The Effect of “The Forever” Stamp
May 9th, 2006 by Grant in: Economics
A few days ago I wrote about the new “Forever Stamp” proposed by the US Postal Service, and how you could effectively hedge your postage against future increases in postage.
Then I thought a little deeper and contemplated how this move could really affect the postal service.
Currently there is no true market for postage. The rate is what it is; you pay the same price for stamps in Georgia as your buddy does in New York. It costs the same amount to send an envelope across the country as it does to send that same envelope across town.
That will change with the Forever Stamp, whether the postal service realizes it or not.
Effectively, this move by the Government creates a free market for postage. In an over-simplified example, you could buy Forever Stamps for $0.39 a piece and sit on them until the rates go up to say, $0.45. You then market your stamps for $0.44 cents a piece, turning a 5 cent profit.
In another strategy, if you subscribe to the philosophy that postage rates will never come down (why would they? gas and wages will always go up), you could look at your stamp collection as a Government backed bond: Buy them now, and in 30 years when postage goes to $1.00, sell them to your neighbor for a tidy profit.
On the other hand, you could earmark cheap stamps you bought long ago for post going across town, and use those more expensive stamps for post going across the country…
Even better yet, you could get with the times and send an email!
No matter how you plan to hedge your postage, it doesn’t take a broad imagination to see how this seemingly small decision by our beloved postal service could shake up the way we mail letters.
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May 9th, 2006 at 10:46 pm
point #1, if you could have invested your principle for the forever stamps somewhere else, it might earn a better return. Plus, inflation eats at your “investment”
point #2, deflationary economic times can cause prices to lower
May 10th, 2006 at 8:18 am
I agree with point number 1, thomas. You’d have to factor in inflation when analyzing your profit margin.
I also agree with point number 2, however I can’t recall postage rates ever going down. However, it may be that this is because the postal service has a monopoly on postage, and knowing you have to buy stamps from them, why lower rates?
Would this change in a free market system for postage?
Thanks for contributing!