A Novel Savings Plan

There are very few long term savings certificates that are tied to the rate of inflation, but several years ago the United States Post Office effectively issued an even better investment vehicle. With the “First Class Forever” stamps, the Post Office promised completely paid first class postage any time in the future. In 1960, the postage rate was 3¢. According to to Bureau of Labor Statistics, the rate of inflation during that 50 year period from 1960 should have produced a current postage rate of 22¢. So the cost of first class postage has gone up at twice the rate of inflation over the last fifty years.
It’s anybody’s guess whether the cost of first class postage will continue to increase at twice the rate of inflation, but my guess is that it should. What has been holding down the inflation rate is technological development. Driving up the inflation rate has been labor and energy costs. Delivering letters is on the labor and energy side of the inflation curve. Further, declining postal use drives up unit costs; so it would be hard to see how postage rates could go up less in the future than they have in the past. A Forever stamp could well provide a guaranteed service far into the future at a price that will be far less inflation adjusted than it will cost to buy that service at the time. Suppose you buy a bundle of $1,000 Forevers on the discount postage market for say $800. In fifty years (if things go as they have in the last fifty), an inflation rate investment should have netted you a return of $5,600. However, the first class postage that your Forevers could buy would be valued at $14,000, and you could sell your stamps on the discount postage market at 80%, or over $11,000, twice the rate of inflation. Not a bad return.
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