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Money vs Barter Exchange ( class 12) - YouTube
Channel: The Sagar Raut Channel
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most of us might know that in the
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primitive society currency was not the
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means of buying and selling things goods
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were bought and sold for other goods and
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services for example a hairdresser might
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exchange rice for the service that he is
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giving or a milkman can exchange his
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milk with a carpenter for a wooden chair
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in those good old days this is how
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people traded with each other this was
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called the barter system however the
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system had certain difficulties that
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made the rise of coins and currencies
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welcome to the sagara-san offense his
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talk about money this video will explain
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you the difficulties in the barter
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system types of money functions of money
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paper money and its limitations and what
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qualities should good money have the
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biggest problem with the barter system
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was that it lacked common measure of
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value it means it was difficult to
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compare two commodities say for example
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you have two litres of milk to sell in
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such a case as a person you won't be
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able to make out if that two liters of
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milk is equal to two cages of onion or
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five liters of potato worth the massage
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service award because of such things it
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was difficult to calculate the value of
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the goods exchanged another problem with
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the barter system was of double
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coincidence of wants say a person
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produces rice and wants feet in exchange
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but the person producing vide wants milk
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in exchange because he doesn't eat rice
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in such a situation person a will never
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be able to purchase vide and no trade
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would exist between them
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storage problems for another difficulty
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some goods are highly perishable in
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nature puts Lake Malik fish or
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vegetables do not have durability plus
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they need to be stored carefully which
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meant additional cost
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this made trading pretty difficult in
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barter system you had to buy things as a
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whole this means a cobbler service might
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not be valued the same by a hairdresser
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in exchange for a silo services but he
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cannot give him a half haircut right
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hence there existed problems of
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divisibility in the barter system last
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but not the least providing payments in
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the future were also difficult this
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means that a person may want cow in
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return for the food that he is selling
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the biomat tell him that he is willing
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to give the cow to him after two months
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however in those two months the cow
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might get sick and may lose its milk
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giving capacity this may serve as a
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problem for the person who has given
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food in exchange of the cow hence future
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payments or deferred payments as they
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call it in economics but also one of the
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problems in the barter system before
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moving on to the types of money let us
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first define what money is professor F a
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walker
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defines money as money is what money
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does whereas professor Crowther defines
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money as money is anything that is
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generally accepted as a means of
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exchange by the people money also acts
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as a measure and store of value what
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both these economists are trying to tell
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us in simple language is that anything
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literally anything that I can use to
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exchange goods and services with other
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people is money plus it should have a
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stove value meaning that if you keep
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that thing with you for a long period of
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time you shouldn't lose its value for
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example using milk as a medium of
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exchange you can so very difficult as it
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might get spoiled the other
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whereas using good skin or pots or rice
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etc as money is really possible there
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are five types of money that we learn
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let us start with commodity money
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commodity money is the oldest of its
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kind when humans first started to trade
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with each other they exchanged girls for
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different commodities some societies
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used good skins to trade with each other
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whereas others used seashells while some
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societies even use Birds feathers as a
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means of exchange however as we
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discussed earlier problems of storage
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durability etc made people replace
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commodity money with metallic money
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metallic money was made during the time
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of monarchy
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however metallic coins are used to a
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date earlier coins were made out of gold
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silver copper iron etc the rulers of
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various Kingdom minted these coins with
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their own seals the seals with a
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certification of purity metallic coins
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can be further divided into two parts
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some coins which are meant I'd have the
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face value equal to its intrinsic value
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what this means is say if I have a coin
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of gold weighing five grams and the
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price for five grams of gold is
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equivalent 200 kgs of rice then the coin
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weighing five grams will only give you
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hundred kgs of rice
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nothing more thus coins which have face
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value equal to its intrinsic value are
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called standard coins of full-bodied
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coins but a recent time currencies which
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are minted under the seal of government
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are made out of different metals like
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aluminum or nickel which are cheap so
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the cost of aluminium used to make that
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five rupee coin might actually be only
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one rupee
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however that coin helps you purchase
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things of up to five rupees such coins
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whose face value is more than entrance
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value are called token coins nowaday you
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must have seen people making payments
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through debit cards and credit cards
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this is also Bank money however as the
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cards are generally made out of plastic
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some prefer calling them as plastic
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money-wise you must have surely heard
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your parents going to bank and
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depositing a check what is a check every
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person who is an account holder can take
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checkbook from his bank and use it as
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the means of paying money to whoever he
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wishes to pay this helps because he need
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not carry lots of cash with him
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everywhere if person a has to make a
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payment to person B a payment of rupees
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5000 then all he has to do is give him a
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cheque of 5000 which person B can then
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deposit into Bank person is account gets
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debited by 5000 and person B's accounts
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get credited by 5000 thus making
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transaction possible without actually
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having to pay money in physical form
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instruments like cheque hence are called
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as Bank money or credit money last but
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not the least the money that we all use
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in a day to day life is paper money
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across the world people use this money
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because it is a legal tender this means
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that if no person wishes to accept these
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notes from you then the government
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promises to do so and as everyone trusts
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the government people readily accept
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this notes paper money is a substitute
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to metallic money for two reasons one is
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that it reduces costs significantly
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which are high in melting coin second it
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is easier to print money of higher
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denominations rather than minting them
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central banks have a history of printing
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currency in different manner in the
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earlier days central banks used to only
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print that much amount of money as much
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as they had gold or silver reserves with
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them for example if the central bank had
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gold worth rupees 50 crore it was
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restricted to print
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money only worth 50 crore as the money
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printed represents gold or silver
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reserves of the central bank such money
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is called as a representative money
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nowadays
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central banks do not print money which
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has any sort of backing like gold or
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silver they print money according to
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their will after looking at proper
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economic conditions such money is called
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as fiat money fiat means government
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order it is obligatory for the people of
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the country who use this money to buy
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and sell goods or pay their loans the
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limitation that people currency has is
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that it has less durability than
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metallic coins another limitation is
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that paper currency can be easily faked
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as compared to metallic coins I hope
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you'll enjoyed the video if you did and
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learn something useful do share it with
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your friends and you know the drill like
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comment share and subscribe until then
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adios hasta LaVista
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