The Run on Greek Banks—Can the U.S. Stay Out of the Runners’ Way?

 By: Dr. Lynn Reaser

Events in Europe continue to spiral quickly downward.  The Greeks will vote in new national elections on June 17, which will be a referendum on the commitment to remain a part of the Eurozone.

Most Greek citizens want to remain a part of the Eurozone but are unwilling to make the continued sacrifices and endure the austerity that has been forced upon them to secure additional financial assistance.  Most Germans want the Eurozone to remain intact but resist sending even more financial aid to the weaker members.

 A run on banks has already begun in Greece, with about 800 million euros ($1 billion) being withdrawn a day.  As the June 17^th Greek election approaches, the outflow of funds is likely to accelerate.  Fears of a banking collapse might prod the Greeks and Germans to compromise.  Barring such an agreement, a Greek exit from the Eurozone would trigger bank runs in other nations, including Spain.

 In the U.S., the impact would be a stronger dollar, lower interest rates, lower oil prices, lower stock prices, and slower economic growth.  Preventing a deepening and widening of European bank runs will be critical to the world economy.

INCOME INEQUALITY VERSUS PROSPERITY—DEFINING OUR FOCUS

By: Dr. Lynn Reaser

It has been nearly three years since the “Great Recession” officially ended, but many Americans are gripped by a sense of malaise.  Unemployment has eased but is still high.  Recent attention has also focused on the gap between the rich and the poor.  Some are asking the question:  “Is income inequality a threat to our prosperity?”

While the frustration of those asking the question is understandable, the answer is “no”.  America’s core values do embrace equal opportunities, but this does not imply equal outcomes.  Some will work harder than others, incur greater risks with new ideas and businesses, or just possess greater talents than others that will be rewarded.

A company where everyone is paid the same regardless of how well they perform would certainly give little incentive to be one’s best.  Taking such a model nationwide would be a recipe for mediocrity not prosperity.

America does need to do a better job in lifting the incomes of the poor by improving a woefully inadequate education system.  That should be the focus, not dissuading those who would strive for excellence. 

A Bittersweet Goodbye from the FBEI

As graduation arrives in a mere 3 days, I have spoken to many undergraduate and MBA students who are experiencing a strange mixture of joy at their accomplishments but also anxiety, concern and fear. Certainly, they enter into this next chapter of their lives in a challenging business, economic, and political era, but the source of this anxiety is something much more personal and touching.

Many conversations with graduating students have focused on the great relationship built up over these past years in school, either at our lovely ocean front campus or at Mission Valley. The rhythm and routine of the certainty created by an academic schedule is now being replaced, and often with something far less certain. For some, it means a move away and the knowledge that we will see each other again only if circumstances allow.

The first year I sat as a faculty member in graduation, I was profoundly moved by watching the festivities around me but even more so by the embraces, photos, and introductions to families and friends who were there to celebrate a great accomplishment. Those are great memories and for those whom I stay in contact with, across many industries and parts of the world, these relationships have grown even deeper. Ultimately, graduation proves to be a very bittersweet experience for us all.

So to all of our pending graduates I say to each of you ‘well done!’ Finish strong in these final days and know that many of us are praying, supporting, and hoping the best for you both now and in the future.

Sincerely,
Randy Ataide
Executive Director

Cathy Gallagher – Director
Commencement truly is a bittersweet moment for us as we have been blessed to get to know many of you in different settings and on varying levels. We are so excited at what the future has in store for each of you, yet saddened by the thought that life may somehow get in the way of continuing the relationship we have worked so hard to build. Please know nothing give us greater joy at the FBEI then when we reconnect with our alums, whether it be a week, month, or year after they graduate. We want to maintain contact with you, have coffee, lunch, take a moment to catch up on what is going in your life, and celebrate accomplishments with you. We want you coming back to give a bit of yourself, share your experiences with those who are following behind you, and provide connections within your own network, or tap back into our network. So as you go on your way, wherever life is taking you beyond PLNU, take a moment to look over your shoulder now and again and say hello to those who remember you, brag about you, pray for you, and wish you well.

Lynn Reaser – PLNU Chief Economist
You are entering a world that holds both unprecedented opportunities and challenges.  Stay true to your values and you will never go astray.  Strive for excellence and work for a better world.  We are extremely proud of you.  Stay in touch and know that we will be here for you.

Dieter Mauerman – Economic Research Assistant
We are proud of each of you. In your future careers make the most of each opportunity you are presented with.  Don’t be afraid to go against the norm and be yourself.  Relationships made in school are often times the most rewarding, so come visit us and don’t forget to stay in touch.

Emily Gallentine – Manager
Over the past year as Manager of the FBEI, I have gotten the sincere pleasure of walking with many of you through opportunities, successes, trials, stresses, fears, and professional growth. At the FBEI, we get the distinct joy of completely understanding what our business partners mean when they say to us, “There’s just something about those PLNU students.” “That something” they are speaking of will take you far in life. We are proud of you and are honored to know you. Although this time is bittersweet for us all, we continue to be your biggest fans and will be here to support you today and in the future. Best of luck and congratulations PLNU Class of 2012!

Mega Million Maniacs…Do lotteries have any economic benefit?

By: Dr. Lynn Reaser

No.  Lotteries involve essentially a transfer of income from one set of individuals to others (the winners) and the government.  The money that is spent on the lottery subtracts from funds that might have otherwise gone to other venues (including restaurants, movies, stores, and casinos) or even savings.  The winner might spend a significant share of the payout on “big ticket” items, including a car, house, or vacation.  There will thus be winners and losers in terms of both individuals and businesses, but no net gain.  Perhaps the only economic benefit is a brief euphoria and diversion for many Americans.  The downside is a sense that there is an economic “free lunch.”

Why I Teach?…Professor Randy Ataide unpacks his journey and shares his joys of teaching

In late 2004, Dr. Bruce Schooling, then Dean of the Fermanian School of Business, asked me if I would consider teaching the second half of a management course for MBA’s. At the time, I was the CEO of my own agricultural company near Fresno and while the thought of teaching was appealing, I had serious questions regarding my capacity to be able to succeed at teaching, let alone the 640 mile weekly round trip from my home. Preparing a syllabus and laying the theoretical foundation for a class was completely new to me, as were all of the many other things needed to teach. At a deeper level, I wondered if I could translate my own experiences in business and entrepreneurship to the classroom level.

The course turned out to be exhilarating (at least for me!), and even the long solo drive provided a respite from the burdens of the company and its many functions, initiatives, and burdens. At the completion of the course, I had built some excellent relationships with students which inspired me to seriously consider the possibility of joining PLNU full time, leading to a decision within the next year to move to San Diego. Since then, I have been busy with many tasks and responsibilities, but I have also taught a significant number of courses at both the MBA and undergraduate level.

This past Wednesday, I arrived at my office at PLNU and the flashing red light of my office telephone was informing me of a voicemail. Entering my code, the steely mechanical tone of the automated system was replaced by an exuberant voice of an MBA that I quickly recognized. She proceeded to report in enthusiastic terms how she had taken the principles learned from our Negotiation Strategy and Value Creation MBA course, and applied them into an employment setting. She explained that these skills had enabled her to successfully negotiate a new position that met or exceeded her personal and professional goals and expectations. In a most gracious and affirming way, she thanked me for the knowledge learned.

I recall coaching Little League many years ago when our son was young, and my initial year our team, despite our best efforts, went 0 and 16. Every time we were near a win, the opposing team, not wanting to be the first to lose to us, would quickly shuffle their lineup late in the game and bring in their ‘Ace’ to overpower our young hitters. With two close friends as fellow coaches, we worked hard to keep our boys encouraged and build skills throughout that long season. Morale remained high and the following season we won many games and finished second overall in the league tournament. The memories of those boys and coaches and the mutual encouragement we provided each other stay with me to this day.

There are days when I wonder why I teach, for I may be very busy or tired or stressed out (or some combination of all of these.) I question my effectiveness and after the class is completed I have doubts if I have been able to provide to the students information, knowledge, and skills that are of use to them, both now and in the future. Like my Little League team, I know that we often do not see an instant uptake, but with time the opportunity for a positive result increases. The unexpected phone message this week, just like the regular cups of coffee and conversations I have with a number of alums, or the visit I had last week in L.A. with a couple of young entrepreneurs from my class in 2006, are all examples of what provide me the continued energy to stay in the classroom. At the end of the day, they are all reminders to me of why I teach.

The Secret to Success: Silencing the Snooze

By Randy Ataide

Often when I travel, I find myself in an airport bookstore wandering the aisles. While I am an avid user of eBooks and other technological innovations, I do enjoy seeing what is currently being published and pushed to the mass markets. The blaring headline of “Ten Quick Steps to Success” or “Become a Real Estate Millionaire with Nothing Down!” usually upset my stomach, as little more than thinly veiled scams. Ugghhh!

Students, alumni and others in business frequently ask me about personal and professional success, and while this is not a topic that I have done any amount of research on, I do believe that there are certain things that any person can do which usually has very positive results. In fact, I can say that among most successful people I know, they often share one thing in common more than anything else. It is not the status of your university, a  specific field of study, grade point average, gender, socio-economic background, geographical location, career path or any of the “usual suspects.” It is something much simpler and much more accessible and attainable by anyone.

We have all heard the famous quotation of Benjamin Franklin “Early to bed, early to rise, makes a man healthy, wealthy and wise.” Perhaps our parents or grandparents recited this short proverb to us, and anyone who was raised in a farm community knows that this is near gospel to those populations. But the philosophical foundations of this traditional wisdom run much deeper, for Aristotle wrote “It is well to be up before daybreak, for such habits contribute to health, wealth, and wisdom.” In many religions the spiritual value of the early morning is at least one area in which we find much agreement. This time has been called “the heroic minute” and it is likely that Jesus often went early to find solitude to pray, think and meditate.

My students and peers at least appear to be surprised when I tell them I was a slothful and unmotivated youth, a poor student and with little life direction. At the age of seventeen, my own body clock altered, and four years in the military only reinforced this discipline. For nearly forty years, I have been a notorious early riser (you should read some of the comments I receive from people who notice the time stamps of some of my early morning emails!) I find this to be a superb time of reading, writing, thinking, praying and looking ahead to my day. The great value in having several hours of absolutely uninterrupted time cannot be overstated. Ben Franklin offered another bit of wisdom of well: “The early morning has gold in its mouth.” My own experience is that while this may not be literally true, the early morning does give one a great competitive advantage, a head start to the day in productivity which most others cannot catch up to through the rest of the day.

Recently, I have met with several young professionals, each in very different fields and all in the mid to later twenties. Without any prompting, all told me that they are rising earlier and found much of what I wrote above to be true. I have great confidence in each of them achieving their own level of success. My advice to you? Save your money on the slick airport books, lectures or other systems of success. Simply set the alarm clock, brew some coffee, and start your day!

Q: Are San Diego consumers in a better buying mood this coming holiday season than they were in 2010?

By: Dr. Lynn Reaser

Q: Are San Diego consumers in a better buying mood this coming holiday season than they were in 2010?

 

                                                                                                                                                                A:  No.  While San Diego County has added 15,000 jobs so far this year, triple the gain for all of 2010, the jobless rate is still close to 10%.  Wages have not kept pace with prices as food and energy costs have jumped.  Home prices are somewhat lower than a year ago.  Stock prices remain volatile and have struggled to even match last year’s closing values.  Meanwhile, a major cloud of uncertainty looms regarding both the European debt situation and our own budget problems.  San Diego consumers will still spend for the holiday season but they will remain cautious as in 2010.

Another Housing Rescue Plan—Will This Time Be Different?

By: Dr. Lynn Reaser

The Administration this week announced a new program aimed at assisting “underwater” homeowners (whose homes are worth less than their mortgages) to refinance.  It will be voluntary for lenders, mortgage insurers, and other industry participants to sign up.

Although operational details may not be released until November 15, lenders may find it worthwhile to refinance loans where loan-to-value ratios have climbed above 125%.  This could especially be true where borrowers might otherwise “strategically default” or abandon their houses even if they are able to make the required payments.  Lenders may target the provision of the new program waiving risked-based fees if the borrower shortens the term of his mortgage.  Hence, lenders could receive almost the same monthly payments although for a shorter time span.

About 900,000 borrowers have refinanced through the first refinancing program, called the Home Affordable Refinance Program (HARP).  Another 900,000 participants in this amended HARP would amount to only about one-thirtieth of the mortgages owned or guaranteed by Fannie Mae and Freddie Mac.  Moreover, the new program will do little to absorb the excess of foreclosed properties still weighing on the housing market.

In sum, this program might provide some assist to beleaguered homeowners but is hardly a panacea.

The Occupy Wall Street Movement—Helpful or Harmful?

By: Dr. Lynn Reaser

While the Occupy Wall Street Movement’s criticism of the fraud, financial abuses, and government “bailouts” of Wall Street are warranted, it is important not to extend the attack to business in general.

Entrepreneurs, such as Steve Jobs, who started out on a shoestring before climbing to the top one percent, have certainly benefited millions of Americans in terms of jobs, consumer products, or even increases in their 401(k) plans.  The last decade has been trying for all of us, but the median family income of Americans last year was still 8% in real terms above its level of 1985 and 14% above its level of 1975.

To regain our trend of rising living standards, the individuals and firms who create jobs and income for their employees need to be supported not chastised.

Q&A with Dr. Lynn Reaser

By: Dr. Lynn Reaser

Q: Is President Obama’s proposal to raise taxes on millionaires and billionaires good public policy?

A:  No.  Millionaires and billionaires should not pay lower tax rates than others, but they generally do not. They now pay an average of about 25% of their income in taxes versus about 7% for households earning $40,000 to $50,000.  Even increasing their average tax rate to 35% would generate at most about $72 billion, which would make only a modest dent in a deficit running $1.3 trillion…  Many wealthier households do benefit from larger share of their incomes in dividends and capital gains taxed at the 15% rate.  However, that income is currently “double taxed” as corporations pay a 35% on profits before it is distributed to shareholders.  Good public policy calls for total tax reform.