By Brett Arends Anyone who tells you that interest-rate increases have been put off for a couple more months is talking out of his hat. Yes, Janet Yellen and her fellow policy makers at the Federal Reserve Board decided to leave official short-term rates unchanged at last week’s meeting. But other key interest rates are rising throughout the economy — and the folks at the Federal Reserve have either decided not to stop them, or, perhaps, they can’t. What this is going to mean for the stock market, house prices and the economy remains to be seen. But it should be enough to get investors to sit up and take notice. And yet it gets far too little attention, because too many people are obsessed solely with the news value of what the Fed does with short-term rates. Since April, corporations have seen the interest rate they must pay on new bonds rise by as much as a third, according to Bank of America Merrill Lynch data. High-risk companies with credit ratings of CCC or below have seen average bond yields rocket from 10% to 13% in just a few months, while even triple-A-rated, bluest-of-blue chips have seen average yields jump from 3.4% to 4.1%. The highest-risk companies must pay almost twice as much to borrow money today as they did early last year. Read: For investors, U.S. data still key gauge for when Fed will hike Meanwhile, the so-called “risk-free� interest rate, meaning the interest rate on 10-year Treasury bonds, has jumped by a fifth to 2.2% since the spring. And the post-inflation “real� yields on inflation-protected Treasury bonds has surged dramatically. Higher rates are good news for lenders but bad news for borrowers. And despite the best advice of William Shakespeare’s Polonius in “Hamlet,� who suggested we should be neither, these days we are both. As it happens, new data released by the Federal Reserve on Friday showed how widespread the impact of these rising rates may be. Private sector U.S. debt, covering both non-financial businesses and households, are higher now than they were on the eve of the 2008 financial crisis. Households and businesses together owed $26.6 trillion at the end of June, according to Fed data. In 2007, the figure was $24.1 trillion. For every dollar of mortgage debt that a household has either paid off or (more likely) written off, a business somewhere has borrowed two dollars. Also see: Why the Fed is driving gold prices higher Oh, joy. (And notice I’m not even mentioning the gigantic increase in federal debt at the same time — a story for another day.) Since 2009, the stock market has boomed. Too little understood has been what has driven that. The Federal Reserve was able to drive down short-term (and, for many years, longer-term) interest rates. As interest rates fell, U.S. corporations issued vast amounts of bonds — and used the money to buy up their own shares, driving up prices. Typically they borrowed at longer-term rates, not using short-term money. This entire process worked fine — so long as long-term interest rates fell. What happens when that goes into reverse? We may be about to find out.

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