Stamps as an Inflation Hedge

The rise of the price of stamps during the most recent inflationary period (1975-1980) has given stamps a reputation as an inflation hedge that they do not deserve. First, from about 1950 to about 1975 stamp prices rose tremendously, 300% or more, and were a leader in investment returns for this period. But this period was a very low inflation period. The rise in stamp prices during this period was due more to three things- a rise from very low prices at the start of the period , an increase in popularity of philately, and the increased wealth of the west during the post WW II era. Further, the increase during this period was driven by the fall of the US dollar against the mark. Germany has always been the largest stamp collecting nation in the world. As Germany went from war induced impoverishment to affluence from 1945-1975 not only did demand for stamps increase but the value of the mark increased further advancing the value of stamps in dollar terms. Stamps really rose in the 1975-1980 period. Much of this was induced by currency controls in Great Britain which were imposed at that time. Stamps may not be a good inflation hedge but they are small and can be transported under the radar of Customs and Treasury officials. British stamps made a tremendous run in this period as British citizens bought stamps to export (usually to Switzerland) where they were sold for Swiss Francs to get money out of Britain. Then the stamps made their way back to Britain and the cycle began again. This buying frenzy preceded and fueled the US stamp craze of 1975-1980 and made it look as if stamps were responding as an inflation hedge like gold and silver when the reasons for stamp price increases were only secondary to the inflation that was happening at that time.

 Currently, the hottest stamp market in the world is the PRC market. This is for the two reasons above. First, the citizens of China have largely been poor and now with increasing wealth many are turning to philately as a hobby. And second, China is a politically unfree nation with currency controls on how much money can be moved out of the country. Currency controls breed philatelic popularity for the same reasons today that they did in Britain in 1965 and Germany in 1933-1940. Wealthy people without faith in government want something they can run with. Stamps are not a inflation hedge, they are a hedge against fear.

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