"Capital, however capital may be defined, would practically cease to exist as an income producing fund, for the simple reason that if money, wherewith to buy capital, could be obtained for one-half of one per cent, capital itself could command no higher price"

In this quote, John Buchanan Robinson is discussing the concept of capital and its intrinsic worth in relation to rate of interest and the cost of money. At its core, the declaration explores the economic concepts of supply, need, and the fundamental value of capital.

Robinson assumes that if the expense of borrowing money were extremely low-- particularly, at a rate of interest of simply half of one percent-- then the worth of capital as a means of generating income would diminish substantially. Basically, capital refers to any monetary assets or resources that can be used for financial investment to generate profits, such as equipment, buildings, or financial investments.

The central concept here is that the rate of capital, or its ability to produce earnings, is heavily affected by the cost of cash, which is represented by rates of interest. In an environment where cash can be obtained at such low rates, individuals and organizations might get capital at very little cost. As a result, the one-upmanship that capital generally provides-- as a scarce resource that can be utilized to generate income-- would be eroded.

If money is too inexpensive, capital itself ends up being cheapened due to the fact that its acquisition does not need considerable investment or expense. With an abundance of cheap cash available, the scarcity that previously given capital its income-generating potential would efficiently disappear, minimizing its capability to command a higher price or yield higher returns.

This scenario raises important concerns about the implications of monetary policy and rate of interest manipulation by central banks, and how these actions can impact the more comprehensive economy. When rate of interest are incredibly low, the reward for savings decreases, potentially resulting in misallocation of resources and distorted financial investment top priorities, which eventually affect the operating and stability of the economy.

Robinson's statement serves as a tip of the fragile balance needed in managing monetary policy to make sure that capital retains its role as an important and income-producing asset within the financial system.