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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Monday, July 28, 2008

BlackBerrys Be Damned: Can You Do Business Without Them?

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Kathryn Tuggle

FOXBusiness

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In an era of instant communication and constant connectivity, electronic devices like BlackBerrys and PDAs have become a staple of the American workplace. However, as these devices invade our personal lives, many executives are saying goodbye to ever-present e-mail.

“I don’t need a BlackBerry. I work as hard as the next man-- harder than most-- but I don’t need it,” said executive chairman of Bytemobile, Hatim Tyabji, who doesn't allow BlackBerrys or any other type of handheld device in meetings.

“When I’m on a plane and that seatbelt goes off, I don’t instantly reach for my phone. I am content to get to my hotel room and then I will open up my computer. I am as effective in my job, but my Saturday is a little better than most peoples."

As the founder of VeriFone 20 years ago, Tyabji said his company was the progenitor of an all e-mail workplace, but that e-mail has evolved into a huge problem.

“The BlackBerry is now a manifestation of self worth from a professional standpoint,” Tyabji said. "It makes people feel more important to be tapping on a BlackBerry rather than talking to the lady next to them. There’s a feeling that if you don’t appear connected than you’re not busy.”

Tyabji is strict with his no BlackBerry or other hand held devices policy during meetings. He said he wants employees focused on the subject of the meeting and not what e-mail is populating the inbox.

The use of BlackBerrys in meetings can actually be a contagious phenomenon, noted Anthony Oncidi, Chair of the Labor and Employment Department at the Los Angeles-based law firm Proskauer Rose. If one person starts clicking away at a BlackBerry everyone else is likely to follow suit, he said.

Sam Glenn, CEO of Everything Attitude, refuses to carry any electronic device besides a cellular phone, and never checks his e-mail during meetings. He said he can keep up with all his company’s happenings via telephone.

“People who have a PDA lose sight of what the most important things are. With [a PDA], little things keep popping up, and at the end of the day, they say, ‘Man, I didn’t get anything done,’” said Glenn. Glenn opts for in-person meetings whenever he can, and makes it a point to send handwritten thank-you notes often.

“Tech can’t make up for the experience you create when you have a personal meeting with somebody,” said Glenn. “In my first job out of college, my boss made us find two people on a weekly basis to write thank-you notes to. I’ve been doing that for 15 years now, and there is always somebody to thank. It’s personal and meaningful because it’s not electronic.”

For Donna Childs, founder and CEO of Childs Capital, an economic development firm, using BlackBerrys and handheld devices is a big no-no unless it’s an emergency. None of Child's 14 employees use a BlackBerry in meetings or to work from home.

“As a primary form of communication, [the use of BlackBerrys] can give rise to misunderstandings and harm your business reputation,” Childs said. “Communicating via e-mail or, heaven forbid, text messaging, can create misunderstandings with a business person from a different culture. It is impossible to gauge context, response and tone and modulate your message accordingly."

Childs said she finds it “galling” to see people text messaging in meetings because it’s a slap in the face of those who are holding the meeting.

The infectious desire to keep up with one’s business dealings can be more dangerous than most people think, according to Mellanie True Hills, author of A Woman's Guide to Saving Her Own Life, a book on stress management for women.

Hills penned the book after suffering a heart attack brought on by stress at work. The BlackBerry that Hills used on a daily basis had turned into a corporate “albatross” around her neck, she said.

“Because I was tethered to my work 24/7, I constantly felt like I was being tugged on,” Hills said. “Having a BlackBerry is kind of like being a mommy and having kids pulling on your apron all the time, only it’s hundreds and hundreds of customers pulling on your suit, and you feel like you have to get back to them as quickly as possible.”

Hills had to teach herself how to step away from work in order to recover, a course of action she recommends to anyone feeling bound to their PDAs. “Take fewer clients, and say 'no' gracefully. Have a discussion with your boss and determine what your top priorities are, and what you can cut back on,” she said.

Although a meeting’s moderator may not take too kindly to overt PDA use, Harry Lewis, former Dean of Harvard and author of BLOWN TO BITS: Your Life, Liberty, and Happiness after the Digital Explosion, readily admits to checking his BlackBerry at work gatherings.

“I do it because I'm in the middle of a 90-minute meeting that should have been 45 minutes,” Lewis said. “Sometimes, people’s reaction to wasted time is to do a little parallel processing, and the right answer isn’t for the bosses to tell people turn off e-mail, it’s to try and get the meeting focused.”

Lewis said it’s never smart to go after particular technologies as though they are the enemy, because ultimately, the use of tech simply requires good judgment.

“When Bill Gates was at Harvard, no one was going to tell him, Bill, get some sleep every now and then,” Lewis said. “I’ve had the honor of having both Bill Gates and Mark Zuckerberg in class, so I know it's not right to say that working all the time is the wrong thing to do, because clearly, sometimes it’s the right thing to do."