And yet investment is low. And that is because the yield on speculation and not investment is high. So there is, after all a misallocation of capital. But this fault lies not with the low interest rate but with the nature of markets, the appetite for risk that they reveal (which is very low in the long term: if anything, anywhere reveals commitment phobia it is capital markets) and the tax system we operate.
Right, so, it turns out that people don’t like long term risk. We thus have markets where people can shed risk if that’s what they want to do. That the stock market is liquid means, for example, that if I get a bit worried about Glencore then I can get out of Glencore. This makes me more willing to invest in Glencore in the first place of course: I know that I can shed my risk.
Ritchie’s basic contention is to acknowledge that distaste for risk. And then to insist that everyone should be investing in 30 year bonds which won’t have a liquid secondary market. So that investors cannot shed their risk. And that this is going to make them happier to invest because investors don’t like long term risk.