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Arthur, I would say
that Interest is a “time” reward. We invest
exertion and we want the result at once. If we are asked to wait for the result
of our exertion, we might do so for compensation. This is Interest. Formally: “Interest
is the return for delaying satisfaction.” If risk is
involved, the lender may demand a higher payment, but this is insurance against
loss. It will probably be added to Interest and still be called Interest, but
it isn’t according to the definition above. When Friendly
Finance lends you money, they may charge 25% “Interest” but that
cost includes the office, the advertising, the salaries, and all the other
expenses. Although it is called Interest – it isn’t. That is if we want
to make sense of it all. Harry ******************************************** From:
[EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED] On
Behalf Of [EMAIL PROTECTED] It seems that all returns to capital vary
with the degree of risk. Money in a secure FDIC or CDIC account
will earn less than in a bank which does not have such insurance.
The higher returns covers the added risk if the bank fails. So too with mutual funds.
"investors" are looking for a range of returns: the
"growth" funds have earned more but have brought greater risk.
"Safe" funds bring a lower return but are usually safer, but still
not insured by FDIC or CDIC The capitalist invests in a venture.
After paying for production (materials, labour, distrib. etc. etc.) costs there
is a residual, this can be called profit. Usually the first entrant, if
successful, has greater returns than would be the case than if invested in a
range of other options. These higher returns are called "abnormal
profits." Interestingly in economic theory it is
this profit that is said to draw in new entrants to the market, so many that
these "abnormal" profits are brought down. With competition
comes a whittling away of profits and with entry and exit there is some degree
of normalcy in this new market. With new entrants the remaining businesses
are earning "normal" profits (probably a few points over risky bonds,
but who knows) Phew...Now I remember why I refused to
teach economics. good holidays to all. Arthur ---
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