Monday, March 26, 2007

What would you pay for a forever stamp? 

The US Post Office has just issued a new stamp to effect a rate increase of two cents on first class postage effective April 12. The new stamps will sell for 41 cents, but rather than marking them with a 41 they are marked 'forever'. The stamp is indexed in value -- no matter what the price of postage is in the future, you may use that stamp for first class postage.

Now I doubt the USPS is doing this out of generosity. It costs money to print one- and two-cent stamps, and perhaps the cost of printing and delivering them is greater than the benefit of selling these. I'm pretty sure you can make a sticky stamp for less than a cent, but distribution might be expensive. (See my post on the penny for a comparable thought.)

But what does this do to the price of 39 cent stamps now in existence? If an indexed stamp and an unindexed stamp co-circulate, the unindexed stamp should sell at a discount since it doesn't carry that additional value. Alternatively, the indexed stamp should cost slightly more than 41 cents, as one acquires an insurance policy against postal price inflation. Gresham's Law should apply here -- the forever stamps will be relatively rare.

Hoarding of stamps, however, is an interest-free loan given by the public to the USPS. Seems like they always win, doesn't it?

Much greater discussion found at The Simple Dollar. Hat tip to my colleague Ming, who figures he sends only 100 pieces of mail with a stamp per year and so it's not worth it to him. We send probably four times that, so I'm thinking about it.