When government does something right, we should celebrate and give it credit. The United States Postal Service seeks to increase the postage for the first ounce of first class mail to 42 cents in 2007, with increases also for postal cards, express mail, and other mailings. So that users may purchase stamps at the new rate in advance, the USPS has announced that it will issue "forever stamps" which will always pay for one ounce of first-class postage.
Customers will buy them at the current postage charge and will be able to use them at whatever the rate is when used. These stamps will be an ideal inflation hedge, so some folks will stock them as a store of value. A bonus is that the gain would be tax-free if the stamps are used rather than sold for the nominal capital gain. There would be no real gain, but no tax penalty, unlike selling goods that have gone up in price and being taxed also on the inflation!
The USPS should have issued these stamps long ago. Instead, when postage rates went up, it issued stamps misleadingly designed "first class," when in fact the stamps would not fully pay for first class in all future postage increases. The problem has been that postage increases must be approved by the Postal Rate Commission, so it was uncertain whether the postage increases desired by the USPS chiefs would be in effect. At first, the USPS issued stamps denominated in letters: A, B, C, etc., which then confused users who held the older stamps.
The logical solution is to issue "eternal stamps" always good for first-class postage. About 30 postal administrations, including the the United Kingdom, have issued nondenominated perpetual stamps, while the USPS failed to do so. Finally, after over a dozen postage rate increases, the USPS has done the efficient thing, with what they call "forever stamps." Hurrah! With the ever increasing price of gasoline and other costs, along with price inflation, postal rates are sure to keep rising, and with eternal stamps, annual increases will go smoother.
Some people will hoard the stamps as an inflation hedge, but that should not burden the postal service if it invests the revenue or "float" from the stamps. Money today is better than money tomorrow. Those who stock up on the forever stamps would have to be careful to keep them dry and safe from critters that eat paper and gum. Most businesses use meters and permit imprints rather than hire labor to lick-and-stick or peel-and-stick, so they would not be affected anyway.
Government guarantees are never absolute, so it is possible that in some distant day, if the US switches to the metric system for postage weights, the forever stamps would no longer be valid for the current postage rate. But in fact all stamps issued by the USPS are still valid for postage, and so I am confident that the forever stamps will be valid at least to half of forever. To a mathematician, half of infinity is also infinity.
I have written previously on the idea of using eternal stamps as money. An alternative to today's fiat money, not backed by any commodity, would be to back the currency with a service, namely postage. Many countries have had currency crises and sudden devaluations because with fiat money, the currency can collapse down to zero if people lose confidence in it. Any devaluation or inflation is a tax on money holdings, a cruel tax that wipes out savings and unfairly rewards going into debt.
I suggested that a country such as Argentina, which had an economic crisis and currency collapse, could issue eternal stamps and then "issue currency always convertible into the eternal stamps." That would provide a stable currency convertible into postal services. So far, no country has done this, but perhaps an entrepreneur will issue private currency denominated in forever or eternal stamps, just as there are today private liberty dollars backed by silver.
Even without official postal currency, forever stamps can be exchanged for other goods, and could be used as purchasing media if an inflation-prone national currency becomes less useful as a store of value. Aside from this, the forever stamps will provide a much better transition for eternal postal rate increases, so this is an occasion to celebrate. Sure, the USPS should be privatized, and first-class postage should not be a government monopoly, but so long as government is running it, we should cheer when it finally does something right.
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FRED E. FOLDVARY, Ph.D., is an economist and has been writing weekly editorials for Progress.org since 1997. Foldvary's commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and currently teaches at San Jose State University.
Foldvary is the author of The Soul of Liberty, Public Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary's areas of research include public finance, governance, ethical philosophy, and land economics.
Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.