Freedom From Work is Here

The unthinkable has happened. Millions of Americans have embraced freedom from work and have now reclaimed their lives from the dreaded grind of employment. So many have walked away that businesses can’t fill job openings. We did it! Freedom is in the air and so many people have the opportunity now to build that business, find that calling, or go bohemian.

There’s no longer a need for a blog called “Quit Your Job” these days. It’s already been done.

But back to reality. While the above sounds utopian, that’s not what is going on exactly. At the moment, unemployment is high…but companies are also struggling to hire anybody. A recent article from the New York Times titled “Unemployment is High. Why Are Businesses Struggling to Hire?” lays it out:

“…the data tables produced every month by the Bureau of Labor Statistics, which suggest a plentiful supply of would-be workers. The unemployment rate is 6 percent, representing 9.7 million Americans who say they are actively looking for work…[while] businesses, especially in the restaurant and other service industries, say they face a potentially catastrophic inability to hire.”

So we’ve got jobs and people looking for jobs, yet the jobs remain unfilled and the people remain unemployed. What gives? Recently, a McDonald’s in Florida is offering people $50 just to come in to interview for a job because they’re so short staffed and unable to hire. You read that correctly. McDonald’s — once the employer used as a threat for people who didn’t want to go to school or study (as in “You’ll end up working at McDonald’s”) — can’t even hire right now. McDonald’s is also offering a $400 signing bonus if you end up getting the job. The state of Montana is bribing citizens with $1,200 if they go back to work, “blaming an expansion of unemployment benefits for a labor shortage in the state.”

We’re through the looking glass here people.

Do people not need jobs anymore? Is work outmoded? When the pandemic started, millions of Americans were let go or furloughed, feeding huge unemployment numbers to all-time highs. American had staggering food lines not seen since the Great Depression in 2020.

Now states are reopening up, restrictions easing off, and businesses trying to return to normal. But the workers aren’t coming back. Is it because of COVID fears and aversion to risk being around people? Maybe that’s part of it. According to the Chicago Tribune, “A Census survey taken in late March shows that 6.3 million didn’t seek work because they had to care for a child, and 4.1 million said they feared contracting or spreading the virus.”

There’s also something else at work here. From the same Chicago Tribune article, entitled “Where Are the Workers?”:

The National Federation of Independent Business found in a March survey of its own members that 42% had job openings they couldn’t fill. Owners cited higher unemployment benefits as one factor. And a study released last month by the National Bureau of Economic Research found that a 10% increase in unemployment benefits during the pandemic led to a 3.6% drop in job applications.

“Unemployment benefits allow workers to be able to wait longer before they take a job, which can make hiring harder,” said Ioana Marinescu, a University of Pennsylvania professor who co-authored the study.”

Unemployment benefits, particularly Federal ones, have caused disruptions in the labor market. A ZeroHedge article, “Biden’s Trillions” Spark Historic Labor Shortage” puts it [perhaps oversimplified] as “trillions in Biden stimulus are now incentivizing potential workers not to seek gainful employment, but to sit back and collect the next stimmy check for doing absolutely nothing in what is becoming the world’s greatest “under the radar” experiment in Universal Basic Income.”

Universal Basic Income (or UBI) is an eventual topic I plan to cover in this blog.

As I was writing this post, the US Chamber of Commerce came out after a dismal April jobs report and suggested to the government to shut off the $300 in extra unemployment benefits: “Based on the Chamber’s analysis, the $300 benefit results in approximately one in four recipients taking home more in unemployment than they earned working.” [Emphasis mine] And just this morning in the local Dunkin Donuts drive-thru I saw a huge poster advertising a free car for getting hired in a management position (I’m assuming it’s a company car but the poster didn’t elaborate).

Between DD and McDonald’s, businesses are literally bribing people to come work for them. Gone are the days, it seems, where winning a job and earning an income were admirable achievements. I guess it comes down to if you can make $900 a week working a job, or $800 not leaving the house…why not take the $800? You don’t have to drive anywhere, do anything, change clothes, or actively participate in society.

Which makes having a blog called “Quit Your Job” all the more abstract.

So government altruism is disrupting the job market. How long can it go on? Businesses still need employees to function. Not having enough employees is also severely disrupting supply chains, causing shortages and empty shelves. Another article from Zerohedge, this one entitled “Biden’s Stimulus Checks ‘Wreck Labor Pool’ As People Get Paid to Stay Home,” quotes the Federal Reserve Bank of Kansas City: “It is very difficult to handle the increased business with supply chain issues across all materials and finding anyone who wants to work. The federal government has incentivized people to stay home and not be productive.” This, combined with extra cash being handed out by the government, is very inflationary (also a future topic on this blog).

As mentioned above, surely this can’t go on, right? Hopefully not. The Federal unemployment bonuses are scheduled to expire in September of this year. If the Federal unemployment benefits expire, people will be making below what employment would bring in, so it only makes sense to return to work. Employers need it. The supply chain needs it. Then again, if the supply chain disruptions cause shortages prices of things increase, which would offset the extra unemployment and people would need to return to work just to afford basics. The only thing that doesn’t make sense is to leave the Federal unemployment bonuses permanent, especially as the country continues to reopen.

Which is exactly what some lawmakers want.

The idea behind this blog and “Quit Your Job” is to build something — a business, skills, expertise, ultimately bettering yourself so you no longer need to work for someone else. Taking money from the government and choosing not to work is not bettering yourself. Choosing to do nothing over working is not in the essence of Quitting Your Job.

Just remember, there’s no such thing as a free lunch.

The Word No One is Talking About

Six weeks into lockdown mode, the U.S. economy is a mess. States are just now starting to open back up, but the damage has been done — some of it permanently. The current unemployment rate in the United States is 14.7% and by some calculations (likely the bureau of labor statistic’s U6 measurement), as high as 23.6%, not far from the peak of the Great Depression.

Bankruptcies are beginning to pile up too. In the month of May alone, Neiman Marcus, Gold’s Gym, and J. Crew have filed for bankruptcy and J.C. Penny is considering it (AMC Theaters possibly too). Wall Street believes the vast majority of the 20 plus million Americans jobs lost will only be temporary — but maybe not so with bankruptcies piling on. Even companies that avoided bankruptcy are slashing jobs at a historic rate: Boeing cut 16,000 jobs in April and, according to a coronavirus layoffs calculator site, 375 startup companies have laid off more than 42,000 employees.

Ok, the point is made. Unemployment is breaking out as a bad as the virus. People are losing their sources of income. Jobs are vanishing — temporary or not.

But there’s something else going on that’s headed straight for the unemployment quagmire.

In the six weeks of shutdown due to COVID-19, the Federal Government has spent over $6 trillion. Trillion with a ‘T’. That’s $6,000,000,000,000 — or one trillion dollars per week. $2.4 trillion of that amount comprises four coronavirus relief bills; this includes the CARES Act, SBA Payroll Protection Programs. The remaining money has come directly from the Federal Reserve, who has acted aggressively to stave off economic collapse through numerous programs, including purchasing securities directly. On top of all this, the Fed also reduced bank reserve requirements to zero. This means if you deposit $100 in a bank, they can lend out all $100 of it, keeping none in reserve. This has massive implications — too much to explain here, but watch this to see the impact of reserve requirements in bank lending.

Furthermore, the Fed has also lowered the federal funds rate (the rate banks use to borrow from one another) down near 0%. This rate is used as a benchmark for various other loan rates, reducing the cost of borrowing for mortgages, auto loans, etc. This is the equivalent of turning on the spigot and the handle coming off.

Make no mistake — this is a massive amount of liquidity suddenly appearing out of thin air. The national debt just crossed $25 trillion, and the juice is running. And at the time of this writing, this whole thing is not over. Congress is discussing more stimulus packages. Just today Congress unveiled another coronavirus relief bill (the fifth so far), costing another $3 trillion. No problem — the Fed’s Neel Kashkari says the Fed is going to do “whatever we need to do to make sure the financial system continues to run.”

Sure, what’s another $3 trillion on top of the 6 just minted?

In short, there’s more money coming but not necessarily jobs. So what’s the word no one is talking about?


An odd little portmanteau of “stagnation” and “inflation.” It is a period of high inflation coupled with economic depression. It’s odd too that no one in the media or government is mentioning it, because it looks exactly where we’re heading: $6 trillion and counting in six weeks coupled with job losses and bankruptcies.

Stagnation is a nasty beast because it’s difficult to resolve. In an inflationary environment, rates can be raised to cut off the spigot of currency expansion and reel in spending — a by product is reductions in borrowing and ‘tightening of the belt’ so to speak. Value returns to the currency. In a stagnation — or deflation — prices are falling and money is hard to come by. Loosening the belt allows money to flow a little easier, lending to be encouraged, which leads to businesses expanding via credit (and hiring).

So what do you do when you have falling employment and rising inflation?

If you ‘tighten the belt’ to choke inflation, it worsens the unemployment and makes it even more difficult for businesses to access credit. The currency may level off, but higher interest rates deepen the deflationary hole. If you ‘loosen the belt’ to make credit easier to obtain (e.g., federal funds rate) to save jobs, inflation gets worse prices go up and you risk a total collapse of the currency a la hyperinflation.

The choice is no win, but the effect felt by the average American is even worse. Job loss or cutbacks result in less income. People are left rubbing nickels together and deciding to pay bills or put food on the table. But in a stagflation, prices are rising due to inflation of the currency and suddenly you can’t afford bills OR to put food on the table. You can’t afford anything and there’s no way to bring in more money with the drag on employment.

The last time stagflation hit the United States was in the 1970s. Core inflation (CPI) was over 5% annually during the back half of the 70s, with unemployment high and an official recession running from November 1973 to March 1975. (As a point of reference, the Fed’s federal funds rate during the 70s was mostly between 5% and 10% — it currently is 0.25% to 0%) To choke off the inflation, Federal Reserve Chairman Paul Volcker raised federal funds rate to near 20%, throwing the U.S. into another recession but alleviating the increasing inflation.

I believe Volcker was a rare breed and no one today would pull the trigger on such a hefty interest rate increase. But there was no COVID-19 lockdown in 1979. With unemployment so high, companies going bankrupt or drawing heavily on available credit, jacking interest rates up would shatter all remaining functional pieces of the economy. To wit, another word has surfaced that people are talking about — NIRP.

NIRP stands for Negative Interest Rate Policy. NIRP is the theoretical physics of economics. A negative interest rate works in theory, but suddenly everything goes to plaid. It goes something like this: If an interest rate is 10%, that is the amount it ‘costs’ to borrow money. A loan of $10,000 would cost you a total of $11,000: the original $10,000 principal plus $1,000 (10%) interest. An interest rate of -10% would (in theory) pay you to borrow money. You would borrow $10,000 and get $1,000 for doing so. An $11,000 loan costs you $10,000.

Up is down. Black is white.

This would greatly increase the velocity of money, as banks essentially got paid to take out loans. The problem is, this cuts both ways. Cash deposited at a bank that previously paid interest now costs money. Your $20,000 life savings earning 1% annually now costs you 1% to leave in the bank. Last year your $20,000 became $20,200. This year under negative interest rates it goes from $20,000 to $19,800. You lost $200 by having it in savings.

The concept behind NIRP becomes searingly obvious — borrow and spend. Who in their right mind would save money with negative interest rates? Who wouldn’t borrow when you get paid to do so. In theory, since mortgage rates are tied to the 10-year Treasury yield, but in theory you would pay back less than you borrowed to take out the mortgage.

NIRP would cause everyone to borrow and spend away savings (why keep it in cash losing money when you can invest it or buy something with it?) But how would this impact things like bank profitability when you’re paying people to take out loans? In a NIRP world, home-owners would refinance to try and take advantage of negative rates which would disrupt interest and mortgage-backed bonds. The whole thing is bizarre.

But in any case, the result would certainly be increased borrowing and spending. Would the Fed actually consider doing NIRP? It’s already being floated in financial circles…

So if the Fed doesn’t crank up interest rates in positive territory, then the only end game here is inflation and prices going up while people struggle to hold or regain jobs. The government can hand out cash in relief packages all it wants to offset jobless and loss of income, but this just further fuels the fire. If this keeps going, a $1,200 stimulus check from the government won’t buy much or things just won’t be affordable at all.

But cutting stimulus checks gives the pretense of ‘doing something’ for the people on the street. Granted, they’re walking a fine line with the COVID lockdown, but spending into infinity is going to be a losing proposition for all. Giving someone a check is simpler than explaining how velocity of money or banking interest rates work.

Especially in an election year.