The global threat to the Dollar posed by Iran working with China, Russia and Venezuela...
WERE IT NOT for the Dollar's status as the "reserve currency", now slowly turning into a post-World War II relic, the US currency would have already collapsed by now.
A string of $4.4 trillion in US trade deficits since 1996 – plus heavy reliance on foreign funds to support its external imbalance – has severely weakened America's global economic leadership over the past five years. The US Dollar survives, due to America's political stability, its military might in the Persian Gulf, its large $12.5 trillion economy (28% of global GDP), and deep and liquid financial markets for bonds and stocks.
But last week, the US Dollar fell to an all-time low against the Euro, a new milestone in a steep decline that began more than six years ago. The Euro hit a record high of $1.3682 on April 27th, up from $1.20 a year ago and as little as 83 cents in October 2000, when the rally against the Dollar began.
The British Pound continues to hover near $2.00; the Australian Dollar fetches 82.50 cents. Both currencies are at 15-year highs.
Since the start of this year, fifty of the world's currencies have risen against the Dollar. Only eight have declined. Behind the falling US Dollar is a changing global economy. China and the US remain the locomotives, accounting for 60% of all global growth in the last five years. But now the $12.5 trillion US economy is sputtering, due to a slumping housing sector. The $2.5 trillion Chinese economy, meanwhile, is overheating. It expanded at a blistering 11.1% pace in the first quarter.
India's elephant, China's dragon, and the other dynamic economies such as Russia and South Korea, are expected to contribute more than 50% to world economic growth in 2007. China's contribution alone should be worth 30% and India's 10%.
In comparison, the US contribution to world growth is expected to fall to 12% after its economic output halved to 1.3% in the first quarter – the smallest gain in four years.
Every time since 1960 that US year-on-year GDP growth has dipped below 2%, a full-blown recession unfolded. In contrast, the Eurozone economy is expanding at a 2.6% clip, its best performance in six years. Now the European Central Bank is aiming to lift its interest rate in June, thus making the US Dollar less attractive next to the Euro.
As such, many foreign central banks have been reducing their exposure from the US Dollar to the Euro and British Pound over the past year.
Dollar slides despite smaller trade deficit
As Global Money Trends has noted before, the US Dollar Index has been sliding on a slippery slope since the bursting of the Dot-Com investment boom on Wall Street in 2001. Weakened by rising US trade and budget deficits, the Dollar also has to fund an increasingly unpopular war in Iraq. It's now costing the US Treasury about $2 billion per week.
The US Dollar Index has a weighting of 57.6% in Euros, 13.6% in Japanese Yen, 12% in British Pounds, 9% in Canadian Dollars, 4.2% in Swedish kronas, and 3.6% in Swiss francs.
The weaker Dollar is beginning to translate into an improved US trade balance for the first time in six years. The trade gap in Feb. was $59.4 billion, compared with a record high of $69.6 billion in July 2006. In Feb. the US posted a surplus with Britain for the first time since 2001. For the first two months of 2007, the deficit with the European Union was less than $13 billion, down 28% from a year earlier. With Canada, the deficit fell to below $12 billion from more than $16 billion.
Still, the US deficit with China soared to a record high of $232.5 billion in 2006, up from $201.5 billion the year before, to account for nearly one-third of the total. The annual US deficit with Japan also hit a new high at $88.4 billion, up 7.2% from 2005, thanks to Tokyo's weak Yen policy.
Beijing and Tokyo have achieved such spectacular results by manipulating their currencies against the US Dollar.
The giant US trade deficit of $763 billion in 2006 produced a huge outflow of Dollars to other countries. The People's Bank of China, the Bank of Japan, and the Arab Oil kingdoms have been the key linchpins in limiting the US Dollar's losses by buying US Treasury debt. Foreign central banks boosted their holdings of US Treasury and agency debt by $14.2 billion in the week ended April 25th, to a record $1.93 trillion.
Although the US Dollar is sliding to multi-year lows against most major currencies, the greenback is up 5% against the Japanese Yen from a year ago. The Bank of Japan is the largest holder of US Treasures with $618 billion, and pursues a radical monetary policy, pegging its overnight loan rate at only half-percent, or 475 basis points below the US Fed Funds rate, in order to prop-up the US Dollar.
"Most countries are diversifying their investments to non-US Dollar assets," said Hiroshi Watanabe, Japan's powerful currency chief, in Abu Dhabi on April 19th. "But in the case of Japan, we are still cautious about shifting from the Dollar to other currencies.
"If we do that, it goes towards the depreciation of the Dollar. So why should we trigger such a stupid action?"
The Bank of Japan is the world's largest "Yen carry" trader. Last fiscal year, Tokyo paid ¥7.6 billion in interest expense, while earning ¥3 trillion in interest-rate income on US Treasuries.
"Thus, we don't have any plans to sell foreign currencies to redeem government bonds," said Japanese finance minister Koji Omi on March 23rd.
The US Treasury is thrilled with Japan's "cheap Yen" policy, which encourages the flow of capital from Tokyo to US financial markets. Tokyo also reaps big rewards, as the Yen has fallen 14% in the past year against the Euro, 5% against the Dollar and 9% against China's Yuan. That boosted Japan's trade surplus by 74% to a record ¥1.63 trillion (some $14 billion) in March from a year earlier. China overtook the US as Japan's largest trade partner in the year ended March 31st.
Arab Oil kingdoms recycling their Petro-Dollars
Washington's allies in the Arab world, particularly in the Persian Gulf, are now worried about the influence of Shi'ite Iran in Iraq – and elsewhere – in this predominantly Sunni Muslim region. The US accuses Tehran of seeking to set up a covert nuclear weapons program, a fear shared by Saudi Arabia, the world's biggest oil exporter.
Riyadh fears that US troops will leave Iraq prematurely, and enable Iran to consolidate its influence and leaving Sunni Arabs at the mercy of Shi'ite militias. So the Arab Oil kingdoms are supporting the US war effort in Iraq by recycling much of their Petro-Dollar surpluses into US Treasuries.
But nearly four years into the Iraq war, America's patience with the war is growing thin. Democrats voted for a $124 billion funding bill for Afghanistan and Iraq for the current fiscal year, but with strings attached. They ordered US troops to begin withdrawing from Iraq by October 1st.
The Arab Oil kingdoms are willing to recycle their Petro-Dollars into US Treasury bonds, but they also want to be compensated for the weaker Dollar by higher oil prices. The Opec cartel has lowered its daily oil output by 1.8 million barrels since November 2005 – and with the depletion of 500,000 bpd from Mexico's giant Cantarell oil field last year, Opec is back in the driver's seat.
Opec has now guided the benchmark North Sea Brent price upward to $68 per barrel, from as low as $51 per barrel in Jan. this year.
China now weary of the weaker Dollar – and the weaker US
But while Tokyo's financial warlords and the Arab Oil kingdoms are firmly committed to a defense of the US Dollar, how Beijing decides to use its $1.2 trillion of wealth would have much bigger ramifications for financial and commodities markets worldwide.
China's foreign currency reserves soared by $136 billion in the first quarter, more than half the $247 billion gain for all of 2006. They're on course to reach $1.5 trillion next year.
Whenever it allows the Dollar to move lower against the Yuan, however, China suffers losses on its massive $700 billion US bond portfolio. The Dollar has fallen only 1.3% against the Yuan so far this year, and dealers expect a devaluation of only 4% for 2007.
Still, the Dollar fell to a new post revaluation low of 7.7025 Yuan on April 30th. The Chinese central bank raised bank reserve requirements 0.5% to 11% last Friday.
The slow pace of Yuan appreciation could invite "veto-proof" legislation by the US Congress taking a protectionist stance against Chinese exports in the second half of this year. Until now, Congressional efforts to get China to move toward a more flexible exchange rate with threats of tariffs have been frustrated by the leverage exerted by the Chinese through their huge ownership of US Treasury debt.
But if the US Congress slaps tariffs on Chinese imports into the US this year, it might cause Beijing to switch its allegiance to the "Axis of Oil" – a loosely aligned alliance of top oil producers who are slowly chipping away at the US Dollar's allure. They aim to thwart American economic and foreign policy at every turn.
Axis of Oil now chipping away at the Dollar
The "Axis of Oil" – led by Russia, Iran, and Venezuela – is slowly chipping away at the US Dollar's status as the world's "reserve currency". Russia, the world's second largest oil exporter, now demands Roubles in exchange for its Urals crude oil. Iran, the world's fourth largest oil exporter, is earning most of its revenues in the Euro. Venezuela's central bank began shifting its foreign currency reserves in to Euros in 2005.
This "Axis of Oil" is also seeking to draw China into its sphere, exploiting China's huge thirst for oil. Iran became China's top oil supplier in January, providing 2.14 million tons of crude, up 13% over the same month last year and tripling Dec.'s supply. China aims to establish 625 million barrels of strategic petroleum reserves to be able to cover 90 days of net oil imports by 2015.
China's state-run Zhuhai Zhenrong, the biggest buyer of Iranian crude worldwide, began paying for its oil in Euros late last year. Japanese refiners who buy 500,000 barrels per day (bpd) of Iranian crude, or a fifth of Iran's 2.4 million-bpd shipments, continue to pay in Dollars, but they will be willing to shift to Yen if asked.
Why does oil matter so much to the Dollar?
A major share of global trade in commodities belongs to crude oil, which is widely transacted in US Dollars. That forces oil importers and central banks to buy US Dollars, regardless of the direction of US interest rates.
Last month, world-wide oil consumption rose to 85.5 million bpd. By 2030, crude oil demand is expected to reach 118 million bpd, so the Dollar-crude oil link is vital to maintain the Dollar's "reserve currency" status, and allowing America to live beyond its means.
Right now, the only serious threat to the US Dollar's international dominance is the Euro. The gross domestic product of the Eurozone is roughly the same as that of the US, and its population is 60% bigger.
Europe is the Middle East's biggest trading partner, is a major oil importer, has a comparable share of global trade as the US, but its external accounts are much better balanced. The Eurozone ran a current account deficit of only €3.2 billion ($4.2 billion) over the past 12 months.
The "Axis of Oil" could topple the US Dollar if it demanded payment for oil sales in Euros. In November 2000, Saddam Hussein insisted that Iraq's oil be paid for in Euros. When the value of the Euro rose, Iraq's oil revenues increased accordingly. The economic threat this represented to the US Dollar might have been one of the reasons why the Bush administration was so anxious to topple Saddam.
Russia leads the assault on the Dollar
The "Axis of Oil" poses a greater threat to the US Dollar than simply choosing to ask for payment in Euros. Russia is the No.1 producer of natural gas and the No.2 producer of crude oil worldwide. Much of its vast energy assets are still under exploration.
Each up-tick in the oil price pumps billions of additional Dollars into the Kremlin's coffers. And one year ago, on May 10th, Russian kingpin Vladimir Putin declared that Russian Urals blend crude oil would be traded for Russian Roubles, instead of US Dollars. He also made the Rouble fully convertible.
One month later, on June 8th, 2006, the Russian central bank said it had cut the share of US Dollars in its reserves by 5% to 50% and boosted the Euro's share to 40%, with the rest in Sterling and Yen. Due to soaring oil revenues and an appreciating Euro, Russia's foreign exchange reserves have mushroomed to $361 billion today, the third largest in the world, behind China and Japan.
Russia's foreign currency reserves now exceed its outstanding foreign debt of $103 billion, a vast improvement since 1998 when Moscow defaulted on $40 billion of debt repayments.
Its currency reserves ballooned alongside its widening foreign trade surplus, which rose to $164.4 billion in 2006 – up 15.1% from 2005. Two-thirds of Russia's oil and natural gas exports were shipped to the European Union.
Russia's $800 billion economy expanded at a sizzling 8.4% rate in the first quarter, and industrial production was 16% higher from a year ago, outpaced only by China and India. The Kremlin is securing its political control over Russia's natural resources, yet so far has done little to scare foreign investors away – at least in the energy sphere.
Russia attracted $26 billion in foreign direct investment last year, even after the Kremlin pressured Royal Dutch Shell to relinquish its controlling stake in the Sakhalin II oil-and-gas field and installed Gazprom as the controlling partner instead. The Kremlin built Rosneft into the world leader among publicly-traded oil companies with 16 billion barrels of oil reserves and 24.7 trillion cubic feet of natural gas.
Rosneft, still seen as a state asset, has a reserve life of 30 years for oil and 51 years for gas. Russia's other top oil producer, Lukoil, has oil and gas reserves of 20.4 billion barrels of oil equivalent.
Russia also earns 15% of its export revenues from metals. It's home to the world's largest nickel producer, Norilsk Nickel, as well Rusal – the world's largest aluminum company.
Russia is the world's fourth-largest steel maker with foreign sales of $22.5 billion and non-ferrous metal exports of $16.5 billion last year. Russia's gold mines produced 164.2 tonnes of the yellow metal last year.
The Russian central bank prints massive amounts of Roubles each year, in exchange for Euros and US Dollars that are flooding into the country. The central bank said its M2 money supply grew by 52.7% in the 12-months thru April 1st. Yet the US Dollar is sliding to seven year lows against the Russian ruble. The Russian central bank said the annual increase in Russian M2 is equal to around 27% of gross domestic product, which creates excessive liquidity and inflates financial assets. The Russian Trading System Index (RTS) has been further inflated by "Yen carry" traders, who borrow Yen in Tokyo at less than 1% to buy Russian stocks.
Russia is the largest economy in the world not yet party to the World Trade Organization. It had apparently overcome all major roadblocks in bilateral WTO talks with the US last year – but once Putin made it clear that Russia would continue building Iran's nuclear reactors, the US began hindering its admission to the global trade body.
On April 9th, US Trade Representatives Susan Schwab said Moscow was making only "slow progress for entry into the world trade body."
"We would like to see Russia a full fledged member of the WTO and hope that Russia will undertake the commitments and responsibilities, the obligations that come with being a WTO member," she said.
Schwab also said the US Congress was not prepared to revoke the 1974 Jackson-Vanik amendment, crucial for Moscow to enter the WTO. On April 23rd, US defense chief Robert Gates then met with Putin to address criticism of Washington's plans to place missile defense systems in Poland and the Czech Republic, a dispute that is driving relations between the countries to a Cold War low.
Putin argues the sites are too close to Russia's borders and the US could eventually equip the sites with offensive weapons aimed at Russia.
But in a swipe at Russia's steadfast support for the Iranian regime, Washington says its 10 interceptor missile sites in Poland and radar in the Czech Republic are meant to defend against long-range missile threats from Iran.
Washington also accuses Moscow of rolling back democracy and reviving its imperialist past, and Moscow charges Washington with meddling in its domestic affairs. America's efforts to isolate Iran economically have been frustrated by Putin's insurance that UN Security Council resolutions against Tehran's mullahs are watered down as much as possible.
Moscow has also provided Iran with anti-aircraft missile systems and S-300 missiles that could make any possible US military strike on Iranian nuclear sites more dangerous.
Then, on April 26th, Russian kingpin Putin suspended Russia's obligations under the Conventional Forces in Europe Treaty, a move he linked to US plans for a missile defense shield in Europe. Two days later, Russia's pipeline monopoly Transneft said it has built a third of its planned pipeline to China and is on track to complete the 1650-mile pipe by the end of 2008.
The pipeline, Russia's first oil route to Asia, will eventually pump 600,000 bpd of crude oil to China. Beijing is a major buyer of Russia's oil and natural gas as it is, and it lobbied hard for top-priority access over Japan to the oil pipeline carrying Siberian crude to Asia.
China is also helping Russia develop its natural resources, particularly in Siberia. Trading between the two emerging giants is growing rapidly. Last year, bilateral Sino-Russian trade was $33 billion, up from $20 billion in 2005, and is expected to reach $70 billion by 2010.
China is Russia's fourth largest trading partner while Russia is China's eighth largest trading partner. They are the most important members of the Shanghai Cooperation Council, one of the most powerful economic centers of the world. Chinese banks provided $6 billion in financing for Rosneft's acquisition of Yuganskneftegaz, secured by long-term oil delivery contracts between Rosneft and the Chinese National Petroleum Company.
The CNPC is also involved in several joint ventures with Gazprom to develop energy reserves in Iran.
Iran solidifies its alliance with China
Beijing must walk along a delicate tightrope, balancing its hugely profitable trade surplus of $232 billion with the US against its increasing dependence on crude oil imports from Iran. An oil exporter until 1993, China now produces only enough for domestic use. Its proven oil reserves at home could be depleted in 12 years, so Beijing is aggressively trying to secure supplies in hot spots the globe.
Heads from China's Sinopec will visit Iran next week to discuss outstanding financial issues on a possible $100 billion deal to develop the giant Yadavaran oilfield. Yadavaran is expected to produce 300,000 bpd says Gholamhossein Nozari, director of the National Iranian Oil Company, about the same amount Iran now exports to China. Royal Dutch Shell is also interested in participating.
Beijing also wants to reinforce its relations with Iran to tap the Caspian Sea region, and lessen its dependence on maritime oil imports from the Arab kingdoms in the Persian Gulf, thus securing an uninterrupted flow of oil.
China proposes to help Iran modernize its petroleum industry and the wider Iranian economy with industrial technology, capital, engineering services and nuclear technology. Thus the Sino-Iranian economic relationship now extends beyond exploitation of Iran's oil reserves.
Beijing sells anti-ship missiles like the Silkworm and surface-to-surface cruise missiles to Tehran. It has assisted in the development of Iran's long-range ballistic Shihab-3 and Shihab-4 missiles. But Beijing wants to deepen the presence of its firms in the Iranian market, which could be a good outlet for Chinese exports.
Blessed with the second largest oil reserves in the world, Iran's oil production has averaged about 3.9 million for the past three years. However, as a result of surging domestic demand, growing 10% per year and depleting oil fields, Iranian oil and gas revenues are expected to fall from $54 billion in 2006 to $49 billion this year. In ten years, Iran's 2.4 million bpd of oil exports could dry up, unless new oil fields are developed with the help of Chinese, Russian, or European oil companies.
But the US State Department is strongly urging its trading partners not to invest in Iran. The US Congress is pushing a broad spectrum of legislation against Iran this year, with "veto proof" bipartisan support. The most recent proposal is sponsored by Senator Chris Dodd and Rep. Tom Lantos. It brings China and Russia into the fray by threatening economic sanctions on any country that aids Iran's oil industry.
Tehran, however, is well aware of its commercial links with other nations. It buys one third of its imports from the European Union, led by Germany, France, and Italy. This all means that Iran is actually in a far stronger position than its size.
Consider the year of debating, threatening, and blackmailing that went into two UN Security Council resolutions aimed at Iran's nuclear program. In the end, China and Russia stripped the guts outs of the action.
Meanwhile, tension with Iran over its nuclear weapons drive is keeping oil prices high, which in turn, pumps up the flow of cash to the Kremlin and Venezuela. For good measure, Iran sits on the neck of the Strait of Hormuz, through which 17 million barrels of oil flows each day.
Once Iran's mullahs obtain nuclear weapons, the cost of crude oil and shipping rates could sky rocket, forcing central banks to inflate their money supplies at an even faster clip to offset the economic pain.
On March 26th, Ebrahim Sheibany, Tehran's top central banker, said the Iranian economy can withstand the watered down UN sanctions. The regime has enough foreign currency reserves to handle any major shocks.
"In US Dollars, it is at 20% because we need to keep that," he said. Sheibany indicated that he's asking overseas buyers of Iranian oil to pay in Euros rather than US Dollars – a tactic that is being closely watched by foreign-exchange markets.
"That's our policy and right now we are doing that. I think that this is bad for the importers. As I say, I believe that they are shooting their own foot because they have international currency and they should take care of that. If not, we are shifting to other currencies."
Chavez also a key player in the "Axis of Oil"
Now let's add Venezuela's mercurial Hugo Chavez to the "Axis of Oil". This makes matters much tougher for Washington.
Venezuela is the fourth-largest supplier of oil to the United States, accounting for more than 10% of American oil imports. It ships 1.3 million barrels of crude oil north every day. And Chavez has promised to cut off oil shipments to the US if Iran is attacked by the US military. He's already reduced oil shipments to the US by 200,000 bpd from a year ago.
On July 30th 2006, on a two-day visit to Tehran, Chavez pledged that his country would "stay by Iran at any time and under any condition. We are with you and with Iran forever.
"As long as we remain united we will be able to defeat US imperialism, but if we are divided they will push us aside."
Chavez then invited Iranian oil companies to invest in Venezuela. Iran's president, Mahmoud Ahmedinejad, replied:
"I feel I have met a brother and trench mate after meeting Chavez. We do not have any limitation in cooperation. Iran and Venezuela are next to each other and supporters of each other. Chavez is a source of a progressive and revolutionary current in South America and his stance in restricting imperialism is tangible."
To cap the group hug-in, Chavez noted that "Russia helped break a US-imposed blockade by agreeing to sell fighter planes and helicopters worth billions of Dollars to Venezuela."
Venezuela seizing new assets
On May 1st, Chavez declared that Venezuela will strip the world's biggest oil companies of operational control over the Orinoco Belt crude projects. These can convert about 600,000 barrels of heavy, tar-like crude into valuable synthetic oil every day.
Venezuela says there are around 235 billion barrels of crude reserves in the vast Orinoco Belt. If correct, that would give Chavez the planet's largest oil supply. Venezuela currently has 80 billion barrels of proven reserves. Petroleos de Venezuela PDVSA is working with oil companies from China, India, Iran and Brazil to certify the Orinoco reserves, while Chavez seeks to reduce his reliance on the United States.
As regards the seizure, oil minister Rafael Ramirez has said that Venezuela will only consider agreements on the booked value of the projects rather than their much larger current net worth.
The implications are potentially stark for the United States, which imports 62% of its oil supply. Chavez says PDVSA is ready to become the sole energy supplier to Cuba, Bolivia, Nicaragua and Haiti, and would finance up to 50% of the total oil bill. Chavez is also giving away at least 100,000 bpd to Cuba, which the Castro brothers sell on the open market at their own profit, draining Venezuela's finances further.
Chavez is also absorbing higher shipping costs to reach China, expanding oil exports to the Asian juggernaut by tenfold since 2004 to 160,000 bpd.
The Baltic Exchange's Dry Freight Index – a composite of global seaborne trade routes for commodities – hit a record high on April 27th, driven by surging demand for raw materials to Asia. The cost index of merchant ships tripled to 6,230 points over the past 14 months, surpassing the all-time high of 6,208 in Dec 2004.
Venezuelan Finance Minister Nelson Merentes says Caracas used some Petro-Dollars to pay off $4.7 billion of foreign debt in 2006, lowering the national debt by 15% to $26.3 billion. Merentes aims for Venezuela's debt to be lower than 25% of GDP by the end of 2008.
Revenue at PDVSA came to $101 billion in 2006, but the net profit was only $4.8 billion. Chavez spent an estimated $9 billion to keep gasoline prices under 20 cents a gallon, and spent billions more to cement political alliances with Bolivia, Cuba, and Nicaragua.
Because of heavy spending on social programs – and also thanks to subsidizing oil sales to Central America – Venezuela's currency reserves haven't grown anywhere near as fast as Moscow's hoard. S&P puts a "junk status" rating of BB- on Venezuela's bonds; it has put Caracas on notice about a possible downgrade too, due to the ousting of Exxon Mobil, ConocoPhilips, Chevron Corp, Total, Statoil and British Petroleum from the Orinco Belt.
That might not scare Chavez however, who can rely on investment from Sinopec, Lukoil, and Petroleos de Brazil for development of the Orinco oil reserves. During the last several decades, control of global oil reserves has steadily passed from private companies to national oil companies like Rosneft and Petróleos de Venezuela. Roughly 77% of the world's 1.15 trillion barrels of proven reserves now sits in the hands of national companies. Fourteen of the top-20 oil companies are state-controlled. Together, the "Axis of Oil" pumps one-fifth of global oil output.
Maintaining the US Dollar monopoly on the sale of oil is critical to the US government's ability to print money without sending the greenback into a tailspin. However, if the "Axis of Oil" and/or the Chinese Dragon decide to shift more of their trade surpluses towards the Euro or gold, it could seriously undermine the US Dollar, increasing the cost of US imports and corralling the US economy into a "Stagflation" trap.
Such a scenario is more likely in the event of a US military strike on Iran. But the G7 group of seven leading central banks has worked together for a long time, dealing with many market crises – usually by coordinated inflation of their money supplies. That keeps their currencies in stable target zones.
A shift by the "Axis of Oil" – and especially China – away from the US Dollar could override the G-7's manipulative antics. On May 1st, US Federal Reserve chief Ben Bernanke warned the US Congress against imposing tariffs on Chinese imports – just the kind of move that could spark Beijing's flight from the Dollar.
"If trade both destroys and creates jobs, what is its overall effect on employment? The answer is, essentially, none," Bernanke said in Butte, Montana.
The Fed's ability to print unlimited amounts of US Dollars and inflate assets, might hang in the balance...
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