My letter on Interest in your May-June issue caused some comments, and a supplementary letter may be in order.

In economics, capital is always something tangible. Money, stocks, bonds, notes are neither wealth nor capital. They are tokens, receipts, credits, evidences of wealth or of ownership. The term Labor in its economic sense includes all human effort (brain and brawn) used in production and its return to labor is wages.

Capital is the assistant factor only and when used by Labor the product is thereby increased and the gross result is wages. That increase of wages obtained from the use of Capital is interest. Capital of itself is dead, useless until it is utilized by Labor. It then partakes of the properties of the lever and with a given effort raises the productivity of labor.

When capital is borrowed, the lender transfers the "tool" temporarily. For this temporary loss of use and or enjoyment he receives interest. However he can collect only that part of interest for which he has relinquished the above equivalent, but he cannot collect in equity any part of the net increase of production which is the result of the labor of the borrower when using the borrowed capital. This net increase which labor may obtain furnishes the incentive for the borrowing of capital, viz., causes demand and increased or decreased demand causes interest rates to rise or fall according to the quantity supply. A low interest rate is not necessarily a desirable thing. The objective is that labor shall produce exchangeable things for consumption and the supply of wealth, diverted to use as capital, should never exceed the efficiency point. A normal quantity of capital used all the time at an adequate rate is preferable to an excessive quantity at a lower rate and idle part time. Over the years there is an increasing demand for both consumers goods and capital goods but the law governing their varying proportions is not a part of the present subject.