Home / Economy / How to explain to your boyfriend why he got fired

MUMBAI : She loved the rains in Mumbai. Dark clouds. The red gulmohars in all their glory. The wind. The glitzy roads. And the slight chill that came with all this on some days. But his phone call had gotten her worried. The startup unicorn he worked for had started firing people.

As she thought about this and that and everything else, the doorbell rang. She opened the door and there he stood with a bottle of wine and a parcel of pasta from her favourite restaurant.

Illustration: Jayachandran
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Illustration: Jayachandran

“What’s this?" she asked as soon as he entered. “I thought you were worried about losing your job. Looks like you are in the mood to party."

“Oh, I am still worried about that," he replied. “But I found two notes of 2,000 lying on the road, just when I was getting into a rick."

“And you kept them?"

“Today is my lucky day!" he replied. “And why are you complaining? I got you your favourite pasta and had to take a long detour for that."

“Hmmm. You know what you did with the 2,000 notes kind of explains what’s happening in the world at large and why you might lose your job," she said, channelling the real-economist inside her.

“Really?" he asked, as he opened the bottle of wine.

“You spent the money you found buying a bottle of wine and pasta. The money you spent was an income for someone else, like the wine shop owner."


“Now let’s say the wine shop owner decides to spend that money in buying an umbrella for his wife and raincoats for his children."


“The restaurant owner spends the money in buying more pasta and other ingredients that go into its making," she said. “Oh, by the way, I hope you got penne pasta and not fusilli."

“Of course, I don’t make basic mistakes," he replied.

“So, the money you spent on buying wine and pasta will be spent further. The wine shop owner might buy an umbrella and raincoats. The owner of the shop selling umbrellas and raincoats might use that money to buy vegetables on his way home. And so, the cycle will keep repeating itself."

“What’s your point?" he asked, sipping wine.

“For an economy to keep chugging along, people need to keep spending money."


“But sometimes, things happen. They disrupt this spending."


“Like in early 2020, the covid pandemic started to spread and governments across the world initiated lockdowns. These lockdowns ensured that many people lost jobs. Further, even those who didn’t lose jobs had to stay at home. And when that happened, they couldn’t spend money."


“And when people couldn’t spend money, the incomes of others who depended on this spending crashed. In the process, everything from restaurants to cinema halls to hair saloons to shopping malls to gyms, suffered. This impacted societal spending in a very negative way."

“That explains it."

Reviving spending

Something similar had happened many years back in 2008," she said.

“In 2008?" he asked. “I was in junior college then."

“Yes, I know how young you are," she replied.

“Let’s not deviate from the topic."

“Yeah, yeah," she said sarcastically.

“So, what happened in 2008?"

“Lehman Brothers, which was the fourth largest investment bank on Wall Street back then, collapsed."


“AIG, the largest insurance company in the world, was also on the brink of failure. Many other large financial institutions were in a mess. This led to the start of a financial crisis. The stock markets and real estate markets all over the world collapsed. People started to lose jobs. Those who didn’t get fired had the fear of getting fired. And the societal spending capacity collapsed."

“What happened then?"

“Well, the size of many economies all across the world contracted."

“Oh! That is a rarity," he said.

“So, in 2008 and in 2020, it was very important for governments and central banks across the world to ensure that the spending capacity of people was quickly revived."

“Sounds like a no-brainer."

“It does. But it’s not very easy. Typically, people spend more money when they are optimistic about their economic future. This happens when economic activity is growing. Over a period, it’s a function of firms expanding and, in the process, creating more jobs, which is a function of innovation in the society and higher economic productivity, where there is more output for every unit of input."

“Now you sound like a proper economist," he said.

“Hah. I am trying to explain things to you at a very simple, almost simplistic level. The economy on the whole is a very complex creature."

“So how do you revive spending quickly?"

“What the central banks around the world did in 2008 and 2020 was to print a lot of money," she explained, having her first sip of the wine.

“But why?"

“The idea was to drive down interest rates. At lower interest rates, people would hopefully borrow and spend money, and companies would borrow and expand. In the process, spending could be revived quickly."

“And did that happen?" he asked.

“Yes, to some extent," she replied. “But other things also started along with that."


“In the years that followed 2008 and until late 2014 and early 2015, central banks continued to print money to keep interest rates low. With low interest rates, people had to look at other avenues to make money. A lot of this money found its way into stock markets and real estate all over the world."


“And some of it also found its way through venture capitalists to be invested in startups."

“Oh, so my job is directly linked to money printing!" he exclaimed.

“Yes, it is."

Central banks napping

“But why are all the startups firing people now?" he asked.

“In 2020, when the covid pandemic started to spread, societal spending and economic activity collapsed. The central banks went to their tried and tested formula of printing money. One estimate suggests that more than ten trillion dollars of money, in different currencies, was created out of thin air."


“Again, interest rates collapsed. And again, money found its way into stock markets and real estate all over the world. But there is another thing that happened this time around."

“What?" he asked.

“In 2008, the central banks had printed money and pumped it into the financial system. They had also invested some of this money into financial institutions to prevent them from collapsing."


“This time around, the central banks of the rich world indirectly handed over some of this freshly created money to governments and the governments directly handed over this money to citizens by depositing it into their bank accounts."

“Really?" he asked.

“Yes. So, other than being able to borrow at low interest rates, citizens of the rich world also had money handed over to them which they could spend."


“And they did spend. The trouble was that the supply couldn’t keep up with this increase in demand for goods."


“Well, covid had led to global supply chains breaking down. Given this, goods couldn’t be manufactured and shipped at the same pace as the demand."


“And then Russia attacked Ukraine."


“Russia is one of the largest exporters of commodities in the world and this sent the price of oil, natural gas, fertilizers, coal, etc., soaring."

“Ah, this is the inflation thing you keep talking about."

“As too much money chased the same amount of goods, prices went up. The central banks were caught napping. They thought things would play out exactly like they did post 2008, when the rate of inflation hadn’t gone up."

End of easy money

So, what happens now?"

“Three things. One is that central banks of the rich world have decided to more or less stop printing any more money. Two, they have decided to gradually withdraw some of the money that they printed and pumped into the financial system over the years. This will push up long-term interest rates. Three, they have also decided to raise short term interest rates," she replied.

“Basically, interest rates are going up and money is becoming more expensive," he said.

“You are right."

“But how does this impact my job?"

“Well, over the years, the startups tried to build scale. They did it by essentially offering discounts and selling their product or service at a lower price. This led to losses. The losses had to be funded by venture capitalists (VCs). The VCs continued to do this because the interest rates in the rich world were low and there was a lot of easy money going around wanting to be invested. As long as the VC money kept coming in and was greater than the losses being accumulated by startups, these firms kept running by selling at a discount. The moment this changed, they had to start firing people to control costs."

“And now money has become more expensive."

“Yes. So, the VCs cannot continue to fund the losses of startups. Which is why startups are firing people to control costs. Also, discounts have totally gone out of the window."

“I guess this explains it," he said. “Everything is connected."

“Indeed. In fact, this also explains why foreign investors, between October and now, have net sold stocks worth 2.6 trillion. When they sell stocks, they get paid in rupees. These rupees need to be converted into dollars. When that happens, the demand for dollars goes up, putting pressure on the value of the rupee. This explains why the value of the dollar, which was less than 75 at the beginning of the year, is now more than 79."


“A weaker rupee makes imports expensive for India, especially energy imports, like oil, natural gas and coal. This feeds into retail inflation. Also, the rising interest rates have now led to a threat of an economic recession in the rich world."

The recession

What is a recession?" he interrupted.

“It is a situation where the economy contracts for two consecutive quarters."


“This will lead to a slowdown in Indian exports, or they may not continue growing at the same pace as they were. It will also impact remittances or the money Indians working abroad send to their families."


“To keep pace with other central banks and to control inflation, the RBI has been raising interest rates as well. This will impact those who are already paying big EMIs to some extent. It will also impact home sales."

“But why can’t central banks cut interest rates as they have in the past whenever there has been a threat of a recession?" he asked.

“Oh, that’s because inflation is still around. In fact, people can feel the inflation. And when they can feel inflation, they tend to incorporate it into their economic decisions and make higher salary/wage demands. This leads to a situation where it becomes very difficult for a central bank to control inflation. Hence, the only way that central banks can control inflation is by engineering a recession, hoping that higher interest rates might dampen consumer demand," she explained.

“That was some explanation," he said, sipping the last drop of wine from his glass.

“Well, I would like my boyfriend to be better informed," she smiled.

“Thanks to you, I am."

“But tell me something. When we spoke yesterday, you were so agitated that you might lose your job and you are all cool today."

“Oh, I was fired today morning."



“How come you are so cool about it?" she asked.

“Because, I have made enough money in the last four years. Plus, I got lucky on cryptos."

“That’s good to know."

“So, I was thinking, let’s move to Goa," he said, trying to be all romantic. “The math works. I am unemployed and you anyway work from home."

“Ah! Do you know why I broke up with the last one?" asked the Mumbai girl used to having the last word. “You zoomers really need to grow up! Life can’t be lived by simply running away from the city at the first opportunity."

(The example is hypothetical)

Vivek Kaul is the author of the Easy Money trilogy.

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