In such a world, the whole set of assumptions embodied in retirement income plans will be called into question. Increasingly, we hear commentary about the difficulty – or impossibility – of defined-benefit pension plans making good on their promises with long-term rates of return so low.
The one way that an equilibrium (of sorts) could be established was to bid up asset prices so that the high intrinsic profit opportunities were counterbalanced by over-priced assets - but of course this distorted investment incentives and fuelled over-optimistic expectations. The result, in short, was a widespread perception that borrowing was cheap, with all the resource misallocations and distortions that go with this.