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.

Home / Personal Finance / On Topic / Gadgets

Wednesday, July 23, 2008

Think Your Deleted Texts are Gone? Better Think Again

Email this Story | Respond to Editor | Print

Kathryn Tuggle

FOXBusiness

Related Content

As any cheater will tell you, the digital age has opened many doors through which roaming eyes can peer. Whether it’s through instant messages or text messages, typing your way into someone’s heart--or bedroom--has never been easier.

One of the reasons digital transgressions are preferred to old-fashioned love letters is because they are so easily erasable… Or are they? The invention of the SIM Recovery Pro, a gadget that can recover deleted messages from a cell phone, is changing the way cheaters look at messaging.

Invented last year by a company called L.M. Technologies out of Birmingham, England, the SIM Recovery Pro taps into a phone's SIM card to view previously erased messages. The company touts the device as the only SIM card reader on the market that can recover deleted communication. But how does it work?

When most phones delete text messages, the messages are only deleted off the phone’s virtual memory; the messages (up to 40 of them) remain on the phone’s SIM card. A phone’s SIM card can be removed and inserted into the SIM Recovery Pro, which the company says can be placed into any computer’s USB drive and display the messages on the monitor.

“Our main goal was to catch cheaters,” said Andreas Pavlides, a sales executive at L M Technologies. “Most people who buy [the SIM Recovery Pro] are spying on someone they think is cheating.”

Developed in 2007, the SIM Recovery Pro is more popular in the U.S. than it is in Europe. “I guess it means you cheat more, or that you’re more paranoid,” joked Pavlides about American couples.

As for who’s really more interested in spying, sales so far indicate that women lead the charge, according to Pavlides. However, at ProofPronto.com, a Miami, Fla-based site that carries products devoted to domestic spying, men account for 52% of the customer base, according to the site's Director Scott Julian.

Julian estimated that 80% of the company’s customer base is married, between the ages of 22 and 45.

Julian said he is often regaled with stories of spouses who arouse suspicion by being too protective of their phones, sleeping with it under their pillow, taking it into the bathroom with them, or locking it with a password.

Although most Cell Phone Spy customers are trying to confirm or deny suspicions about a cheating spouse, some customers are parents interested in protecting their children.

Many parents concerned about a nanny’s behavior or a teenagers' whereabouts will invest in the device, according to Todd Morris, founder of Brickhouse Security, a New York-based retailer of the SIM Recovery Pro.

“Parents feel a little outgunned these days, and it’s hard to keep track of who your kids are talking to,” Morris said. Most parents that invest in the product for either their child’s caretaker or their child are in the 45 and younger crowd, he said.

Other more benign uses for the Cell Phone Spy include recovering old numbers or transferring old numbers to a new phone. Some employers use it to monitor correspondence between employees, Pavlides said.

Last year, L.M. Technologies sold 19,000 SIM Recovery systems at about $150 each, and the product continues to fly off shelves at Brickhouse Security, where the company is often left with back orders.

Occasionally, the folks at Brickhouse will get an earful from a customer who used the product. A suspicious boyfriend once ordered the device to investigate his girlfriend’s suspicious dealings. He called back later to say he had indeed uncovered dishonesty—her covert actions had all been to plan a surprise party for his birthday!

But would-be Cell Phone Spy users should beware of the fine print: It doesn’t work on all phones, and if you’re a heavy texter, the message history is continually overwritten with new data. Phones that do not support the device include Sprint and Verizon phones that do not use SIM cards, as well as the iPhone, BlackBerries, or Treos.