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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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Monday, May 05, 2008
Gift Ideas for Mother's Day from Future Shop
Comtex
BURNABY, BRITISH COLUMBIA, May 5, 2008 (Marketwire via COMTEX News Network) ----Future Shop, Canada's largest retailer and e-tailer of consumer electronics, has gift suggestions for Mothers Day.
Michelle Grawe, Director Merchandising for Future Shop, says, "Future Shop is the perfect destination to shop for Mother's Day. We have a huge selection of gifts for Moms from digital cameras to digital picture frames to entertainment systems and kitchen appliances."
Future Shop Mother's Day gift suggestions:
- Capture memories with a digital camera equipped with smile detection. Sony Cybershot W120 camera features 7.2 Megapixels, 4x optical zoom, optical image stabilization, Face Detection Technology, Smile Shutter Mode. Price: $229.99 (on sale for $199 May 2 to May 15).
www.futureshop.ca/catalog/dept.asp?logon=&langid=EN&catid=14
- Share pictures at home or at work with a digital picture frame. Dynex 7" Digital Photo Frame With Remote. Price: $99.99
www.futureshop.ca/catalog/subclass.asp?logon=&langid=EN&catid=24916
- While waiting for the kids, spend time relaxing with a portable Nintendo DS handheld video game system and Brain Age game. Price: $139.99 for game system and $19.99 for Brain Age game.
www.futureshop.ca/catalog/class.asp?logon=&langid=EN&catid=22013
- Update Mom's kitchen with a new TV or new appliances such as food processors, espresso makers or indoor grills. For small appliance products and pricing go to www.futureshop.ca/catalog/class.asp?logon=&langid=EN&catid=1830. Insignia 15" LCD TV perfect for the kitchen. Price: 199.99
www.futureshop.ca/catalog/class.asp?logon=&langid=EN&catid=23505
Women interested in technology
According to NPD Marketing Group and JC Williams Group, 43% of all consumer electronic purchases are made by women, totaling $7.3B in Canada. The main electronic purchasing categories are: TVs, portable DVDs, digital cameras and MP3s.
About Future Shop
With 131 stores across the country and the nation's premier web store (www.futureshop.ca), Burnaby, BC-based Future Shop is Canada's largest retailer and e-tailer of consumer electronics. The company employs more than 10,000 technology enthusiasts, has enabled its website to deliver unparalleled content about the products it sells and host an online community forum for technology beginners and tech-savvy experts to exchange ideas, reviews, tips and other consumer electronics information (www.futureshopforums.ca). As a proud corporate citizen, Future Shop has developed solutions to recycle used electronics (see www.futureshop.ca/green) and is committed to employee volunteerism and supporting non-profits organizations dedicated to transforming local youth into Future Leaders (see www.futureshop.ca/community).
SOURCE: Future Shop Ltd.
Future Shop Ltd. Susan Kirk Communications Manager (604) 412-1226 Email: skirk@futureshop.com Future Shop Ltd. Cheryl Grant Communications Specialist (604) 412-1008 Email: chgrant@futureshop.com Future Shop Ltd. - In Quebec Thierry Lopez Quebec Marketing Manager (514) 905-7713 Email: tlopez@futureshop.com Website: www.futureshop.ca
Copyright (C) 2008 Marketwire. All rights reserved.
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