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 25, 2008

Hidden Cameras Aren't Just for 007

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Kathryn Glass

FOXBusiness

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Who would have thought we would one day live in a world where you have to be suspicious of a can of shaving cream?

Thanks to micro technology and cheaper manufacturing, tiny, affordable cameras that take remarkably good video and sound can be hidden inside just about any ordinary object.

"Tissue boxes, shaving cream cans, wall clocks, computer speakers, smoke detectors--we can pretty much put a camera inside of just about anything," said Blair Kovacs, owner of SpyCamMan.com, an Ontario, Calif.-based Web site. Kovacs said he gets special orders all the time from customers who ask him to put cameras in everything from coffee cans to working DVD-players.

Today's hidden cameras are the stuff of spy novels; they're wireless, can capture nine or more hours of video and have motion detection software, so they don’t actually start recording until someone walks into a room. Some of the more advanced hidden cameras are completely self contained, so that you can record and then playback all of the video by simply plugging the device into your TV, while others transmit video back to a receiver hidden elsewhere or store it to an memory card.

All of this new technology has its advantages. Parents, suspicious of a nanny can order a teddy bear with a camera inside for a mere $270. People who can't afford a home security system can place a camera over their garage for a fraction of the cost. Small business owners can keep their employees honest by installing low-cost security cameras to monitor cash registers.

“I had a guy who owned a bar who came to me about a camera,” said Leif Kehrein, owner of Monterey, Tenn.-based Spyville.com. “He put the camera in and caught an employee stealing from the cash register two nights in a row.”

Still the sudden ubiquity of personal surveillance is a little unsettling since it's made it a whole lot easier for the peeping Toms of the world. Kovacs’ top-selling camera is a fully functional radio and CD player for the shower with a hidden camera inside. It sells for $329.99.

Thankfully, there are gadgets out there that help track down all of those prying eyes. Hidden camera detectors are also becoming more affordable, and some allow you to see exactly what the camera is recording. Click here to read about gadgets for the paranoid

Kehrein said detectors are about as popular as hidden cameras themselves. Kehrein said he had a customer who bought a detector and found a camera hidden in the clock radio at his hotel room when he was on vacation and when he notified the police they found three rooms with hidden cameras.

“It was a small hotel chain—the former owner had passed away and apparently kept those cameras for some time,” Kehrein said. “Anyone who stayed in those rooms had to get a call…the current owner had no idea.”

Kehrein also sells hidden cameras, and he said it’s not hard for him to justify selling cameras that spy on people without their knowledge.

"I always thought that people should be morally responsible for themselves,” he said. “But I’d ask the critics—if they have a child whose nanny is beating them with a wooden spoon—wouldn't they want to know?"

Kehrein said eventually as the prices on cameras continue to drop, the number of hidden cameras out there will double. He said he even gets a lot of buyers who are looking to place a camera in their cubical or office at work to protect their things.

So the next time you walk by a clock radio, or a teddy bear, or a box of tissues--remember--someone might just be watching.