By Audrey Elwood, Chief Columnist

Bonds, or fixed income, are a lot more than just the gift your grandma got you for your confirmation. A bond, in simple terms, is a loan to a larger entity. It is not a stock or a share, you own no stake and to repay you for the loan, the entity gives you interest.

Obviously, the biggest issuer of bonds is the U.S treasury, U.S treasury bonds or t-bills, which are from the U.S. government. The U.S. government debt has ballooned to around $40 trillion. That is larger than our economy as a whole, and we pay almost $3 billion in interest every single day. That comes out to around one trillion a year, and interest payments are 19% of our federal budget.

Now debt is not inherently bad, as if it were not for debt, COVID-19 recovery would have been much more painful. The issue is the rate at which the debt is rising. This rate is wholly unsustainable, and now the market is starting to catch up.

Austerity, or no debt, is often a farce that individuals believe would help. While Dave Ramsey may lead you to believe that all debt is evil, it is nearly impossible for the government to fully function without debt. However, we have not decreased the overall debt amount since the Clinton administration.

The U.S. is frankly “too big to fail” when it comes to a default. As the biggest issuer of bonds, if the U.S. could not pay back its debt, it would likely plunge the worldwide economy into an unfathomable depression.

When inflation is high, bonds become less desirable to investors. It is not a smart investment to wrap up your money for a long period of time where you cannot access it, when there is a high chance it could lose its value rather than gain value. The purpose of investment is to make money, and you will lose the real value of your bond if inflation outpaces the amount you would make from the bond.

The treasury secretary has issued a bond buyback program with the primary goal of managing the supply and dampening the pressure for the bonds to rise.

If inflation stays high, the Federal Reserve (FED) will be pressured to keep rates the same or even raise rates.

Right now, economists are expecting about or around 50-50 if the rates will change or stay the same. The FED will announce if it changes rates on Sept. 15-16.

While this may sound overly complicated, it is important to have a basic understanding on how the bond market would affect the average consumer. Bond rates play into mortgages, car loans and unfortunately also student loan rates.

In fact, interest can be simplified to the price of debt, and as a college student you statistically have to take out some debt to complete school.

While individuals are limited in what can be done, this is something that needs to be tracked consistently by anyone taking out debt. The financial markets can seem abstract and unimportant to people who are not majoring in it, but they will affect your day-to-day life.