Nina is a puller on the block line at the masonry plant I own outside Hagerstown, Maryland. She pulls freshly pressed concrete blocks off the steel pallet, stacks them on the curing rack, and feeds the rack into the kiln tunnel. 12 blocks a minute. 10 hours a day. 5 days a week. The blocks in your house came off her line.
The crystalline-silica concentration at her station is 0.47 mg/m³. OSHA’s permissible exposure limit is 0.05. She breathes 9.4 times the legal limit. By spring her cough has an edge that wasn’t there in January. By autumn it has a sound she doesn’t describe to her daughter. She doesn’t have a wet-suppression hood. The quote has been on my desk since 2022. It’s still on my desk.
The Wall Street Journal Editorial Board wrote this week that Kevin Warsh is the most hawkish Fed Chairman since Volcker. The FOMC raised the fed funds rate a quarter point to 3.75%–4%. The vote was 12-0. They called it reform. They’re right about the rate. They haven’t priced what the rate does to the paper.
Let me show you what a quarter-point buys.
Every basis point the Fed adds pushes another borrower past the ability to service the debt. The credit card at 28.99% becomes 31.49%. The auto loan at 7.2% becomes 9.7%. The ARM adjusts 25 basis points higher than the borrower penciled. Some of them stop paying. The bank charges off the balance, sells it at auction, and moves on.
I buy it.
$0.037 on the dollar. The face value of the note is $8,200. I pay $303.40 for the right to call the borrower until she settles or files. My collectors extract at $0.41 on every dollar of face value — $3,362 per account touched, over 14 months, from a borrower who opened the card in 2023 when her hours were longer and the rent was lower.
Candace is a collector on the collections floor at the debt-buying portfolio I own outside Shreveport, Louisiana. 400 phones built for 200 bodies. 10 hours a day. 5 days a week. Her headset cost me $11.99. The noise-canceling model costs $89. She has the $11.99 model. She has a quota of 140 outbound calls per day and the recovery target I set last January. She doesn’t set the target. I do.
Now here’s where the arithmetic turns sharp.
I could install a dedicated line — a number a borrower can call before she defaults, staffed by a counselor who negotiates a reduced balance. The VoIP line costs $4,800 a year. The counselor costs $28,000. Pre-default accounts settle at $1,558 instead of $3,362 after charge-off. The delta: $1,804 per account. On 12,000 accounts: $21.6 million in annual revenue I would leave on the table.
$32,800 against $21.6 million.
The catering at the last annual meeting cost more.
I did not set up the line.
Now read the other column. The hoods for Nina’s four stations cost $2,400 each. $9,600 one-time. They cut respirable silica 85% at the source. The system pays for itself in 2.7 days of production. The quote has been on my desk since 2022. It’s still on my desk. The respirators — P100 half-face, $14 each, replaced every 2 weeks — for 11 hands on the block floor: $4,004 a year. I haven’t spent that either.
$13,604 a year. Against $1,178,600 in gross margin on 14.2 million blocks.
The dust is free.
Mateo batches the concrete mix that Nina presses into blocks. Same plant. One room closer to the aggregate hopper. The concentration at his station reads 0.62 mg/m³. He’s been there 7 years. His wife says his breathing sounds like gravel in a drum. I haven’t asked which drum.
Now. Here is where the lesson gets useful.
I teach Managerial Economics at Warden University. Third-year seminar. 28 students. Last month I assigned the Fed’s rate decision as a case study. 26 of them wrote that the fed funds rate is the primary pressure on operating margin. I gave them C’s. The one who identified unit labor cost as the only lever a plant manager actually controls — she got an A. She’s interning this semester at the firm that manages the index fund holding bonds in my Hagerstown plant. She’ll be pricing Nina’s replacement cost by December. She’s very good at it.
I’m not unusual. I’m a curriculum.
Warsh said at the press conference he doesn’t believe he must harm the labor market to bring inflation down. He’s right. He doesn’t have to. I do that. I’ve been doing it since before he took the chair. My graduates are in the firms that set your wage. Your insurance deductible. Your retirement target. One of them priced the job you hold right now. The best of them run the subtraction faster than I do. I say that with a teacher’s pride.
Paul wrote to the Ephesians:
“Servants, be obedient to them that are your masters according to the flesh, with fear and trembling, in singleness of your heart, as unto Christ.”
He was pricing a different kind of labor in a different kind of century. The arithmetic is the arithmetic.
Widen the frame. The Consumer Price Index measures the price of goods. It does not measure the cost of the bodies that make them. When Warsh says inflation is 3%, he means the dollar lost 3% of its purchasing power. He has not measured what Nina’s lungs lost. The index does not contain a column for silica. There is no row for the debt collector’s hearing, no entry for the borrower whose ARM adjusted and whose hours were cut in the same quarter. I haven’t traced what happens to the purchasing power of a woman who can no longer breathe deeply enough to climb a staircase. The quarterly number is clean.
I eliminated the occupational-health nurse at the Hagerstown plant in Q2. The line didn’t change. The paperwork did. The county asked about the staffing change. I sent them the production report. They haven’t followed up.
The rate moves first. The paper follows. The borrower follows the paper. I follow the paper. The FOMC’s own projections show 14,000 new defaulted accounts hitting the secondary market next quarter. I reviewed the estimate this morning. The pipeline is sufficient through March.
I have no further outlook to provide.
The grace of the Lord is sufficient for the patient, if not for the borrower or the puller.
The calls start at 7. The room is warm. Candace is there. Her headset is still $11.99. Nina is at the line. The dust is free.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.