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Charles Hugh Smith

Charles Hugh-Smith

At readers' request, I've prepared a biography. I am not confident this is the right length or has the desired information; the whole project veers uncomfortably close to PR. On the other hand, who wants to read a boring bio? I am reminded of the "Peanuts" comic character Lucy, who once issued this terse biographical summary: "A man was born, he lived, he died." All undoubtedly true, but somewhat lacking in narrative.

Articles by Charles Hugh-Smith

How the Fed Fails

4 days ago

The Fed has a binary choice: preserve America’s global hegemony or further enrich the
billionaires. You can’t have both.

The Fed will fail as a result of two dynamics: diminishing returns and the U.S. dollar’s
role as a global reserve currency. The Fed’s reign as the godhead of financier-banker supremacy
has been fun and games for the past 12 years of stock market euphoria, but that’s about to
All those expecting the Fed to sink the USD to near-zero to "save the stock market" don’t seem
to realize that they’re also expecting the U.S. to surrender its global hegemony, which rests
entirely on the U.S. dollar. The USD is the world’s dominant reserve currency–please
examine the chart below. The USD dwarfs the next largest reserve currency, the euro. The Chinese
yuan–due to

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The Dangerously Diminishing Returns on Monetary and Fiscal Stimulus

6 days ago

Allow me to translate the risible claims of Jay Powell and Janet Yellen that their stimulus
policies haven’t boosted wealth inequality to the moon: "Let them eat cake."

The euphoria of ever greater monetary and fiscal stimulus overlooks the
diminishing returns and higher risks generated by near-exponential increases in stimulus.
I prepared a chart that graphically displays the extraordinary increases in stimulus and the
declining results in the primary goals of economic policy: broad-based opportunity to get ahead and
reducing systemically destabilizing wealth inequality.
Looking back on this era, the fatal irony that all this stimulus has rocket-boosted wealth
and income inequality while gutting the bottom 90% will be glaringly obvious. It’s
actually glaringly obvious right now to

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A Few Notes on Deflation/Inflation

8 days ago

The consensus is that asset inflation is unstoppable and forever. History begs to differ.

Not unsurprisingly, people want a binary option: do we get deflation or inflation?
Unfortunately, reality is messy.
Broadly speaking, globalization is
deflationary as capital seeks the lowest cost labor, parts and materials, the least stringent
environmental standards and the most corrupt governance to maximize profits by any means
available (in this case, exploitation and corruption).
Wages lose purchasing power as every labor force competes with the cheapest available pool of
global labor, and domestic companies must lower prices or face obliteration by the global
Broadly speaking, financialization is inflationary as the costs of services
increase as financialization enables

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Designed To Fail, Failure Guaranteed

11 days ago

Yet it still comes as a great surprise to everyone when ‘doing more of what’s failed
spectacularly’ ends up collapsing the whole rotten structure.

Systems and nations are designed to fail without anyone even noticing:
nobody set out to design the current broken system to fail at critical points, but now
failure can’t be avoided because the incentive structure has locked in embedded processes
that enrich self-serving cartels and insiders at the expense of the nation and its populace.
Nobody chose America’s insanely perverse healthcare system–it arose from a set of initial conditions that
generated perverse incentives to do more of what’s failing and protect the processes that benefit
cartels and insiders at the expense of everyone else.
In other words, the system that was

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Is 2021 an Echo of 1641?

13 days ago

If you don’t discern any of these dynamics in the present, what are you choosing not to see?

The reason why history rhymes is that humanity is still using Wetware 1.0 and so
humans respond to scarcity, abundance and conflicts over them in the same manner.
I am struck by similarities between the conflict-torn mid-1600s and the present:
global climate change (The Little Ice Age in the 1600s), political upheavals and wars
which intertwined civil and imperial conflicts.
Global Crisis: War, Climate Change and Catastrophe in the 17th Century
is a fascinating overview of this complex era which disrupted regimes and empires from England to
Climate change (The Little Ice Age) generated scarcities of grain in a time of burgeoning
human populations. As in the present day, everyone

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Five “Interesting” Financial Tidbits

14 days ago

Is that a red flashing light on the control panel of "the man behind the curtain"?

Among the many "interesting" (a safe word to use in perilous times) signs and portents swirling
around us, here are five financial tidbits "of interest." What do they mean? The answer is of
course nothing. There are many "interesting" things with no discernible meaning. Being "interesting"
is enough.
1. Just like in 2000, proponents claim "this time it’s different." Back then, the claim was that
since the Internet would be growing for decades, dot-com stocks could go to the moon and beyond.
The claim the the Internet would continue growing was sound, but the prediction that this growth
would drive stock valuations into a never-ending bubble was unsound.
Once again we hear reasonable-sounding claims

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2021: If It Wasn’t For Bad Luck, We Wouldn’t Have No Luck At All

16 days ago

If we have indeed begun a sustained "reversal of fortune", it might be prudent to consider the
possibility we’re only in the first inning of a sustained run of back luck.

In our self-deluded hubris, we reckon we’ve moved beyond the influence of fortune, a.k.a.
Lady Luck: our technologies are so powerful and our monetary policies so godlike
that nothing as random as luck could ever crush our limitless expansion.
Thus does hubris beg for a comeuppance: the greater the hubris, the greater the reversal
of fortune, the greater the confidence in our godlike powers, the greater the collapse of our
prideful faith in technology and economic policies.
So we’ve enshrined our hubris-soaked happy story: the virus will naturally weaken,
vaccines will conquer the Covid virus in short order, and by

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The Tyranny Nobody Talks About

19 days ago

All the tricks to hide our unaffordable cost structure have reached marginal returns.
Reality is about to intrude.

There is much talk of tyranny in the political realm, but little is said about the tyrannies
in the economic realm, a primary one being the tyranny of high costs: high costs
crush the economy from within and enslave those attempting to start enterprises or keep their
businesses afloat.
Traditionally, costs are broken down into fixed costs such as rent and fees which don’t change
regardless of whether business is good or bad, and operating costs such as payrolls, fuel,
etc. which rise and fall with revenues.
To some degree, this division no longer matters, because the entire cost structure of our
economy is tyrannically high: if rent, insurance, taxes and general overhead

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The Coming War on Wealth and the Wealthy

21 days ago

Here’s looking at you, Federal Reserve–thanks for perfecting ‘legalized looting’ and
neofeudalism in America.

The problem with pushing a pendulum to its maximum extreme on one end is that it will swing
back to the other extreme minus a tiny bit of friction.
America has pushed wealth/income inequality, unfairness and legalized looting to the
maximum extreme. Now it will experience the swing back to the other extreme. This will
manifest in a number of ways, one of which is a self-organizing populist war on wealth and the wealthy.
To say the system is rigged to benefit the already-wealthy and powerful is a gross
understatement. Take the tax code as an example–thousands of pages of arcane tax breaks
and giveaways passed
by a thoroughly corrupted Congress and thousands more pages of

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2020 Was a Snack, 2021 Is the Main Course

23 days ago

One of the dishes at the banquet of
consequences that will surprise a great many revelers is the systemic failure of the Federal
Reserve’s one-size-fits-all "solution" to every spot of bother: print another trillion dollars
and give it to rapacious financiers and corporations.

Though 2020 is widely perceived as "the worst year ever," it was only a snack. The real banquet
of consequences will be served in 2021. The reason 2020 was only a snack is that systems
didn’t break down in 2020. The reason 2021 is the main course is that systems
will break down, and once broken, they cannot be restored.
I made the chart below to explain how systems fail and why they cannot be restored.
Systems have numerous sources of potential fragility:
1. Systems can be tightly bound to other

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The Top 10%’s Bubble Is About to Burst

28 days ago

When the top 10%’s bubble pops in 2021, the loss of illusions/delusions of security and
wealth will be shattering to all those who believed artifice and illusory "wealth" were real.

A great many people are living in bubbles that are about to pop. The largest bubble is the one
inhabited by people who complacently believe in time travel, i.e. that the world of 2019 is about to
replace the nightmare of 2020 and we can all go back to our carefree debt-funded consumption frenzy
and illusions of ever-greater wealth forever and ever.
The greater one’s sense of security, the more durable the bubble. Those in America’s top 10%
who have reaped virtually all the gains in income and wealth of the past 20 years live in a bubble
that they view as unbreakable: no matter what problems arise, their

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2020 the “Worst Year Ever”–You’re Joking, Right?

29 days ago

So party on, because "the worst year ever" is ending and the rebound of financial markets, already
the greatest in recorded history, will only become more fabulous.

Of the lavish banquet of absurdities laid out in 2020, one of the most delectable is
Time magazine’s December 14 cover declaring that 2020 was the "worst year ever." You’re
joking, right? In history’s immense tapestry of human misery, it’s not even in the top 100 worst years.
Consider 1177 B.C., when many of the
great civilizations of the Mediterranean Sea and Mideast collapsed, and the survivors struggled
through a pre-modern Dark Ages. This book assembles what is known about this
catastrophic era:
1177 B.C.: The Year Civilization Collapsed.
Then there’s 1644 A.D., when the Ming Dynasty was overthrown by the Manchu

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The Most Hopeful Scenario for 2021

December 26, 2020

Choose wisely, America, or the options for a positive outcome will vanish like mist in Death
Valley on a clear July afternoon.

From the point of view of evolution, the most hopeful scenario for 2021 is the sudden and
complete collapse of everything that is obsolete, inefficient, ineffective and sclerotic.
When obsolete systems and entities pass away quickly, the cost and pain are processed and absorbed
quickly as well: enterprises go bankrupt and their assets are liquidated, failed ventures close,
and schemes that didn’t yield the desired benefits are scrapped.
This is the evolutionary process. Whatever has lost its selective advantages will succumb
to selective pressures and fade away.
The problem arises when self-serving insiders siphon resources to keep their obsolete,

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Give Yourself a Gift Next Year: Agency

December 25, 2020

We think we’re powerless because we don’t have wealth and power over others, but nothing could
be further from the truth.

To have agency is to have power over your own life and control of your assets,
options and resources. There are a great many things that influence our lives that we do not
control, but there are also many things we could influence in our lives but do not.
The conventional view puts great weight on the agency
created by money, as an abundance of money enables people to do a number of things that people with
little money cannot do: live comfortably in costly locales, buy a larger home, buy a second home,
buy a boat, pay for college with cash, pay for expensive medications not covered by insurance, take extended
vacations and start enterprises without ceding power

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Our Phantom Middle Class

December 23, 2020

What happens when America finally admits its middle class is a phantom of feel-good fantasy?
We may well find out in the next four years.

Of the many things we cannot bring ourselves to admit, one of the most consequential is that
our vaunted middle class is illusory, a phantom of our imagination rather than a reality.
The reality is the vast majority of the nation’s wealth and income has been diverted from the
middle class to those at the pinnacle of the wealth-power pyramid and the technocrat / financier
insider class (the top 10%) that serves the interests of those at the pinnacle.
This transfer has accelerated rapidly in the 21st century as virtually all the real income gains of the
past 20 years have flowed to the top 0.1%. This RAND study found that America’s elites siphoned

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Big Media: Selling the Narrative and Crushing Dissent for Fun and Profit

December 21, 2020

profit-maximizing Big Tech / Big Media Totalitarian regime hasn’t just strangled free speech
and civil liberties; it’s also strangled democracy.

The U.S. has entered an extremely dangerous time, and the danger has nothing to do with
the Covid virus. Indeed, the danger long preceded the pandemic, which has served to
highlight how far down the road to ruin we have come.
The danger we are ill-prepared to deal with is the consolidation of the private-sector
media and its unification of content into one Approved Narrative which is for sale
to the highest bidders. This is the perfection of for-profit Totalitarianism
in which dissent is crushed, dissenters punished and billions of dollars are reaped in
managing the data and content flow of the one Approved Narrative.
So don’t post

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What Would Happen If the Fed Ceased to Exist?

December 18, 2020

Extremes get more extreme until risk breaks out; then the reversal will be as extreme as
the bubble expansion.

What would happen if the Federal Reserve ceased to exist? We all know the answer: global
markets would instantly collapse and the global financial system, now entirely dependent on Fed
stimulus, intervention, manipulation, free money for financiers and endless printing
of trillions of dollars out of thin air, would crash, leaving nothing but a steaming, fetid
pile of corruption infested by the cockroaches scurrying around gobbling up the few crumbs left.
What would happen if the Federal Reserve ceased to exist? The Treasury would sell its bonds
on the open market, where buyers and sellers would set the yield on the bonds. Private banks
would take deposits and lend money at

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When Social Capital Becomes More Valuable Than Financial Capital

December 17, 2020

This devaluation of financial wealth–and its transformation to a dangerous liability–
will reach extremes equal to the current extremes of wealth-income inequality.

Financial capital–money–is the Ring that rules them all. But could this power fall from
Continuing this week’s discussion of the idea that that extremes lead to reversions,
let’s consider the bedrock presumption of the global economy, which is that money is the
most valuable thing in the Universe because the owner of money can buy anything,
as everything is for sale. The only question is the price.
Reversion to the mean is a statistical dynamic but it is also a human social dynamic:
for example, once the social / financial / political pendulum reaches Gilded Age extremes of
wealth/income inequality, the

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Can 20 Years of Deflation Be Compressed into Two Years? We’re About to Find Out

December 16, 2020

Extremes become more extreme right up until they reverse, a reversal no one believes possible
here in the waning days of 2020.

The absolutely last thing anyone expects is a collapse of all the asset bubbles, i.e. a
deflation of assets that reverses the full 20 years of bubble-utopia since 2000.
The consensus is universal: assets will continue to loft ever higher, forever and ever,
because the Fed has our back, i.e. central banks will create trillions out of thin air
without any consequence other than assets lofting ever higher.
This research paper from the San Francisco Federal Reserve begs to differ.
Here is an excerpt from

Longer-Run Economic Consequences of Pandemics (San Francisco Federal Reserve)

"Measured by deviations in a benchmark economic statistic, the real natural rate

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One Little Problem with the “All-Electric” Auto Fleet: What Do We Do with all the “Waste” Gasoline?

December 14, 2020

Regardless of what happens with vaccines and Covid-19, debt and energy–inextricably bound
as debt funds consumption– will destabilize the global economy in a self-reinforcing feedback.

Back in the early days of the oil industry (1880s and 1890s), the product that the industry could
sell at a profit was kerosene for lighting and heating.
Since there was no automobile industry yet, gasoline was a waste product that was dumped into streams.
Why couldn’t the refiners produce only kerosene? Why did they end up with "worthless" gasoline?
The answer is a barrel of oil produces a variety of products. While there is some "wiggle room"
to produce more diesel and less gasoline, etc., it isn’t possible to turn a barrel of oil into
only one product.
John D. Rockefeller became very wealthy by

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New Audiobook, New Song, Renewed Focus

December 13, 2020

There is no way a status quo that is completely dependent on the permanent expansion of these
interlocking extremes, asymmetries and imbalances can unwind them all and retain its myriad
parasitic elites.

Thanks to my friend and colleague Mark Jeftovic, the audiobook of

A Hacker’s Teleology: Sharing the Wealth of Our Shrinking Planet is now available.
Hands-free grokking is now accessible.
A new song also burst forth from the ether:
I Can’t Hear What You Say.
This is my take on polarization and the tone-deafness of those claiming to be charge of things.
(lyrics below) My friend and mentor CC did all the heavy lifting: the guitar, drums and bass tracks,
while all I had to do was the vocals and a few guitar fills. All nine of our collaborations
are posted here.
Two friends also

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Dreaming of a Christmas Without Stuff Nobody Wants or Needs

December 11, 2020

Freeing ourselves of unwanted/unneeded gift-giving is not just heresy in a debt-funded
consumerist economy–it is tantamount to treason.

Did you see the new "gotta-have" coffee-pod flavors this Christmas? Crayfish, Spanish Moss,
Pumpkin Spicy Radish and Jungle Rot. Yowza, it doesn’t get any better than this….
Future archeologists will marvel not just at the enormous quantity of stuff left by our late-oil-boom
frenzy of consumption but by the peculiar concentrations of never-used stuff in closets, basements
and strange (possibly religious in nature) immense structures comprised of endless rows of small
rooms crammed to the ceiling with stuff without any apparent utility or value.
When can we finally admit that Christmas gift-giving no longer serves any purpose other than

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Cycles, Systems and Seats in the Coliseum

December 10, 2020

The idea that debt, leverage, speculation, greed, exploitation and parasitic
elites can expand exponentially forever is magical thinking.

Contrary to first impressions, I am not a doom-and-gloomer; I’m a systems-cycles-er,
meaning I’m interested in where systems and cycles are heading.
Cycles work because we’re still running Wetware 1.0 which entered beta testing around 200,000 years
ago and was released, bugs and all, around 50,000 years ago. Since the processes and inputs
haven’t changed, neither do the outputs.
Nature is a mix of dynamic, semi-chaotic systems (fractals, etc.) and cyclical patterns which
tend to operate within predictable parameters. Why should human nature and human constructs
(societies, economies and political realms) be any different?
So longterm success breeds

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Welcome to the U.S.S.A.’s Banquet of Consequences

December 8, 2020

The incontestable incompetence of the USSA’s monopolies, institutions and agencies is about to
take center stage in 2021.

When I mention that the U.S.A. feels increasingly like the U.S.S.R., a surprising number of
people tell me they feel the same way. Welcome to the U.S.S.A.: United Simulacra States
of America where everything is an absurdly transparent simulation with little connection to reality
and dissent is crushed by an everpresent, ubiquitous narrative police state enforced by
the union of Big Tech social media, search and other monopolies and the Savior State:
do what we tell you and you’ll get a piece of our endlessly spewed trillions.
My colleague Mark Jeftovic recommended an insightful book on the unraveling of the USSR,

Everything Was Forever, Until It Was No More:

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Covid Is Toppling America’s “Points of Failure” Dominoes

December 7, 2020

Sorry Fed, it’s too late. The dominoes are already toppling, and every point of failure
is being exploited by the catalyzing effects of Covid.

America’s many points of failure–leverage points where a break brings down the
entire system–are falling like dominoes, a process catalyzed by Covid. These systemic
points of failure have been masked for the past 20 years by the widespread distribution of
trillions of dollars, either printed or borrowed.
There’s no point of failure that can’t be glued together or covered up a bit longer with
fountains of cash. That’s the American way of solving problems: just throw more
money at it.
Unfortunately for America, substituting borrowed trillions for real problem-solving generates its own
set of problems, problems that increase the system’s

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Covid Is Revealing the Cancerous Underbelly of U.S. Healthcare

December 4, 2020

If you still believe that America’s Sickcare is "the finest in the world" and is
endlessly sustainable, please study these three charts and extend the trendlines.

I’ve long been making the distinction between healthcare and sickcare:
healthcare is the service provided by frontline operational caregivers (doctors, nurses, aides,
technicians, etc.) and sickcare is the financialized system of Big Hospital Corporations,
Big Insurers, Big Pharma, etc. and their lobbyists that keep the federal money spigots wide open.
This financialized sickcare system is being consumed by the cancer of greedy profiteering
pursued by self-serving insiders. The delivery of healthcare is secondary to maximizing
revenues and profits by any means available.
To believe such a corrupt system is sustainable is

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About Those Vaccine ID Cards…

December 3, 2020

An idea that’s simple as an abstraction–vaccine ID cards–turns out to be extremely
difficult once real-world operational realities must be dealt with.

Authorities around the world have made it clear that they will do "whatever it takes" to
vaccinate their citizenry with one of the first available vaccines. Authoritarian states may
mandate universal vaccinations while less authoritarian states will favor a "carrot and stick"
approach of offering benefits to the vaccinated and exclusions from employment, education, travel
and most of everyday life for those who refuse to be vaccinated.
To identify the vaccinated and unvaccinated, many nations are planning to issue
ID cards or "vaccine passports."
As an abstraction, this seems straightforward, but if we start digging into the actual

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Do You Really Think the Empire Will Sacrifice the Dollar to Further Enrich Billionaires?

December 2, 2020

As for stock markets–the devil take the hindmost.

Let’s keep it simple: US dollar up, stocks down. US dollar down, stocks up. Stocks up, billionaires
get richer. Since that spot of bother in
March 2020 when the US dollar (USD) soared and stocks cratered, the USD has been in a free-fall,
boosting the wealth of America’s Robber Barons and various other skimmers, scammers and other undeserving
Chief among the undeserving scoundrels feasting on the decline of the USD are global
stock markets which have soared not because revenues and profits are soaring but because
the USD has plummeted.
The Federal Reserve is widely worshiped as the Ultimate Power in the Universe, a kind of
financial Death Star. The Fed has seen fit to crush the USD to further boost the
wealth of

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2021 is Already Optimized for Failure

November 30, 2020

One sure way to identify a system "optimized for failure" is if all the insiders are
absolutely confident the system is "optimized for my success".

I often discuss optimization here because it offers an insightful window into how
systems become fragile and break down. When we optimize something, we’re aiming to get
the most bang for our buck: maximize our efficiency, profit, productivity, etc., while
minimizing our costs.
To maximize our goal, whatever it is–profits, power, whatever–
we strip away redundancy and buffers because these add costs and don’t boost our desired output.
They create resilience, i.e. the ability to survive disruptions, but the logic of optimization
is relentless: get rid of all extraneous costs, because resilience doesn’t boost the bottom line.

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Moral Decay Leads to Collapse

November 27, 2020

Our national claim of moral superiority is no longer plausible.

A very strong case can be made that America is now a moral cesspool. Consider just three cases:
Jeffrey Epstein, the CEO of Pfizer and JPMorgan Chase.
Sadly, Epstein is the epitome of America’s elite: getting away with abusing children for years, if not decades; when finally caught a few years ago, escaping with a legal wrist-slap; acquiring a fortune of $200 million without creating any jobs, innovations or value; buying his way into the good graces of Harvard, MIT and a seemingly endless parade of celebrities, politicians, scientists, etc.
And very par for the course in America’s elite: Epstein’s crimes were known by America’s
intelligence and law enforcement agencies, but rather than indict him, they made him an

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