That didn't use to be a conundrum. It used to be a virtuous cycle. When the Fed raised short-term interest rates too high in 1999 and 2000, they took away the incentive to take risk at the margin. The inverted yield curve that persisted throughout virtually all of the year 2000 signaled that there was no incentive to invest for the long term. Now that Greenspan has lowered rates dramatically this year, the yield curve has steepened again, and is signaling that there will again be rewards for investors who are willing to take long term risks.
Virtuous cycles are easy to break.
Any vandal knows how easy it is to break things. It's much harder to make things in the first place. It's not clear to me that the virtuous cycle is going to get started again any time soon. Inc. All rights reserved. Ltd. All rights reserved.