>>>> An exactly balanced budget would have exactly the effect of   
   >>>> paying off only mature bonds.   
      
   >>> An "exactly balanced" budget would be able to pay off   
   >>> mature bonds by issuing new ones, thus keeping the debt the   
      
   >> Since paying off maturing bonds are part of the govt fiscal   
   >> policy, no further change than exacly balancing spending and   
   >> revenue is necessary to pay off the debt by the time the current   
   >> bonds all mature.   
      
    EC> Paying off matured bonds without issuing new bonds to   
    EC> replace them would require running a surplus, not a   
    EC> balance.  At an exact balance, the total indebtedness would   
    EC> remain the same.  Less aggregate indebtedness would mean a   
    EC> surplus.  All of which has nothing to do with Greenspan's   
    EC> point about the disruption that would come from buying   
    EC> NON-mature bonds back prematurely.   
      
    As I went into once before, the budget is not what we are really   
    talking about, that's just a convenient term. What we are   
    talking about is actual spending. Since maturing bonds are paid   
    off, whether by tax money or borrowed money, your point is   
    lacking accuracy.   
      
    If we pay off the mature bonds out of revenue, then that   
    requires balance, not surplus. When we borrow to pay off bonds,   
    that gives us a deficit. If we pay off a portion of the mature   
    bonds out of revenue, and borrow to pay off a portion, the   
    result is a lower deficit. A surplus means we can pay off bonds   
    that haven't matured.   
      
    Paying off some mature bonds from revenue rather than borrowing   
    reduces the debt at a slower rate that paying them all out of   
    revenue, but it does reduce the debt.   
      
    Any way you look at it, to pay off all mature bonds out of   
    revenue all you have to do is have a balance between revenue and   
    spending. Paying bonds is spending. Borrowing only to pay off   
    mature bonds will not increase the debt, if the interest has   
    been paid also. Borrowing to pay current expenses does increase   
    the debt.   
      
    All of which you argued ignored the original point, in which I   
    pointed out that any bond payment plan that incurs more cost for   
    paying early than waiting for maturity is illogical. At least   
    from the borrower's point of view it's illogical. The lender can   
    reasonably expect to charge a bit more for paying early, but not   
    more than the total cost of waiting to maturity. That kind of   
    penalty would be absurd from the borrower's point of view.   
      
      
   BOB KLAHN bob.klahn@sev.org   http://home.toltbbs.com/bobklahn   
      
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