-Allah
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Sep 19, 2008, 03:04 PM
 
I love the fact that our governments have taken a trillion dollars (or more) of our hard earned money and given to some of the richest people on earth.

Lovely.

Capitalism clearly works

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Sep 19, 2008, 03:08 PM
 
Originally Posted by Sayf-Allah View Post
Capitalism clearly works
Clearly it works for capitalists...
     
Sayf-Allah
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Sep 19, 2008, 03:16 PM
 
Originally Posted by Dual Porpoise View Post
Clearly it works for rich capitalists...
Fixed™

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Sep 19, 2008, 03:24 PM
 
Originally Posted by Sayf-Allah View Post
I love the fact that our governments have taken a trillion dollars (or more) of our hard earned money
Not yet they haven't. They created it out of thin air. It won't hit our hard-earned until (1) we have to pay the interest on it and (2) the resulting inflation comes knocking.
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Sep 19, 2008, 03:27 PM
 
Originally Posted by Sayf-Allah View Post
Fixed™
Aren't capitalists rich by definition? I mean, a capitalist is someone who lives by renting out their capital, rather than by wage labor, right?
     
Sayf-Allah
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Sep 19, 2008, 03:32 PM
 
Originally Posted by Doofy View Post
Not yet they haven't. They created it out of thin air. It won't hit our hard-earned until (1) we have to pay the interest on it and (2) the resulting inflation comes knocking.
True.

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Sayf-Allah
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Sep 19, 2008, 03:36 PM
 
Originally Posted by Dual Porpoise View Post
Aren't capitalists rich by definition? I mean, a capitalist is someone who lives by renting out their capital, rather than by wage labor, right?
Yup, that's true.

Forget I said anything.

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Eug
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Sep 19, 2008, 03:39 PM
 
Originally Posted by Dual Porpoise View Post
Aren't capitalists rich by definition?
No.
     
Dual Porpoise
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Sep 19, 2008, 03:44 PM
 
Originally Posted by Eug View Post
No.
You have a different definition of capitalist than someone who lives by renting out their capital, rather than by wage labor, or you think that someone who owns enough capital to live off income from investing it is not rich?
     
Eug
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Sep 19, 2008, 03:51 PM
 
So I guess some loan shark operating near skid row much be rich then.
     
Dual Porpoise
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Sep 19, 2008, 03:58 PM
 
Originally Posted by Eug View Post
So I guess some loan shark operating near skid row much be rich then.
Well the loan shark is presumably running his own business, which puts him in a slightly different class to either workers or capitalists. He is sort of a hybrid, since while he does earn income from his capital, he also shares characteristics of a worker in that he must continue to operate his business in order to gain that income. He is not truly a capitalist, since he is working to leverage it.
     
Eug
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Sep 19, 2008, 04:02 PM
 
Originally Posted by Dual Porpoise View Post
Well the loan shark is presumably running his own business, which puts him in a slightly different class to either workers or capitalists. He is sort of a hybrid, since while he does earn income from his capital, he also shares characteristics of a worker in that he must continue to operate his business in order to gain that income. He is not truly a capitalist, since he is working to leverage it.
Nah, it just means that your definition is so unnecessarily restrictive as to become useless.

You might as well just say, "A rich person is rich."
     
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Sep 19, 2008, 04:05 PM
 
Originally Posted by Eug View Post
Nah, it just means that your definition is so unnecessarily restrictive as to become useless.
It's not really my definition, Eug, it's the definition of the profession of economics.
Originally Posted by Eug View Post
You might as well just say, "A rich person is rich."
No, that's the source of your misunderstanding. A rich person could be rich because they are a worker who is highly waged. A capitalist MUST be rich, because by definition he lives of income generated by his capital without his having to undertake labor.
     
Eug
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Sep 19, 2008, 05:42 PM
 
Originally Posted by Dual Porpoise View Post
It's not really my definition, Eug, it's the definition of the profession of economics.
It's your definition, because that's just an extremely specific definition that the vast majority of people (including economists) don't use.

No, that's the source of your misunderstanding. A rich person could be rich because they are a worker who is highly waged. A capitalist MUST be rich, because by definition he lives of income generated by his capital without his having to undertake labor.
...in the confines of your unnecessarily restrictive definition. To use that definition basically removes any relevance to the term in meaningful real-world discussion.
     
 
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