> A situation in which all relevant assets are priced appropriately and there is no way for one's gains to outpace market gains without taking on more risk. Assuming an arbitrage-free condition is important in financial models, thought its existence is mainly theoretical.

Perhaps more to the point, we live in a world where governments can stimulate investment in stocks by manipulating the interest rates of bonds and maintaining steady inflation, and yet I am to believe that if, in effect, you could collect interest with zero risk by just holding your money, it wouldn't have any effect on the economy? Just as many people would be investing as in the current situation, where if you do that you're losing money? It seems hard to justify all the rhetoric about "war on savers" if that's the case. How does the no-arbitrage principle actually explain this away?

As long as those stocks are related to productive pursuits, I completely agree. Risk and reward. Stocks that are geared towards only capital growth through monetary inflation will do poorly. As they should.