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We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.
The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.
These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.
When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?
Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.
Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.
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Friday, June 20, 2008
Battelle Energy Expert To Be Keynote Speaker at Carbon Capture and Sequestration Conference
Comtex
COLUMBUS, Ohio, June 20, 2008 /PRNewswire-USNewswire via COMTEX/ ----Can carbon dioxide emissions be economically reduced by capture and storage? How advanced are the technologies available to capture and compress CO2 for storage? Is it possible to store it safely underground? What are those in the industry doing about the atmosphere's carbon dioxide problem and what does the future hold?
To illuminate those who attend the Platts Carbon Capture and Sequestration conference June 25-26 in Houston, Battelle's President of Energy Technology Global Business Don McConnell will deliver the keynote address.
McConnell will talk about the importance of carbon capture and sequestration for the reduction in emissions, whether or not it can happen quickly enough to have an impact and if it's worth it financially. He also will forecast how to overcome obstacles in developing new projects. McConnell will be available for some interviews leading up to the conference for interested media.
McConnell is responsible for Battelle's almost $1billion energy business worldwide. He oversees the development of Battelle's five principle lines of commercial energy business, focusing on near-zero emission hydrocarbon conversion, carbon management solutions, alternative energy, energy infrastructure, and nuclear fuel cycle solutions.
The Platts Carbon Capture and Sequestration event is targeted to the needs of power generators, coal producers and energy financiers, as well as companies involved in tertiary recovery and transportation of carbon dioxide.
Battelle is the world's largest non-profit independent research and development organization, providing innovative solutions to the world's most pressing needs through its four global businesses: Laboratory Management, National Security, Energy Technology, and Health and Life Sciences. It advances scientific discovery and application by conducting $4 billion in global R&D annually through contract research, laboratory management and technology commercialization. Headquartered in Columbus, Ohio, Battelle oversees 20,400 employees in more than 120 locations worldwide, including seven national laboratories which Battelle manages or co-manages for the U.S. Department of Energy and the U.S. Department of Homeland Security.
Battelle also is one of the nation's leading charitable trusts focusing on societal and economic impact and actively supporting and promoting science and math education.
Battelle's Global Energy Technology business unit translates Battelle's basic and applied energy R&D base into innovative commercial solutions, products and services. Including the operations of national laboratories, Battelle oversees nearly $900 million annually in energy-related research contributing to advances in climate change solutions, bio-energy, fuel cells, nuclear power, and energy infrastructure.
For more information, visit www.battelle.org or contact Media Relations Specialist T.R. Massey at masseytr@battelle.org or (614) 424-5544.
SOURCE Battelle
http://www.battelle.org
Copyright (C) 2008 PR Newswire. All rights reserved
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