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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Wednesday, July 09, 2008

BeaconEquity.com Issues TraderNotes on Active Stocks: LAUD, RMBS, ARTE, FRPT, SONS, EBAY, BMRN, ICOG

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DALLAS, July 9, 2008 /PRNewswire via COMTEX/ ----BeaconEquity.com announces the availability of TraderNotes on stocks making news today.

Investors can view all of the daily trading notes for free by visiting: http://www.BeaconEquity.com/m

Today's TraderNotes include: Land Resources Inc. (OTC Bulletin Board: LAUD), Rambus Inc. (Nasdaq: RMBS), Artes Medical Inc. (Nasdaq: ARTE), Force Protection Inc. (Nasdaq: FRPT), Sonus Networks Inc. (Nasdaq: SONS), Ebay Inc. (Nasdaq: EBAY), BioMarin Pharmaceutical Inc. (Nasdaq: BMRN) and Ico Global Communication Holdings Ltd. (Nasdaq: ICOG).

Join the investor discussion surrounding these stocks at: http://www.stockhideout.com/

See what Cramer has to say about these stocks at: http://maddmoney.net/

BeaconEquity.com's TraderNotes are brief analyses on the active stocks each day that are affecting the markets. These include breaking news, insider activity, recent 52-week highs/lows, technical breakouts, and other market driving information. Beacon is the authority on research in the small-cap sector, and our analysts strive each day to find the stocks that are poised to be the biggest movers before the rest of the market is aware of them.

We encourage investors to subscribe to our FREE newsletter filled with daily trading ideas by visiting: http://BeaconEquity.com/m

BeaconEquity.com is one of the industry's largest small-cap research providers. Beacon strives to provide a balanced view of many promising small-cap companies that would otherwise fall under the radar of the typical Wall Street investor. We provide investors with an excellent first step in their research and due diligence by providing daily trading ideas, consolidating the publicly available information available on them. For more information on Beacon, please visit: http://BeaconEquity.com/m CRD# 1755680

BeaconEquity.com Disclosure

The companies that are discussed have not always approved the statements made in this opinion. These reports are for informational purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities mentioned. We are not a licensed or registered broker dealer, investment advisor, analyst or underwriter. Please consult a registered broker before purchasing or selling any securities viewed or mentioned here.

 Beacon Equity Research Jeff Bishop, (469)-252-3505
   press@beaconequity.com

Reuben Sushman of Beacon Equity Research is a member of the National Association of Securities Dealers, CRD number 1755680.

 Available Topic Expert(s): For information on the listed expert(s), click appropriate
   link. JEFF BISHOP http://profnet.prnewswire.com/Subscriber/ExpertProfile.aspx?ei=70781

SOURCE BeaconEquity.com

http://BeaconEquity.com/m

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