Anniversary: Four years, 500 pieces

This column turns four this month, with exactly 500 essays published since its launch in September 2022. Over that span the federal funds target rate has gone from 2.25–2.50 per cent to 3.50–3.75 per cent, and a generation of corporate financial engineering built on cheap money has come apart along the way.

Cheap money is gone

Four years ago corporate America took it for granted that near-zero interest rates and frictionless globalisation were permanent features of business. That world has gone. Across 500 essays this column has tracked the steady advance of fiscal dominance and geopolitical fragmentation, the growing friction in supply chains, and the abrupt return of term premia on government bonds. The price of money has reset higher, and it looks likely to stay there.

Four years in brief

The first weeks set the tone. The Fed was in the middle of four consecutive rate rises of 75 basis points in 2022, the fastest tightening since the early 1980s, and in September of that year an unfunded budget in Britain sent gilt yields soaring and forced the Bank of England to buy long bonds to rescue pension funds. The funds rate reached 5.25–5.50 per cent in July 2023, four months after Silicon Valley Bank failed on the losses in its bond portfolio. In October of that year the ten-year Treasury yield briefly touched 5 per cent.

The easing that followed was shorter and shallower than borrowers hoped. Cuts began in September 2024 and eventually brought the funds rate to today's range, a full percentage point and more above where it stood when this column began. In the meantime the trade regime changed: sweeping tariffs announced in April 2025 ended the assumption of open American markets, and Moody's removed America's last triple-A credit rating the following month, citing persistent deficits and rising interest costs.

Governments changed their own behaviour. Industrial policy returned in America with the subsidies for semiconductor plants and clean energy passed in 2022, and similar programmes followed in Europe and Asia, adding public money to the pull that tariffs and security concerns exert on supply chains. Companies now weigh where to build partly on where subsidies are on offer, a consideration that barely featured in the old model.

Why buybacks worked, and why they stop

The arithmetic that made debt-funded buybacks attractive was simple. When a company could borrow at an after-tax cost well below the earnings yield on its own shares, replacing equity with debt lifted earnings per share almost mechanically, and the tax deductibility of interest sweetened the trade. With benchmark yields near five per cent and credit spreads on top, that gap has narrowed or closed for many firms. A buyback funded by new debt now often dilutes earnings rather than adding to them.

The tax side of the old model has been squeezed as well. More than 130 countries agreed in 2021 to a global minimum corporate tax of 15 per cent, and the European Union and others began applying it from 2024, which reduces the reward for booking profits in low-tax jurisdictions. Tariffs add a second cost to long offshore supply chains, since goods that cross several borders can be taxed along the way.

Corporate credit changed shape in response. As banks pulled back from riskier lending after the failures of 2023 and public bond markets grew more expensive for weaker borrowers, private credit funds expanded quickly, lending at floating rates to mid-sized companies and buyout targets. That moved interest-rate risk from lenders to borrowers, and the companies that took those loans have paid the full cost of higher rates ever since.

Equity markets hid much of the strain. In 2023 and 2024 enthusiasm for artificial intelligence drove the shares of a handful of the largest technology companies sharply higher, lifting the main indices while smaller and more indebted firms struggled with higher interest bills. A rising index was a poor guide to how most companies were coping with the new price of money.

What treasurers must unlearn

For corporate treasurers and fund managers, the lesson of these four years is fairly clear. Companies can no longer lift profits simply by borrowing cheaply to buy back shares or by routing supply chains offshore for tax advantage.

The practical changes follow from that. Treasurers should value cash and liquidity more highly than in the era when a revolving credit line cost almost nothing, match the maturity of their debt more carefully to the life of the assets it funds, and test capital projects against hurdle rates that reflect a risk-free return near five per cent. Supply chains built for the lowest landed cost need re-examining for the cost of tariffs and disruption.

Where this view could be wrong

The case against a permanent reset is that high rates have always contained the seeds of their own reversal. A recession, a sharp fall in oil prices or a surge in productivity from new technology could pull inflation and yields down faster than this column expects, and history offers long stretches in which markets overestimated how long high rates would last. The structural forces behind higher rates, large deficits, fragmented trade and a heavier supply of government debt, are harder to reverse than a single cyclical upswing, which is why the column still leans towards persistence.

After four years and 500 pieces, the conclusion is that cheap capital and easy global trade are not coming back soon. Companies will probably have to plan around borrowing costs near five per cent and higher trade barriers for years, and those that still depend on debt-funded buybacks will feel it first.