Ask The Experts: How Prepared are Governments & Consumers for Natural Disasters?

Experts How Hurricanes And Disasters Affect Economy

The enduring image from Hurricane Katrina, in 2005, is thousands of New Orleans residents on the roofs of homes and apartment buildings waiting to be rescued from the rising flood waters. Since 2005, federal and state emergency management units have worked to prevent a similar debacle from occurring again.

New disaster management policies are now in place and have been implemented in the wake of 2012′s Hurricane Sandy in the Northeast, the outbreak of tornadoes in Kansas and Oklahoma and the wildfires that have ravaged the Southwest this summer.

Two Areas of Concern

In a natural disaster there are two areas of concern. First, there is focus on ensuring the safety and survival of the people who live in the stricken area. Second, there are efforts to protect property to minimize loss.

When a home is damaged or destroyed, the consumer suffers an emotional loss. The insurance company insuring the property suffers a very real economic loss. And in the recent case of Sandy, governments along coastal areas suffer damage to vital infrastructure and the loss of tax revenue from businesses that were unable to operate.

The experts we talked to generally agree that policymakers have done a better job of coping with disasters in the last eight years, though consumers are not as proactive in preparing for disaster as they could be.

Focus Back on Natural Disasters

David McEntire, a professor of public administration at the University of North Texas, says Hurricane Katrina has shifted emergency management policy back to a focus on natural disasters. In the wake of 9/11, he says it had shifted to homeland security.

While we still are concerned about terrorism, there was a recognition that we cannot ignore hurricanes, tornadoes, flooding,  and other disasters,” McEntire said. “Also, a new law was passed after Katrina – the Post-Katrina Emergency Management Reform Act — which basically rebuilt FEMA after the organization suffered due to the creation of the Department of Homeland Security. Hurricane Sandy resulted in a new law to improve recovery operations.

Thomas Cova, Director of the Center for Natural & Technological Hazards at the University of Utah, says disaster spending can be divided into before and after, and both have gone up following Katrina.

On the after-side, there are simply more people and infrastructure in hazardous areas every year, and disaster losses continue to skyrocket,” Cova said.”Disaster spending on the before-side has also risen but not as fast as the after-side as more communities invest in mitigating and preparing for disasters. Hurricane Sandy is too recent to speculate on rising expenditures, but the upward trend in spending is likely to continue for the foreseeable future.

Citizens’ Responsibility

While governments have a responsibility to protect citizens from natural disasters as much as possible, the citizens themselves also have a responsibility to reduce their own risk, where possible. Jeffrey Czajkowski, research fellow at the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania, thinks consumers could be doing a better job.

We’ve surveyed households over the past three seasons that were under threat of hurricane and we asking them things like ‘what kind of mitigation have you added to your home?’ And we found that only 20% to 30% of these households had done anything to prepare,” he said. “And these include people living directly on the water.

Among the things they could be doing, he says, are elevating their homes, flood-proofing them or adding proper wind mitigation to the roof or windows. Meanwhile, those living in the nation’s heartland are at risk of, not hurricanes but tornadoes.

In areas with a lot of tornado activity, homes with basements offer the best protection. Homeowners without basements have, in recent years, added underground storm cellars adjacent to their homes. They not only add a place of safety during a disaster but can add value to your home when you sell.

Meet Our Experts:

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Bimal Paul

Kansas State University

How has disaster management policy/spending changed since Hurricane Katrina? What about Hurricane Sandy, more recently?

Disaster spending has not changed much since Hurricane Katrina. I suspect that the disaster funding has decreased in recent years due to economic downturn. However, disaster response at local, state, and federal levels has improved remarkably since Hurricane Katrina. In all hurricanes that occurred after 2005, warnings were issued in a timely manner, potential at-risk population was evacuated successfully and relatively quickly, and coordination among emergency agencies at different levels was noteworthy. Search and rescue operation, emergency medical care, debris removal, and post-disaster sheltering and housing, and emergency assistance efforts went smoothly and efficiently. This is true for almost all natural disasters occurred since 2005, including Hurricane Sandy.

Are storms becoming more deadly, or can recent high-profile natural disasters be explained by other factors (e.g. modern media, population density, etc.)? What types of natural disasters will impact people most in the next 5 years?

I do not think that the storms are becoming more deadly in recent years. For example, 2011 set the record for the number of tornadoes, including the deadly ones. These numbers were much lower in the following year. Deadliness of extreme natural events depends on many factors, such as magnitude of the event, area covered, population density of the affected community, preparedness, timely issue of storm warnings as well as households and individuals’ response to such warnings. Because of global climate change, I anticipate more people will be impacted by climatic disasters in the next five years.

What can the average citizen improve about their disaster readiness? Are there any best practices that you would recommend?

Because tornadoes are the major natural disasters in this state, Kansans should take the tornado warnings seriously and they should comply with such warnings. They must take immediate action when a warning is issued. When a tornado approaches:

• In home, people should take shelter in the basement. If there is no basement, a center hallway, bathroom or closet on the lowest floor is the best place to wait out a storm. Do not go outside to see whether a tornado is approaching or not. • Hide under a heavy work table or under stairs to avoid crumbling walls, chimneys and debris. Avoid areas on lower floors beneath heavy objects such as pianos and refrigerators. Stay away from glass walls and windows, no matter how small these are. • In public buildings and other large structures, avoid areas with free-span roofs. If possible, get under a sturdy table and use your arms to protect your head and neck. Crouch down and cover your head. Stay away from windows and outside walls. • In vehicles, do not try to outrun a tornado. If a tornado is visible far away and the traffic is light, you may able to drive out of its path by moving at right angles to the storm. Otherwise park the car as quickly as possible out of traffic, get out immediately, and head for the nearest sturdy building, or lie flat in a ditch or low-lying area. Do not take shelter under overpasses. Deadly airborne debris can easily be blown into those areas. • If you are caught in the tornado, stay in the vehicle with your seat belt on. Put your head down below the windows, covering your head with your hands and a blanket if possible. • Mobile homes are not safe, even if securely tied down. Abandon them and go to the nearest sturdy building or shelter immediately. • If you are outdoors, get to a sturdy building or low-lying area. Keep your head and neck covered.

How do natural disasters impact the economy?

Depending on the magnitude, a natural disaster can negatively impact local, regional, and national economies by causing damage and destruction to properties and infrastructures [e.g., crops, public buildings (including medical facilities, churches, industries, and schools), houses, roads, bridges, and shopping facilities]. Deaths of human and domestic animal such as cattle and poultry, also directly and/or indirectly impact economy. Human injuries also have a similar impact on economy. In essence, all sectors of the economy are negatively impacted by natural disasters.

What types of companies benefit most from natural disasters? Could consumers theoretically make some short-term gains by investing in such companies during hurricane season?

Construction companies, builders, lumber industries, debris removal firms, and hotels and restaurants benefit more from natural disasters. Consumers may gain short-term benefit by investing in some of these entities.
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David McEntire

University of North Texas

How has disaster management policy/spending changed since Hurricane Katrina? What about Hurricane Sandy, more recently?

Hurricane Katrina shifted emergency management policy back to a greater focus on natural disasters after 9/11. While we still are concerned about terrorism, there was a recognition that we cannot ignore hurricanes, tornadoes, flooding, etc. Also, a new law was passed after Katrina (The Post-Katrina Emergency Management Reform Act) which basically rebuilt FEMA. Hurricane Sandy resulted in a new law to improve recovery operations.

Are storms becoming more deadly, or can recent high-profile natural disasters be explained by other factors (e.g. modern media, population density, etc.)? What types of natural disasters will impact people most in the next 5 years?

There is some debate about this issue. Some are suggesting that we are having bigger storms than in the past. However, others suggest that we are becoming more vulnerable due to a variety of reasons (demographic changes, land use, engineering, crumbling infrastructure, etc.). We have had some major storms recently, but I think the latter issue is actually more problematic. Flooding is the most common disaster, but there is always the potential of other events (e.g., a major earthquake in the Midwest or in California). I imagine we will have more terrorist attacks too.

What can the average citizen improve about their disaster readiness? Are there any best practices that you would recommend?

Educate themselves about disasters and get ready. Look at Red Cross, FEMA, ready.gov, and other websites. Make a plan and buy supplies as needed.

How do natural disasters impact the economy?

They cause both direct and indirect losses. Some businesses will be destroyed or suffer damage to buildings. They may also lose employees to deaths or injuries. Indirectly, a disaster may damage infrastructure which could impact sales, logistics, etc.

What types of companies benefit most from natural disasters? Could consumers theoretically make some short-term gains by investing in such companies during hurricane season?

Certainly, construction companies and debris companies benefit. Insurance companies could lose or gain depending on the event and the time you are talking about. There will be an initial loss but some people will buy insurance after they experience the event.
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Thomas Cova

University of Utah

How has disaster management policy/spending changed since Hurricane Katrina? What about Hurricane Sandy, more recently?

Disaster spending can be divided into before and after, and both have gone up following Katrina. On the after-side, there are simply more people and infrastructure in hazardous areas every year, and disaster losses continue to skyrocket. Disaster spending on the before-side has also risen but not as fast as the after-side as more communities invest in mitigating and preparing for disasters. Hurricane Sandy is too recent to speculate on rising expenditures, but the upward trend in spending is likely to continue for the foreseeable future.

Are storms becoming more deadly, or can recent high-profile natural disasters be explained by other factors (e.g. modern media, population density, etc.)? What types of natural disasters will impact people most in the next 5 years?

‘Deadly’ refers to loss of life, and given that environmental threats are a coupled human-natural system – increasing loss of life (and property) can be due to either an increase in the frequency or magnitude of the threat or an increase in the people and infrastructure in hazardous areas. Right now it seems to be a combination of more frequent and intense storms as well as more population growth in hazardous areas. It’s likely that the ones that impact people in the next five years are the ones we’re seeing now – extreme storms, floods, wildfires, hurricanes, tornadoes. And there is always the chance we’ll have a less frequent, large-magnitude earthquake.

What can the average citizen improve about their disaster readiness? Are there any best practices that you would recommend?

I would suggest a 72 hour kit, family gathering plan, CERT Training, hazard insurance, household mitigation projects.

How do natural disasters impact the economy?

It depends on the disaster and the local economy. A wildfire in an area known for its trees and based on tourism could be impacted for years, but a community that has flooding that recedes quickly may rebound very quickly. Often in the longer term, disasters can spark a construction boom where federal and private sector spending rises enough to transform a local economy into something bigger than it was before the disaster.

What types of companies benefit most from natural disasters? Could consumers theoretically make some short-term gains by investing in such companies during hurricane season?

Construction companies, architects, and everyone associated with building can really see a boom after disasters like Sandy.
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Jeffrey Czajkowski

Wharton School, University of Pennsylvania

How has disaster management policy/spending changed since Hurricane Katrina? What about Hurricane Sandy, more recently?

Since Katrina there has been more of an emphasis on making people aware of storms and events, and I think media has played a bigger role when the events occur. I think a lot of the disaster management policies that have been put into place, especially in regard to evacuation, taking a ‘better to be safe than sorry approach’ after Katrina makes sense, especially considering what happened there. But some of the things that have occurred recently, I think, have been more of an over-reaction. You can look back to 2011 where they basically shut down New York City for a weekend prior to an expected storm. We do have data were people are really aware of an event, but how that translates into action is an open question.

What can the average citizen improve about their disaster readiness? Are there any best practices that you would recommend?

We’ve surveyed households over the past three seasons that were under threat of hurricane and we asking them things like ‘what kind of mitigation have you added to your home?’ And we found that only 20% to 30% of these households had done anything to prepare. And these include people living directly on the water. Among the things they could be doing are elevating their house, flood-proofing it or adding proper wind mitigation to the roof or windows. There are other things that can be done, pre-event. Things like moving your cars to other locations.
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Peter Webster

Georgia Tech

How has disaster management policy/spending changed since Hurricane Katrina? What about Hurricane Sandy, more recently?

I think that one needs to go back a decade and note that the funding of FEMA was at a low at the time of Katrina. Forecasts were great and very precise by the National Hurricane Center and many other organizations, but FEMA was a dilute organization compared with the FEMA of the previous administration. You may remember the ‘great job Browny’ made by the President to the head of FEMA who, in prior life, bred Arabian horses. So Katrina and the subsequent period was the low point for preparation, intervention and mitigation. Not our nation’s finest hour.

Are storms becoming more deadly, or can recent high-profile natural disasters be explained by other factors (e.g. modern media, population density, etc.)? What types of natural disasters will impact people most in the next 5 years?

I believe that it is combination of issues that you have listed. Sea-surface temperature is rising and this means there is more energy for storms. Both Kerry Emanuel and I (in different papers) showed this to be the case 8 years ago and the evidence still seems solid. This increase in intensity has occurred globally. But there are other factors too. In the developed world, by choice, more people live in coastal regions. In developing areas, they have no choice and the principal reason for death with TCs is coastal inundation. So it is a combination of lifestyle choices and population pressures.

What can the average citizen improve about their disaster readiness? Are there any best practices that you would recommend?

If you live in a disaster prone region (e.g. Mississippi delta), prepare for a hazard. There are simple steps such as evacuation routes, food and fresh water stocks, etc. But the best thing to do is to listen to the warnings that NOAA puts out. Occasionally they will issue a ‘false positive’ but it is prudent to believe. The risks are too high.

How do natural disasters impact the economy?

This depends very much upon the type of the economy. Major disasters impact all societies. In a developed economy (e.g. US, Japan) the market allows hedging against disasters. We have artifacts such as declared disaster zones set by the President or the Governor allowing low-cost loans for recovery. I do not have the numbers but I would guess that Katrina, Sandy or the Japanese nuclear disaster caused more than a tiny blip on either the markets or the GNP. In other words, developed and large economies are resilient.

But consider poorer countries (e.g. India, Bangladesh, etc.). There, resilience takes a beating each time there is a natural disaster. I have come to the conclusion that there must be a reason why the richest agricultural land in the world (Ganges and Indus valleys in India and Pakistan) are also the poorest. I think it is because over the millennia, these regions have been constantly battered by hazards (floods, droughts) that have continually lowered economic resilience.

What types of companies benefit most from natural disasters? Could consumers theoretically make some short-term gains by investing in such companies during hurricane season?

This is a good question and a subject that we collectively have given some thought. Of course, if one were to be a savvy watcher of seasonal hurricane forecasts one might invest in home repair or improvement sectors. But at the moment, seasonal forecast of North Atlantic hurricanes, the forecasts that reinsurance and etc., depends, is made in December. And there is absolutely no skill in these forecasts. Skill does not appear until May after it is determined if there will or will not be an El Nino. So once the reinsurance industry develops a system that allows setting of rates and selling of policies after May there is an opportunity for investors. I do not know why the insurance industry lags so far behind the advances in predictive science. But that is their problem. The savvy investor on the other hand will watch for the later seasonal forecasts. He/she will also watch for the 10-20 day forecasts that will allow managing of portfolios on the short term.
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Mark Skidmore

Michigan State University

How has disaster management policy/spending changed since Hurricane Katrina? What about Hurricane Sandy, more recently?

I don’t think disaster management policies changed much since Katrina or Sandy.

Are storms becoming more deadly, or can recent high-profile natural disasters be explained by other factors (e.g. modern media, population density, etc.)? What types of natural disasters will impact people most in the next 5 years?

Evidence suggests that storms are becoming more severe. In addition, increasingly our population growth is occurring on the coasts and in the South…places with greater exposure to severe storms, so a larger portion of our population is exposed to natural disaster risk. Further, our disaster policies encourage people to live in risky zones. Not sure what we might encounter, but I think the large storms like Superstorm Sandy are likely in the coming years.

How do natural disasters impact the economy?

In the very short-run, disasters can stall an economy…supply chains are interrupted, destroyed capital, etc. In the short to medium run, economic activity can rebound as savings, insurance, and government funding flows in to the area and rebuilding occurs. In the longer-run, there are opposing forces but evidence suggest that disaster exposure serves to build trust and encourage collaboration (the building of social capital), investment in mobile human capital (as opposed to immobile physical capital), and the adoption of new technology. These forces may actually lead to positive economic outcomes in the long-run. Also, the short-run damages to economic activity are far, far more severe in a developing economy than they are in an industrialized economy.

What types of companies benefit most from natural disasters? Could consumers theoretically make some short-term gains by investing in such companies during hurricane season?

Construction companies benefit from disasters (rebuilding), as do companies that sell basic necessities.
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Yuri Gorokhovich

Lehman College

Are storms becoming more deadly, or can recent high-profile natural disasters be explained by other factors (e.g. modern media, population density, etc.)? What types of natural disasters will impact people most in the next 5 years?

There is no evidence that storms are becoming more deadly. There is always a possibility of an abnormal storm as well. However, people are infringing on potentially hazardous areas (e.g. flood plains, coasts, etc.) and then simple natural hazards (or their combination, like the hide tide + storm surge in case of Sandy) become disasters. In terms of impact, the most hazardous are floods and hurricanes since they affect large areas. They most likely will continue to be such in the next five years as well.

What can the average citizen improve about their disaster readiness? Are there any best practices that you would recommend?

The best practice is to move out from potentially hazardous areas, either permanently or before disaster strikes. If this is not an option, understand the risk and prepare accordingly. For example, in areas prone to floods, make sure to have emergency kits, floating devices and enough food and fuel for a few days.

How do natural disasters impact the economy?

Greatly. For example, the last few cyclones in Thailand shut down Honda factories and the electronic industry for a few months. Billions of dollars were lost. In the US, Sandy destroyed marine oil terminals that created a shortage of fuel and destroyed many stores and shorefront along the NY and NJ coasts, causing economic losses.

What types of companies benefit most from natural disasters? Could consumers theoretically make some short-term gains by investing in such companies during hurricane season?

There are certain trading companies that benefit from natural disasters by trading insurance companies’ stocks just before disasters. If a consumer has bonds or stocks with these companies, he/she can gain some money.
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Judith Curry

Georgia Tech

How has disaster management policy/spending changed since Hurricane Katrina? What about Hurricane Sandy, more recently?

There have been substantial changes and improvement to federal disaster management following Hurricane Andrew in 1992. Hurricane Katrina contradicted a trend whereby America’s natural disasters had become less deadly (albeit more costly in terms of damage). The failures in federal and state response to Katrina highlighted numerous critical gaps ranging from federal response and preparations to citizen and community preparedness. FEMA is now far more effective than it was at the time of Katrina, and proactive measures are being taken in addition to reactive measures. At the state level, policy response seems to be catalyzed after a disaster hits their locale. Following hurricane Andrew in 1992 and the series of devastating hurricanes during 2004 and 2005, Florida has developed comprehensive hurricane response policies, ranging from building codes to an annual state hurricane response exercise conducted during May that simulates emergency response efforts to manage an evolving hurricane scenario.

The state of New York quickly responded to the devastation from Hurricane Sandy with a comprehensive plan on Recommendations to Improve the Strength and Resilience of the Empire State’s Infrastructure. One thing that I am seeing since Sandy is a growing effort among regional power providers in hurricane vulnerable states to increase the resilience of their electrical power infrastructure to reduce the outage extent and time from hurricanes. Florida Power and Light has been a leader in this regard, with substantial investments in making its electric system more resilient to storms, improving the efficiency of its emergency response organization, and consumer education. This year my company Climate Forecast Applications Network is working with Florida Power and Light to produce extended range, high resolution probabilistic forecasts of damaging winds from hurricanes so that they can better plan to protect assets and to recruit emergency crews.

Are storms becoming more deadly, or can recent high-profile natural disasters be explained by other factors (e.g. modern media, population density, etc.)? What types of natural disasters will impact people most in the next 5 years?

In the U.S., natural disasters have a 100 year trend of becoming less deadly, with Hurricane Katrina being the obvious exception. The causes of billion-dollar weather disasters over the last decade in the U.S. include hurricanes, tornadoes, wildfires, and drought. Other regions have different susceptibilities, and flash floods and slow rise riverine floods are a major source of loss in some regions. The number of billion-dollar disasters is increasing largely because of increases of population density and property in vulnerable regions, particularly coasts, flood plains, and forests.

What can the average citizen improve about their disaster readiness? Are there any best practices that you would recommend?

The first element in disaster readiness is awareness of what might happen seasonally in the area in which you live, and also the awareness of specific impacts from a forecast event that may impact your location. Develop an understanding of the general procedures for disaster preparedness for the particular disaster types you might encounter in you locale. Pay attention to the official warnings and instructions provided by emergency management officials. Social media, particularly Twitter, has played an important role in communicating local details of the evolving event.

How do natural disasters impact the economy?

Disaster economics is a relatively new and controversial field, and financial repercussions associated with natural disasters are complex and difficult to quantify. Short-term economic benefits may accrue owing to increases in employment associated with rebuilding. Disasters can perform the economic service of removing outdated infrastructure and replacing it with more efficient and resilient infrastructure; this seems particularly true for the wealthier developing countries. However, others argue that money and labor that go into rebuilding after a disaster are being redirected away from other more productive uses. Regions that are repeatedly subjected to disasters are not made wealthier by destroying resources. For the poorest countries, natural disasters are relentlessly impoverishing.

What types of companies benefit most from natural disasters? Could consumers theoretically make some short-term gains by investing in such companies during hurricane season?

The companies that benefit from natural disasters are home improvement companies such as Home Depot. Also roofing contractors and general construction benefit from natural disasters. Trash and debris removal companies and medical services also benefit economically. With regards to the financial sector and making money from disasters, it seems to me that innovation in disaster linked financial instruments and more efficient risk financing strategies would be desirable. New advances in probabilistic prediction of extreme weather events, particularly by some private sector weather and climate service companies, could support such strategies.
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Pallab Mozumder

Florida International University

Have disaster preparedness and spending policies by all levels of government changed in the wake of recent major hurricanes and natural disasters?

Yes, there are more people, especially those in the political process, who are more aware of these events, especially because of the political price of the way Hurricane Katrina was handled. You saw in Katrina the response was a little sluggish. During Sandy, government officials wanted to show there were vigilant and prepared. However, from a long-term standpoint there has yet to be much change to prevent or minimize damage in future storms.

Is it your sense these storms are becoming bigger and prevalent?

There is a big debate on the true dimension of these storms, and whether they are becoming more intense. There is more for these storms to damage. For example, if the same kind of storm, like Hurricane Andrew, hit Miami today the damage would probably be three or four times greater. There are more buildings and more development that would be in the direct path of the storm.

Have improvements in forecasting minimized damage from hurricanes in recent years?

Over the last 30 years forecasting has increased preparedness quite a bit. And we’re seeing the benefits of that in terms of fatalities and damage. In the case of Katrina, it wasn’t a forecasting failure but a failure of planning, an institutional failure. Direct hurricane-related deaths have been reduced quite a bit because of the increased accuracy of the forecasting. Better forecasting gives both citizens and government more time to plan and react.
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Dr. Richard Vogel

Farmingdale State College

How have the recent highly-publicized “super storms” changed the way governments prepare for and fund disaster response?

There are certain levels of damage that will trigger a federal response. In that case the governor of the state appeals to the federal government for a disaster declaration, and there are several different levels of disaster declarations. For example, the New York Metro has been hit by tropical storms several times over the last 10 years. Superstorm Sandy was a major event that was pretty overwhelming. But these kinds of events are not, in and of themselves, unusual.

Do you think the storm that trigger disaster response are becoming stronger and more prevalent?

Since the 24-hour news cycle started these storms have generated a lot more press and gotten more public attention. So this tends to place more pressure on public policy.

Are we learning lessons from these storms? After Sandy, do you think people in New York, for example, will be better prepared to handle future storms?

To some extent, yes. There’s an institutional memory that, when another storm approaches people will take more preparations. And certainly governments are moving toward a position where they are taking a much more active role in planning for these events. The level of evacuations ordered in an event like this, for example, is much more advanced than it has been in the past.

 
Image: American Spirit/Shutterstock

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