The 'Forever Stamp'

[Martin Gale]

The USPS is proposing a 'forever stamp' with a price that would be locked in to the price of a 1st-class stamp at the time of purchase.

They're basically proposing a futures market for the 1st-class stamp. The whole point of a futures market is to hedge against future price uncertainty. But the price of the 1st-class stamp always goes up. Thus, there would be a run on forever stamps.

The USPS would sell enough forever stamps to cover normal demand and probably limit the number of stamps sold per person, but that would not prevent hoarding and subsequent scarcity of forever stamps. 1st-class stamps would still be available, but they would not be forever stamps. When the price of a 1st-class stamp goes up, the USPS would sell forever stamps at the new price, and the hoarding would continue anew.

A black market would develop for forever stamps. Then, government would intervene with laws, enforcement and penalties, thus perpetuating the expansion of the 'forever government'.

http://www.washingtonpost.com/wp-dyn/content/article/2006/05/03/AR2006050301039.html

 

[winter]

Quote from Martin Gale:

The USPS is proposing a 'forever stamp' with a price that would be locked in to the price of a 1st-class stamp at the time of purchase.

They're basically proposing a futures market for the 1st-class stamp. The whole point of a futures market is to hedge against future price uncertainty. But the price of the 1st-class stamp always goes up. Thus, there would be a run on forever stamps.

There would be a run on forever stamps only if you thought that the price of stamps would significantly outpace inflation or better yet the risk-free rate of return. The cost of hoarding stamps is the opportunity cost of not putting that capital to work elsewhere - its not a free lunch.

What I heard last week is that they may price them not at the current first-class price but price it one step above (at the anticipated first-class rate after the next increase). So a forever stamp now would cost 42 cents vs 39 for a first class. That would make more sense IMO, otherwise no one would ever just buy regular first class stamps anymore (if forever stamps were always priced the same).

 

[easyrider]

The only thing I can think of is that they expect ground mail to eventually be obsolete so they want to cash in while they can. They are a monoply so the move doesnt really make sense unless they expect business to continue falling.

 

[Martin Gale]

Quote from winter:

There would be a run on forever stamps only if you thought that the price of stamps would significantly outpace inflation or better yet the risk-free rate of return. The cost of hoarding stamps is the opportunity cost of not putting that capital to work elsewhere - its not a free lunch.

Good technical points. Probably lost on the average citizen or prospective black marketeer.

Quote from winter:
What I heard last week is that they may price them not at the current first-class price but price it one step above (at the anticipated first-class rate after the next increase). So a forever stamp now would cost 42 cents vs 39 for a first class. That would make more sense IMO, otherwise no one would ever just buy regular first class stamps anymore (if forever stamps were always priced the same). [/B]

Agreed. I suspect there would still be a run every time the price of the 1st-class stamp increased.

 

[winter]

Quote from Martin Gale:

Agreed. I suspect there would still be a run every time the price of the 1st-class stamp increased.

Or more specifically the time period between when a rate increased was announced but before it took affect - that would be the best time to stock up on the forever stamps.

 

[riskarb]

Quote from easyrider:

The only thing I can think of is that they expect ground mail to eventually be obsolete so they want to cash in while they can. They are a monoply so the move doesnt really make sense unless they expect business to continue falling.

Hit the nail on the head -- analogous to those 100year corp bonds issued at historically-low rates. It's a revenue grab.

 

[lilboy716]

the reason for 42c was the fact that the price is going up again in 2007. that's the time they going to release the forever stamp.

if price go up (for sure it will), then the stamps are bargains. when was the last time you saw the stamp price fell?

i use stamps for rebates & stuff... its a good thing that they allow you to lock it in. marketplace said that other countries already have the same program.

USPS is banking on the possibility of you losing them.

http://marketplace.publicradio.org/shows/2006/05/03/PM200605033.html

Quote from winter:

There would be a run on forever stamps only if you thought that the price of stamps would significantly outpace inflation or better yet the risk-free rate of return. The cost of hoarding stamps is the opportunity cost of not putting that capital to work elsewhere - its not a free lunch.

What I heard last week is that they may price them not at the current first-class price but price it one step above (at the anticipated first-class rate after the next increase). So a forever stamp now would cost 42 cents vs 39 for a first class. That would make more sense IMO, otherwise no one would ever just buy regular first class stamps anymore (if forever stamps were always priced the same).

 

[daddyeaux]

the price increase is obviously a communist plot...hatched by the maker of the 1 cent stamp...

 

[mizer]

Quote from lilboy716:



i use stamps for rebates & stuff... its a good thing that they allow you to lock it in. marketplace said that other countries already have the same program.



http://marketplace.publicradio.org/shows/2006/05/03/PM200605033.html [/B]

You mean from purchasing consumer electronics, etc? I think the trend for that is via the internet like circuit city rebates

I'd have to agree with easyrider......no need to waste sending physical letters, checks, etc anymore

 

[Pekelo]

They can not just issue it once, with a fixed price and unlimited supply, because if the current price would go higher, everybody would just switch to the Forever stamp.

It could only work if they issue it let's say in every 2 years slightly above the current price, and in a limited supply. If people know that they can buy it anytime, they will wait until the current price is higher than the forever stamp's price.