Whatever you do, don't lower yourself to her standards. That is the easy way out, but that is also a trap.
The hard but right way out is this: be better than her, in all aspects. Be more credible, be more productive, etc.
Contrary to popular belief, people aren't blind. In due time, they WILL see what is really going on and act on it. Just pray, for them, that they will see that before a valuable employee such as yourself has found employ elsewhere...
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