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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.
Home / Markets / Innovation
Wednesday, April 30, 2008
Hang Your Flat Panels Without Breaking Walls Open
Donna Fuscaldo
FOXBusiness
Let’s face it, one of the allures of having a flat-panel TV is how elegant it looks floating freely on the wall.
But who wants to spend the extra cost and time to break through the walls to hide the wires needed to actually have it hang seemingly wire-free?
One company is trying to overcome that obstacle by making audio, video and electrical wires that disappear once they're painted over. Called FlatWire, the wires are flat and, when covered with a blending compound like plaster and then painted over, melds into the wall.
The idea for FlatWire was born from inventor Robb Sexton’s frustration when back in the late 1980s he was building a media center with four speakers hooked up to a television.
“There were wires all over the room," he said. "I didn’t want to open and gut the room and after a period of frustration I asked myself why is wire round? Why can’t it be flat?" He found it had little to do with physics and more to do with the manufacturing and construction techniques used for years.
After backing up his assumption, Sexton went to work to create patented flat wire, starting with audio and video wire but not the actual electrical wire needed to power a flat-panel TV. In the beginning of 2008 ,Sexton’s company, Southwire of Carrolton, Ga., got approval from the National Electronic Code, the governing entity that establishes requirements for electrical wiring, to make 120V AC electrical wire, which has opened the door for the company to target the flat-panel market in a more robust manner. FlatWire also plans to offer High-Definition Multimedia Interface, or HDMI, and Cat 6 data wire.
“With FlatWire you can bring audio, video, data and electrical to any point in the room without penetrating the wall,’’ said Sexton.
FlatWire comes at a time when demand for
flat-panel TVs is on the rise as the prices come down. According to market-research firm Strategy Analytics, the flat-panel
TV market is expected to see a 27% increase in shipments this year, with total shipment sales reaching 109.2 million units.
Revenue growth is expected to be $135.7 billion, marking an 11% growth from 2007. Revenue growth only will be 11% this year
because of the declining prices of flat-panel TVs. Over the next five years, Strategy Analytics estimates unit sales will
grow to 192 million units.
Basically FlatWire works like this: You spray the FlatWire adhesive to the wall and then attach the electrical or audio-video wire. (You have 10 to 15 minutes to adjust the wire). The FlatWire Ready interconnect transforms the FlatWire to a standard plug or device. You then cover the wire with blending compound, sand and paint or wallpaper and the wires will be invisible to the eye. The wires range from 4/1000 of an inch to 16/1000 of an inch, or about as thin as a business card.
The FlatWire doesn’t come cheap. It costs anywhere form $1.50 to $10 a foot, with the electrical wire likely costing around $10 a foot. The electrical FlatWire will be available toward the end of the year. Sexton said not having to open the walls or hire a professional to hang your flat-panel TV outweighs the cost associated with the product.
FlatWire does face competition from other television mounts that obstruct the wires. Clo Systems of West Covina, Calif., is making motorized wall mounts for flat-panel TVs that conceal all the cables in the bellows of the mount. The company's line of motorized mounts sell from $299 to $995. TV manufacturers are also coming out with flat-panel TVs that are wireless. There are also wireless speakers on the market used for home entertainment.
Southwire isn’t only going after the flat panel market. FlatWire, which can be purchased on the company’s Web site at www.flatwiretv.com, sees its wires being used for ceiling fans, decorative lighting and adding or moving outlets. The company hopes to forge relationships with retailers.
“This is a whole new way to think about wiring,’’ said Sexton. “Every time you redecorate a room you won’t be required to put furniture and devices by outlets. You can put it where you want them.”
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