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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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Tuesday, June 17, 2008
China's Largest Offshore Outsourcing Provider Neusoft Sets up Global Delivery Center
Comtex
DALIAN, China, June 17, 2008 /Xinhua-PRNewswire via COMTEX/ ----Neusoft Corporation, the largest offshore software and service outsourcing provider in China, inaugurated another software park at the Dalian High-tech Industrial Zone today. Designed to expand its operations and accelerate its globalization process, this facility, the second of its kind invested in by Neusoft in Dalian, may house 10,000 engineers and will become, combined with the previous one, a software & service global delivery center to facilitate its fast-growing offshore-outsourcing operations. In view of Dalian's rapid expansion in the software & information service industry, such a move indicates Neusoft's determination to accelerate its expansion to the overseas market. In addition, the city is making a giant step towards becoming a champion of software & service outsourcing in the world.
(Logo: http://www.newscom.com/cgi-bin/prnh/20061219/CNTU012LOGO )
Positioned to offer IT outsourcing and BPO services to Europe, America, Japan, and Korea, the new park will also include Neusoft's three industry solution business units for telecom, electric power, and finance, as well as its car electronics R&D center and leadership development center. Neusoft will rise up as a large global operations base that focuses on service outsourcing and product engineering solutions. Neusoft will engage itself in building the park into the largest offshore outsourcing base for the Japanese market in China and a leading embedded software outsourcing development center around the world. Neusoft plans to open the park to more of its global partners with more industry-specific offerings, aiming to create an ecological industrial environment where it may share resources with its international partners for mutual growth.
Dr. Liu Jiren, Chairman & CEO of Neusoft Corporation, expressed that the concept and construction of the new park is based on Neusoft's future strategy and business growth. As economic globalization deepens and Asian economy grows, more and more global software & service outsourcing businesses are shifting into Asia. China is becoming another important offshore outsourcing destination, rising as a major force in the future global market. Neusoft, dedicated to becoming a globalized IT solutions & services provider, plans to improve its international revenue percentage from current 30% to 50% in the coming 3 to 5 years.
Contact: Evelyn Tang Brand Management & Corporate Communication Center Neusoft Corporation Tel: +86-24-8366-5663 Fax: +86-24-8366-3451 Email: tangyi@neusoft.com
SOURCE Neusoft Corporation
Copyright (C) 2008 PR Newswire. All rights reserved
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