Professor reassures students in midst of financial crisis
Paul Koch, professor of business, tells his students they will still get jobs despite economic downturn.
Monday, October 6th, 2008
The day after the Dow Jones suffered a 20 percent drop — its largest one-day decline in the market’s history — Paul Koch, the O. Maurice Joy Professor of Business, had at least one thing he wanted to make clear to students in his “Futures and Options” class.
“The sky isn’t falling,” Koch said. “You’re all going to get jobs.”
Photo by Ryan McGeeney
Paul Koch, the O. Maurice Joy professor of business, discusses the rapid changes in the stock market in the wake of the proposed $700 billion economic package, and it's initial failure to win approval in the U.S. House of Representatives, with an upper-level economics class in Summerfield Hall. Koch normally spends the first 10 to 20 minutes of class discussing current events and their relevance to students of economics, business and finance.
The class, which teaches students in the School of Business how to navigate a dizzying array of financial formulas that predict and guide actual business transactions, often begins with a 10- to 20-minute discussion period in which current world events are examined through the lens of the economic theories and principles taught by Koch and other professors in Summerfield Hall.
The discussions have increasingly shifted focus from broad generalities to specific events that seem to change the economic forecast for the country and the world from one day to the next. Many of the students in the course are nearing graduation, and every hint of a financial downturn and possible recession can appear as a bad omen to students about to enter the job market.
“You guys are going to get jobs, and you’re going to start investing in your 401ks,” Koch told the class. “Don’t you want to buy stocks now, when they’re low? Isn’t this good for you? You’re not retiring tomorrow.”
Koch recently garnered a modicum of media attention as a signatory to a letter addressed to Speaker of the House Nancy Pelosi (D-Calif.) and Sen. Robert Byrd (D-W.Va.), the current president pro tempore of the Senate. The letter, signed by more than 200 economists from 100 universities around the nation and read on the floor of the House of Representatives, urged caution in approving the $700 billion Emergency Economic Stabilization Act of 2008.
Both chambers of Congress have since passed the bill and President Bush signed it into law on Oct. 3. The letter cited three major causes for concern: the question of the legislation’s fairness, its lack of transparency and oversight and the potential for long-term, unintended consequences.
“I view the last several weeks as a short-term liquidity crisis, and as the result of some past behavior in the financial markets, particularly the real estate markets,” said Koch, who described the letter as a plea to Congress, the U.S. Treasury and other leaders to simply not be hasty. He emphasized that his primary concern was the ambiguous nature of some portions of the proposed legislation, rather than the dollar amount.
“I don’t like the term ‘bailout,’” Koch said. “It’s really a $700 billion line of credit. I think that’s actually a good idea. The liquidity crisis reflects the engine of the economy coming to a stop. We need to grease the engine of the economy to get it going again, and credit is the grease that makes the economic engine work.”
Koch’s students aren’t the only ones in the School of Business finding themselves engaged in discussions revolving around economic theory in practice. Nick Sherf, Leawood senior, said he had recently seen questions appear on tests that were obviously affected by recent changes in the economy.
“It’s not so much the topics of discussion that change, but the real world application of these principles,” Sherf said. He cited a recent discussion of the housing market’s collapse and how its effect on the labor market had in turn slowed down both legal and illegal immigration in recent months.
Kaylie Traban, Leawood senior, said that while she felt her job prospects were strong as an accounting major, she was still trying to deal with a potential job shortage.
“Even though they’re always looking for people in accounting to deal with the new laws and regulations, I’m still definitely worried,” Trabon said. “I know everyone’s cutting down on the number of new hires. I have a lot of friends who graduated last year who still have not found jobs. It’s definitely worrisome.”
Trabon said she hoped to find an internship in the spring, and hoped to parlay that into full-time employment.
Other students are seeing the recent turbulence in the markets as an incentive to further their education. Jarryd Dudley, St. Louis senior, said his entrepreneurship class had been studying the $700 billion economic package in terms of its effects on burgeoning businesses, especially in terms of inflation.
“It doesn’t look good, at least not for middle-class people like myself,” Dudley said.
Dudley said as he approached his turn to walk down the hill in May, he had been spending a lot of time researching financial and investment companies in the hopes of landing a job with a secure firm. Dudley said it seemed just as likely, however, that he might simply apply for an MBA program.
“It may make me want to stay in school longer for a chance at getting a better job at a younger age,” Dudley said.
Discussion
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"The day after the Dow Jones suffered a 20 percent drop..."
20% Really? Wouldn't that be a 2000 point loss or so??
You might want to re-check your facts, that's kind of embarrassing.
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