Federal Reserve Chair Janet Yellen.
Photograph by Chip Somodevilla — Getty Images
By Alan Murray
December 17, 2015

At last, the Federal Reserve has begun to raise interest rates, and markets around the world are breathing a sigh of relief. The main share indexes in Europe were up between 1% and 2% in early trading, following similar increases in Asia and the U.S.

The Fed’s plan appears to be four more quarter-point moves next year. But Fed Chair Janet Yellen’s comments were full of comforting pragmatism, making it clear the central bank could slow its moves if conditions warrant.

What’s still unclear is what the effects of an unprecedented seven years of zero interest rates will be. The Wall Street Journal’s Greg Ip, one of the most insightful financial journalists around, has a piece this morning that looks at history and concludes that “the scale and nature of the distortions brought on by easy money can take some time to show up.”

A key area that regulators are watching, he says, is the flood of money that has poured into corporate debt and has been used, not so much to expand investment, but rather to buy back stock and acquire companies. This year alone, companies have borrowed $327 billion to finance mergers and acquisitions, more than double the previous high in 2012. Business debt now equals 70% of annual gross domestic product, surpassing its pre-recession peak. Ip’s column is worth a read here (subscription required.)


Meanwhile, the two bad boys of the pharmaceutical business – Turing CEO Martin Shkreli and Valeant CEO Michael Pearson – were both talking yesterday. The two have come under fire for business models based on jacking up drug prices and cutting research. The latter showed some humility and humor in his comments to investors, which you can read about here. The former gave an interview to the web site HipHopDX, which mentioned sex acts with Taylor Swift and called into question his fitness to be CEO. If you have a strong stomach, you can read that here.

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