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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, July 18, 2008
British Students Win U.S.-UK Rocket Contest at Farnborough
Comtex
FARNBOROUGH, England, July 18, 2008 /PRNewswire via COMTEX/ ----FARNBOROUGH, England, July 18 /PRNewswire-USNewswire/ -- A student rocket team from England edged a squad from North Carolina to win the Trans-Atlantic Trophy Friday in the inaugural contest between champions from the United States and United Kingdom.
In an extremely close competition, students from Horsforth Secondary School in Yorkshire, England prevailed over their counterparts from Enloe High School, who traveled from Raleigh, N.C. for the event.
The margin of victory was a razor-thin 7.41 points in a scoring system where the teams are penalized for every second or foot away from the launch goals, and the low score wins. Horsforth ended with a score of 8.91, while Enloe had 16.32 - both very good scores.
The competition pitted the winners of the Team America Rocketry Challenge against the champions of the UK Aerospace Youth Rocketry Challenge, known as UKAYRoC.
TARC is sponsored by the Aerospace Industries Association and the National Association of Rocketry, along with about three dozen AIA member companies. UKAYRoC is organized by Tri Polus Ltd. and the UK Rocketry Association.
AIA President and CEO Marion Blakey said both teams showed great ability and should be very proud of their achievements.
"With kids this talented, there are nothing but winners here today," Blakey said. "All of these students excelled, and I expect we will see many of them as colleagues in the aerospace industry in a few years."
Both contests feature teams of middle and high school-aged students designing and building model rockets to meet specific launch criteria. The goal during the Trans-Atlantic Trophy challenge was to fly 750 feet in altitude and stay aloft for 45 seconds, while returning a payload of two raw eggs unbroken.
Also Friday, the new rules for next year's TARC contest were announced. The height and time goals remain the same, but the one-egg payload be transported lying on its side rather than positioned vertically. That mimics the position of an astronaut and presents the teams with a new engineering challenge.
TARC, in its sixth year, is geared toward attracting young people to careers in the aerospace industry. There is a potential workforce crisis looming in aerospace since current employees are becoming eligible to retire, and fewer students are studying math, science and engineering.
The trip to England was part of the Enloe team's first prize - a premium paid for by AIA member company Raytheon. Raytheon also sponsored Friday's event and provided prizes for both teams.
Founded in 1919, the Aerospace Industries Association represents the nation's leading manufacturers and suppliers of civil, military, and business aircraft, helicopters, unmanned aerial vehicles, space systems, aircraft engines, materiel, and related components, equipment services, and information technology.
SOURCE Aerospace Industries Association
http://www.aia-aerospace.org/
Copyright (C) 2008 PR Newswire. All rights reserved
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