Posts Tagged ‘economy’

Global economy is not run by sheer ingenuity of some intrepid souls whose motto is not excellence but profits. Their dynamic leadership as some segments of capitalistic society make out, does not take finance of nations still higher. Gordon Gekko of Wall Street is a pathetic lost soul who represents a part of global consciousness to enrich themselves. Isn’t it a good thing? The answer depends on the state of our existence. We have chosen to be materialistic at the risk of losing our keen eye and ears for finer things in life. We have become crass  and arrogant in the many number of weaker people we have pushed to the gutter in order to prop up consumer market. It is like the curate’s egg which is good in parts and rotten in the other.

“Crime works

The economic value of crime and its profits are not confined to global finance. It also makes a difference on the ground. Take jobs and living standards. From the 1980s onwards, real wages in OECD countries have declined for those in unskilled and semi-skilled occupations, that is, a good majority of the labour market. If wage stagnation was the order of the day in the West, you can imagine that developing states were hardly lands of milk and honey for ordinary workers.

Take Mexico following the signing of the NAFTA agreement in 1994; this ushered in privatisation by the back, front and side doors. By 1996, if you were not one of Mexico’s 8m unemployed, you worked legitimately in the maquiladoras sweatshop assembly plants or in the informal economy. Poverty became endemic. Fast-forward to 2012 and a banner appears above a highway in Monterey, placed there by one of the countries “big four” cartels:

Operating Group ‘Los Zetas’ wants you … We offer a good salary, food, and we care for your family. Do not suffer bad treatment … We will not feed you Maruchan (noodle) soups. Do not hesitate to call 8671687423.

To Mexico’s legion of economically disenfranchised, Los Zetos are really making an offer they cannot refuse. And the available figures prove as such: the drug industry employs around half a million people – the fifth largest employer in Mexico. Those employed in the drug trade are required to possess a unique skillset – the ability to variously murder, torture, kidnap, mutilate and rape. But this is not the whole story.

The illicit narco economy creates a virtuous commercial circle of sorts. The narcoeconomy not only employs directly but sustains a network of existing or new support industries and business ventures: banking and finance, IT, logistics, farming and transportation, pharmaceuticals, industries which have transformed backwater towns.

Mainstreaming crime

Britain maybe some way from being a fully-fledged narcoeconomy but we should not underestimate the economic contribution of illicit markets and their criminal agents. Take the City of London, international citadel of high finance and favoured port of call for international criminals and organisations looking to wash their dirty or corrupt cash.

According to David Clarke, City of London’s police fraud investigator, London is attractive haven for crime money as checks and balances on those setting up businesses or investing are flexible. Possibly this is why London remains an island of prosperity whilst the rest of the UK economy is in a state of austerity stagnation.

Further down the laundering food chain, there are betting shops and high volume fixed odds betting terminals widely used by drug dealers and gangs to wash their profits. In fact, these digital betting terminals now account for half the profits of bookmakers’ profits. However, the chancellor plans to plunder a good deal of this revenue by raising the duty on betting terminals. William Hill, the UK’s largest high street bookmaker, responded by announcing the closure of 109 betting shops at a projected cost of 420 jobs.

To consider the possible macro-economic benefits of illicit markets is not in any way to justify or celebrate crime. Far from it. The intention has been to consider the growing interdependence between crime and the legitimate economy. In fact, a growing body of research evidence suggests that criminal organisations and illicit markets increasingly form part of the mainstream economy. The boundary between the wider legitimate economy and the illicit economy is increasingly blurred.

A recent scandal when horsemeat was discovered in many “beef” burgers sold in UK supermarkets is case in point. A government commissioned review “clearly showed criminal activity in the global food chain”; a process aided and abetted by the aggressive pursuit by supermarkets of margins in a cutthroat commercial environment. The problem, it seems, is not so much organised crime but a crime-organised economy.”

(quote from The Conversation- article: When crooks get rich the whole economy benefits- Mike Marinetto, Lecturer in Business Ethics at Cardiff university/20 May,2014)

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It was Goldman Sach’s paper “Dreaming With BRICs” predicted that China’s gross domestic product would overtake the U.S.’s sometime in the 2020s. Now the World Bank study in April,2014 said this for certain by end of this year. Such predictions however coming from knowledgable circles ought to be taken with a pinch of salt.
Take the magic Three P’s: Purchase Power Parity
This yardstick takes into account that a dollar buys a lot more in Beijing than in Bethesda, Maryland. According to the Big Mac index for instance, the McDonald’s hamburger costs 40 percent more stateside than in the Middle Kingdom. Labor is cheap in China. Hire and Fire in Beijing under one party rule is same as in America but no American labor will waste on such low pay. Or take a haircut in Palo Alto, California, sets you back $25; the average in Shanghai is five bucks. An American customer may want to have a crewcut with some graffiti thrown in. Or a pancake style. Whereas in Hunan it may be a peasant hair cut would only need a rice-bowl to keep the line and anyone with a pair of scissors snip away the superflous hair and call himself a barber.
So the three P’s don’t reflect real power.
One dollar is a giant in comparison with yuan. When China imports technology from the U.S. or high-tech weaponry from Israel, it has to pay in dollars. Ditto when it gobbles up African mines or buys the loyalty of developing countries with foreign aid. Tuition for Chinese students at Stanford University is also billed in dollars. What little we do not see between the lines is dollar’s clout as International currency has a drawback when US batch of peanut butter sold through retail throws a scare of botulism at home. Compensation is paid in dollars not to mention the killing legal costs. In China melamine laced milk products are paid in yuan and at the worst is the fellows responsible for negligence are shot to appease the irate public.
As early as 1984, China’s growth peaked at 15 percent. Now, the rate is down to one-half that. The sluggish world economy plays a part, but the underlying reasons are structural. There is housing market bubble in the big cities in China. It will break just as it did in the USA in 2008. When it happens all those villagers who were thrown out of their ancestral homes and those who have been made paupers in land speculation can put themselves into the labor pool. Ample low-wage labor will not cut any ice by shipping them to Europe or the US. They have their own unemployment to grapple with.
Spectacular growth is always easy when on paper. It was thus credit agencies gave Greece Cyprus, Iceland such high reports. China has her own problems and growing threats from ethnic minorities and any race for a global economic power do not carry prosperity with it.(ack: Josef Joffe/bloomberg.net)

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I am a war child, in a manner of speaking. When I came to this world, there was a world war inexorably grinding down to its bitter end. Short of everything that made life easier, the wartime austerity left its scars on me as with all others of my generation. At home a meal was not just a meal without being told we ought to be thankful whatever was ladled out to us. ‘Consider the millions who are orphans elsewhere and you ought to be thankful..’ while the spinach and rice were served, leftovers warmed for the occasion. The parents prided on their duty and knowledge they did it with their sweat of blood. It was thus our meal-time, it was tantamount to a moral issue every time. A clean plate at the end equated with a clean conscience.
Now that I am on my own (I for one eat indifferently) while my siblings and I have learned to put our ghosts behind us. We have no excuses and we dribble a little with our conscience when we splurge on food we have brought from far corners of the earth. Did we not filch with our colossal capital reserves from those who are economically less endowed? We call it free enterprise that they must deliver at our terms. Africa, Asia and Far East we know as country of origin when we survey the overstocked shelves in our supermarkets. Fishes from their rivers feed us and their grains we import wholesale, in cereals, crispies cookies and what not. We supply the cunning to make their produce palatable, We bar code their sweat to make it sell. Moral issues are dismissed with the click of cash register. When we cart our weekly grocery we are only conscious of the parking place and not of some rain forests cleared for biofuel. We of our generation have distanced from the burden of our parent who made both ends with hard cash while we do it on credit. Our families were raised on future promises by living beyond our means. Plastic credit cards opened doors at High Street shops and our children knew branded items gave their childhood pleasures a shine. A pair of Reebok shoes made them forget the boredom of walking to the school bus. Our consumerism dulled our conscience from harsh realities of global trade and commerce unduly. Children learned to appease theirs.

Moral issue of now is made more abstract, since our children have no time to listen to us anyway. They are all into the sweet life of virtual reality, of their consumables and privacy of their own den. We are made to feel more as intruders at home since our economic clout is becoming fainter and less constructive to be providers for all. Of course children have their own means of which we are least in the know. We have our own worries: issues of pension funds to sort out than of children whose worlds are on fast tracks. Our world wherein we lashed ourselves to work ethics and burnt incense before family gods for prosperity is gone; those corporate heads whose appeasement was chief concern also have gone; and so are pension funds.
Coming to think of it we have only ourselves to blame.

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If Wishes were horses CEO’s will ride over Taxpayers
The Institute for Policy Studies, a self-described “progressive multi-issue think tank,” analyzed the link between tax loopholes and excessive executive compensation and concluded that the loopholes created an “uneven playing field” between large companies and small businesses and led to lost tax revenue.
The latest edition of the institute’s annual Executive Excess compensation study found that in 2011, 26 CEOs received more in compensation than their companies paid in taxes, and that the four major tax loopholes contributing to excessive executive pay cost taxpayers about $14.4 billion a year.
“The report is timely at a time when the tax debate is so intense in this country,” Sarah Anderson, the institute’s global economy project director and the report’s co-author, told ABC News. “Some leaders are saying we need to reduce the corporate tax burden even more while major companies are taking advantage of loopholes to lower their tax bill.”(Taxpayers Subsidize CEO Pay, Report Says-abc News report/By Susanna Kim )
In short taxpayers subsidize the CEOs lifestyle.

It’s crystal clear that the Bush tax reduction on capital gains and dividend income in 2003 was the cutting edge policy that has created the immense increase in net worth of corporate executives, Wall St. professionals and other entrepreneurs.
The reduction in the tax from 20% to 15% continued the step-by-step tradition of cutting this tax to create more wealth. It had first been reduced from 35% in 1978 at a time of stock market and economic stagnation to 28% . Again 1981, at the start of the Reagan era, it was reduced again to 20%– raised back to 28% in 1987, on the eve of the October 19 232% crash in the market. In 1997 Clinton agreed to reduce it back to 20%, which move was an inducement for the explosion of hedge funds and private equity firms– the most “rapidly rising cohort within the top 1 per cent.”
The facts are clear according to the Congressional Budget Office more than 80% of the increase in income inequality was the result of an increase in the share of household income from capital gains. In fact, you can go so far as to claim that “Capital Gains income is the most unevenly distributed– and volatile– source of household income,” according to Laura D’Andrea Tyson, University of California business professor and former chairwoman of the Council of Economic Advisers under President Clinton.
No wonder the super wealthy plutocrats obtained the largest share of national income– 25% of the nation’s wealth- greater than any other industrial nation in the the period of 1979 to 2005.
I commend you to the late Justice Louis Brandeis warning to the nation that ” We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” We have to make up our minds to restore a higher, fairer capital gains tax to the wealthiest investor class– or ultimately face increased social unrest.(selected from Forbes of 20 Nov.2011)
If Government is for the rich you shall see even worse situations. You will find the highest of the land refusing to come clean of his private wealth and wealth created from ‘loop holes’ that are not to be looked too closely and held in offshore accounts. A time shall come that citizens will hand over their passports and not serve under a unjust government; for serving that nation shall be as odious as serving the cause of the enemy.

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The statutory U.S. corporate income tax rate is 35 percent, one of the highest in the world, but over the 2008-2010 period thirty large companies while their profits were good avoided to pay their dues.
The average effective tax rate for the companies over the period was 18.5 percent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks.
Their report also listed General Electric Co, Paccar Inc, PG&E Corp, Computer Sciences Corp and NiSource Inc as among the 30 that paid no taxes. All 280 corporations examined were profitable over the period. Pepco Holdings, a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied. Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.
“But that does not mean that low-tax corporations bear no responsibility … The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support,” the report said.
As Congress and the Obama administration struggle with a sluggish economy and high deficits, corporations are pressing Capitol Hill for more tax breaks, including one that would let them bring home overseas profits at a reduced tax rate.
The congressional “super committee” tasked with finding at least $1.2 trillion in additional budget savings by November 23 is so far deadlocked across a familiar divide — Republicans refusing any tax hikes, Democrats defending social programs.
On Tuesday, a panel of budget experts warned super committee members that they would fail the country if they do not meet their goal. Financial markets have been waiting for many months for signs that Washington can get its financial house in order, but few have been forthcoming.
Patriots all of them, but talk of paying their tax see how they behave? These are the very epitome of American Capitalism while the old, young and the veterans are thrown to the gutter to fend for themselves. Bill of Rights was penned by an archangel but tax loopholes are the work of Mammon. The same horned Beast also keeps 1% of the nation to enjoy the best fruits of other’s labor and luxuries they don’t really need but money can buy. Did I hear at some quarters the following cry, ‘Occupy the Wall Street is Un-American?’
I am afraid this life in the bubble of corporate greed is a phenomenon, which shall soon be a thing of the past. How long can man’s indifference to fellow man endure?

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The euro zone has been looking to China play a role in supporting its rescue fund by investing some of its $3.2 trillion in foreign exchange reserves — the world’s largest. China cannot barge in and flash wads of money and say, ‘help yourself, folks’ So Hu Jintao has to play a subtle game. In politics a Good Samaritan has one hand extended to pick you from gutter and with the other to chain you forever play second fiddle to his whims. Morality of the parable and hard reality of politics are altogether different. When the Chines finance minister announces ‘China has always supported Europe’s response to the international financial crisis and its economic recovery efforts,” already there are fellows back in Beijing toting up for how much Europe has to pay for China’s help.
Europe can sit back and think of the adage.’Beware of the Geeks bearing gifts.’ EU member Greece has tossed its problem into the lap of Euro block and is now the crisis of eurozone. China has to make moves carefully. If Europe is bruised and cannot afford its melamine laced milk, cough syrup cereals, meat products and toys with deadly paints where would it dump all the shoddy goods? Africa is one place where it can but there is still surplus that must be got rid of. Perhaps Europe? Sure China has now made some sounds tuttutting its sympathy at Europe’s crisis. Let us watch how a nation with poor record of human rights will crack its bullwhip.
It is worthwhile to study how superpowers go out in ignominy or watch the pretensions of a nation in a hurry. China has the USA for a debtor. Now Europe. Here is a chance to score a point where Europe is bending backwards to come up with some solution.
PS. Italy Portugal,and Spain are now watching how they shall make their crisis the crisis of Eurozone.These also shall come. A global economic meltdown seems to be in the cards. Am I being pessimistic? Only time will tell.

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On 1 May, a series of austerity measures was proposed. The proposal helped persuade Germany, the last remaining holdout, to sign on to a larger, 110 billion euro EU/IMF loan package over three years for Greece (retaining a relatively high interest of 5% for the main part of the loans, provided by the EU). On 5 May, a national strike was held in opposition to the planned spending cuts and tax increases. Protest on that date was widespread and turned violent in Athens, killing three people.
In the early hours of 27 October 2011, Eurozone leaders and the IMF came to an agreement with banks to accept a 50% write-off of (some part of) Greek debt, the equivalent of €100 billion. The aim of the haircut is to reduce Greece’s debt to 120% of GDP by 2020.
On 31 October 2011 Greek Prime Minister George Papandreou announced his government’s intentions to put the acceptance of the terms under which the haircut is to take place up for a referendum, which is to happen as soon as the plans have been finalized in 2012.(wikipedia)
The tragedy of Greece is that it has let the workers down by the manner it handled the crisis. Austerity measures shall not paper over cracks of corruption;neither will Government apathy to generate wealth and collect the back taxes from the defaulters (who as I fear are in collusion with the powers that be) the Eurozone debt crisis will go away. Eurozone is better off without unwilling partners. In short it is the deluge Greece need to stave off by all its resources. Greek politicians seem to play politics still. They want to look good and the blame is not laid at their door. Instead of pulling the country together from looming deluge each party is playing politics with an election around the corner.
Let me quote Yahoo blog on finance: ‘The headlines coming out of Europe are filled with talk of a banking and sovereign debt crisis in Europe. The problems which had their origins in Athens, have now spread to Rome — and have become much larger in the process.
Why we should Americans care? It’s simplistic to say, but we’re all connected. U.S. banks — and probably the one where you have an account — have billions of dollars of Greek, French, and German government and private sector bonds on their books; many are active direct lenders in those countries. The Euro zone, taken together, is one of the largest economic forces in the world. Behind Canada, the European Union is the largest destination for U.S. exports, accounting for about 18 percent of the total. If you work in an industry that exports — agriculture, airplanes, tourism — a demand shock from the world’s largest markets would be very bad news. In addition, European companies are big employers in the U.S. On Monday, Mercedes announced it would invest $350 million in a plant in Tuscaloosa, Alabama, to enable it to build a new crossover. If the home markets of the big European employer collapse, they’ll have to retract. Like it or not, we’re all in this together.
First, there’s the continuing tragedy of Greece. The government, unable to stay current on its debt and shut out of bond markets, sought an international bailout and enacted austerity programs — only to find that the economy shrank, which caused deficits to rise and the nation’s debt as a percentage of GDP to soar. And that triggers a need for fresh bailouts. It’s long been obvious that Greece has little hope — and not that much interest — in paying the debts the government incurred to private investors. It can’t hope to repay the bailout funds it has used to remain current on the debt. In July, banks accepted a 21 percent haircut on Greek government bonds. Now there’s talk that investors will have to accept a 50 or 60 percent reduction in the value of their Greek debt.
This prospect is transforming the Greek crisis into a European banking crisis. Ordinarily, banks rely on their colleagues, competitors, and customers for loans and deposits. But when fears arise that banks may not be solvent — due in part to large reductions in the value of assets like Greek debt — banks have to turn to their shareholders. They have to raise new capital in order to make up for the holes that Greek debt will open in their balance sheet. Which is why European bank stocks took a big hit on Monday. In order to withstand this stress — and other stresses — European authorities have determined that European banks need to collectively raise about $150 billion in new capital.
In theory, that’s not so awful. But the European banking crisis, caused by a Greek sovereign debt crisis, now threatens to create sovereign debt crises elsewhere. Banks that have exhausted their shareholders’ assets and patience will have to call upon their governments. Dexia, the French-Belgian bank, last week sold itself to state-controlled companies in Belgium and France. Of course, there’s likely to be more where this came from. If large banks all need to raise capital at the same time, they’ll have to turn to their government.
That’s what happened in the U.S. with the TARP in the fall of 2008. But this likely next step leads to a new problem, which markets are already anticipating. Governments will have to borrow lots of money to backstop their own banks — even if, as with the TARP, the taxpayers end up getting the money back. But given their high levels of existing debt and low levels of growth, there’s no guarantee that, say, France will be able to increase its borrowings without harming its own credit rating.
The next step, after banks have exhausted the patience of their fellow banks, their shareholders, and their governments, is for banks to call on their central bank or some other authority. In the case of the U.S., the Federal Reserve in the fall of 2008 effectively guaranteed large asset classes, bought up chunks of other assets and provided unlimited short-term funding, all in an effort to bolster confidence, stop banking panics and provide some breathing space.
But here’s where the analogy to the U.S. breaks down: The European Central Bank simply isn’t capable of acting in the same way that the U.S. Federal Reserve did. It doesn’t have the authority, the license or the independence to inject itself into markets the way the Fed does. The ECB won’t print money in huge quantities in order to help ward off a financial crisis. Knowing this, in May 2010, the European Union created the European Financial Stabilization Fund, funded by governments, which would perform some of those bank-of-last-resort functions. But its funds are limited at about $600 billion, and it has to act with consensus.
That would be enough to stabilize Greece. The problem is that Greece has caused investors to cast a jaundiced eye on countries with high levels of debt and problematic political systems. And that has caused them to look across the Ionian Sea to Rome. Italy has about $1 trillion in debt that will need to be refinanced in the next three years. Bond markets have signaled their concern about Italy’s dysfunctional political system by driving interest rates up. The European Central Bank in August began buying small quantities of Spanish and Italian bonds in an effort to instill confidence. But these purchases are like bringing a pea shooter to a bazooka fight. Controversial on a small scale, the efforts aren’t likely to be expanded.
The ECB, which can print money, isn’t willing to bail out or guarantee Italy, and the EFSF, which has to ask European taxpayers for money, isn’t big enough. Meanwhile, Italy’s politics, dominated by Silvio Berlusconi, are something of a farce. The markets are continuing to fret that Italy, like Greece, simply may not be able to or interested in staying current on its debt at some point in the not-too-distant future. As the Financial Times reported, at the EU’s big debt summit last weekend in Brussels, Berlusconi, “according to diplomats, pretended to doze off.” At a press conference after the summit, French Prime Minister Nicolas Sarkozy and German Chancellor Angela Merkel practically rolled their eyes when they were asked if they thought Italy was capable of stepping up.
The European Union was designed to avoid the sort of sudden, traumatic political moves that made life in the continent so miserable for much of the 20th century. The policy architecture means that, in the 21st century, there can’t be quick fixes to big problems’.
(Ack:Daniel Gross is economics editor at Yahoo! Finance.)
Politics is about power and wealth also means the same thing. Naturally both converge. Eurozone crisis shows off the clout of USA and China hold. Don’t you see China looming larger than ever, while the USA is looking more pale and specter thin by comparison? What shall China do in this crisis? Are they going to make capital out of the European crisis?( concluded)

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What America has, in the recent times, achieved by politics spells trouble if one goes by enemployment figures. The confrontation between the GOP controlled House and Democratic-controlled Senate was fought on bi-partisan spirit and not for the good of the nation. The government defaulting on its debts was barely avoided but its credit triple rating fell.
‘The job market is even worse than the 9.1 percent unemployment rate suggests.
America’s 14 million unemployed aren’t competing just with each other. They must also contend with 8.8 million other people not counted as unemployed — part-timers who want full-time work.
When consumer demand picks up, companies will likely boost the hours of their part-timers before they add jobs, economists say. It means they have room to expand without hiring.
And the unemployed will face another source of competition once the economy improves: Roughly 2.6 million people who aren’t counted as unemployed because they’ve stopped looking for work. Once they start looking again, they’ll be classified as unemployed. And the unemployment rate could rise’.( 4th Sept- AP News the Daily Caller)
The only reason the Founding Fathers of the nation made their hard earned liberty secure was on capitalism. But politics of the skunks made it crapitalism. Here we see crapitalism at its best.
The politicians are all have their eyes on the 1912. So Democrats and Republicans did not want to look that they compromised on their principles and so cuts in spending had to be be applied for all its worth. Then only, so it seems to me, one party can give tax breaks for the super rich that keep the party relevant. ‘Kickbacks’ as a term in the Capitol Hill means not to kick a good thing that makes their tea party as cosy as can be.
Since politicians are all explaining ‘theology’ as a synonym for politics these days let me quote words of Jesus. ‘You have the poor with you always.’ As I edit this I realize the Labor days are here. Those who are taking time out resting from their labors think of who cannot rest because they have lost their labor from the day one.
The Republican party is full of able candidates who are for making a moral stand even in a political meeting. ‘You have the poor because we cannot go against the word.’
I rest my case.

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Finger length may predict financial success
‘WASHINGTON – The length of a man’s ring finger may predict his success as a financial trader. Researchers at the University of Cambridge in England report that men with longer ring fingers, compared to their index fingers, tended to be more successful in the frantic high-frequency trading in the London financial district’.
(By Randolph E. Schmid, AP Science Writer   – Mon Jan 12)
It comes no surprise quality of being light-fingered and money go together. Those with light fingers are invariably onto insider trading. Inside your pocket, most likely. If they give you trading tips, high frequency or not, hold on to your wallet.

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An expert in finance on account of recent events needs to be redefined. We traditionally think he is a know- all watching over the economic trends; and now it seems he is more like a punter at the dog race.
“An expert is a fellow who is afraid to learn anything new because then he would not be an expert anymore.”(Harry S. Truman)

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