28 May 2009

USPS Forever Stamps as Inflation Hedge?

All Posts No Comments

I’m going to be at the Mises Circle in Dallas (or is it Fort Worth?) this weekend, so blogging may be sparse. In the meantime, can somebody convince me why I shouldn’t buy $1000 worth of “Forever” stamps from the Post Office?

Absolute worst scenario, Krugman is right–and yes, that would be the worst scenario for me–and we are stuck in Japan mode for a decade. OK no big whoop, I never have to buy stamps during that period. Sure I would regret having sunk so much cash into that many stamps, but if it comes down to it, I could sell them to my neighbors and friends at a slightly reduced price (after explaining my foolishness). You might ask, “How many letters do you plan on mailing?!” but I think I could slap a bunch of them on regular packages too. So instead of paying $4.95 for them to ship a book the next time someone wins a Reader Contest, I can instead buy my own generic envelope and slap a bunch of stamps on it, right?

On the other hand, suppose my predictions about massive price inflation come true. Then I’m sitting pretty because (a) I have completely hedged one of my recurring business expenses and (b) Paul Krugman would have been ridiculously wrong. Those two together might make $8 milk (which you need to buy online because of the price controls) almost tolerable.

The only major flaw I see in this is the possibility that the Post Office doesn’t honor pre-2010 Forever stamps at par, because “obviously we need to adjust for the 20% inflation that kicked in.” So if we really did get hit with heavy inflation, I might start unloading my Forever stamps (to neighbors etc.) at a nice discount from their point of view, so I lock in most of my gain before the Post Office debases them.

Comments are closed.