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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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Thursday, July 17, 2008
The Commonwealth Fund July 2008 National Scorecard on the U.S. Health System Performance is a Political Statement, Not a Valid Measure of U.S. Medical Quality
Comtex
NEW YORK, July 17, 2008 /PRNewswire-USNewswire via COMTEX/ ----"Though the Commonwealth Fund report claims to measure the performance of American health care, its conclusions are political, not scientific," says Betsy McCaughey, Ph.D., of the Hudson Institute. McCaughey points out that nowhere in the Commonwealth report is there a measure of how well patients in the U.S. survive major illnesses, compared with patients in other countries. "That is the true measure of a health care system -- what are your chances of recovering from illness?" says McCaughey.
The Executive Director of the Commonwealth Fund tips the organization's hand by reminding the report's readers of the upcoming presidential election. "Voters deserve more reliable, unbiased evidence of the strengths and weaknesses of American health care than what the Commonwealth Fund has put out," says McCaughey.
The report claims to compare countries along "37 core performance indicators." What are these indicators? Not average survival rates after a cancer diagnosis, or survival after a heart attack. Instead the report measures minor procedural matters such as percentage of heart failure patients who leave the hospital with written follow-up instructions.
"What really matters are survival rates -- the likelihood that a heart attack victim leaves the hospital alive," says McCaughey.
In the United States, a woman diagnosed with cancer has a 63% chance of living at least five years after the diagnosis. A man has a 66% chance. Those are the highest survival rates in the world, and these figures reflect the care received by all Americans, not just those with health insurance. In Great Britain, which has had "universal health care for half a century," the survival rates are 53% for women and 45% for men according to the largest ever international survey of cancer survival rates.
Astoundingly, the Commonwealth report gives the U.S. poor marks for "capacity to innovate and improve to achieve excellence." But the report's definition of innovation has nothing to do with new cures and new treatments. It is defined as emphasizing primary care. In fact, the U.S. leads the world in the creation of new cures and breakthrough medical knowledge. In the 1980s, a heart attack victim who made it to the hospital alive still faced a 20% risk of dying during the hospital stay and a 40% risk of dying within a year. Medical innovation has reduced that risk now to less than 5% (Health Affairs, Jan-Feb, 2007).
SOURCE Hudson Institute
http://www.hospitalinfection.org
Copyright (C) 2008 PR Newswire. All rights reserved
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