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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, June 26, 2008
Avenir Diversified Income Trust Restatement of First Quarter 2008
Comtex
CALGARY, ALBERTA, Jun 26, 2008 (Marketwire via COMTEX) ----Avenir Diversified Income Trust ("Avenir Trust" or "Trust") (TSX:AVF.UN) advises that it is restating its March 31, 2008 first quarter financial statements.
As a result of the annual audit in its Elbow River Marketing Group it was determined that the accrual for the employee incentive costs pertaining to the record first quarter 2008 results were understated and an adjustment for a misclassification and change in the valuation of its inventory was required. The impact of the restatement is to reduce funds from operations for the three months ended March 31, 2008, from $21.7 million or $0.52 per unit to $20.3 million or $0.49 per unit. Net income is reduced from $7.8 million or $0.19 per unit to $5.2 million or $0.12 per unit. The Trust's payout ratio increases to 51% of funds from operations for the quarter from 48% previously reported.
The restated March 31, 2008 Financial Statements and the Management Discussion and Analysis for the quarter are available on the Trust's profile on SEDAR at www.sedar.com or the Trust's website at www.avenirtrust.com.
Forward Looking Statements
Certain information regarding Avenir Diversified Income Trust set forth in this document, including management's assessment of the Trust's future plans and operations contains forward looking statements that involve substantial known and unknown risks and uncertainties. These forward looking statements are subject to numerous risks and uncertainties, some of which are beyond the Trust's and management's control, including but not limited to, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of foreign exchange rates, imperfection of reserve estimates, environmental risks, industry competition, availability of qualified personnel and management, stock market volatility, timely and cost effective access to sufficient capital from internal and external sources. The Trust's actual results, performance or achievement could differ materially from those expressed in or implied by, these forward looking statements and accordingly, no assurance can be given that any of the events anticipated to occur or transpire from the forward looking statements will provide what, if any benefits to the Trust.
SOURCE: AVENIR DIVERSIFIED INCOME TRUST
Avenir Diversified Income Trust William M. Gallacher President and CEO (403) 237-9949 (403) 237-0903 (FAX) Avenir Diversified Income Trust Gary Dundas VP Finance and CFO (403) 237-9949 (403) 237-0903 (FAX) Avenir Diversified Income Trust Suite 300, 808 - 1st Street S.W. Calgary, Alberta T2P 1M9 Website: www.avenirtrust.com
Copyright (C) 2008 Marketwire. All rights reserved.
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