May

6

 I have been watching the Queen on the news and her day-to-day visits to the US. Her last visit was in 1956. The Queen has one of the finest collections of rare stamps. On occasion she will lend certain portions of this vast collection to World Philatelic events. She has been afforded the honour of collecting stamps and also having her likeness printed on many stamps. I wonder what she thinks about our new inflation proof US forever stamp. Speaking of stamps, our current 39-cent stamps go up a few pennies this month! Is the forever stamp a good investment over the long haul?

Henry Gifford writes:

Regarding the "forever" stamp vs. inflation, I have a narrow definition of inflation: the lowering of the value of money.

If the price of hamburgers goes up after an epidemic of hoof-and-mouth disease reduces the supply of beef while the demand does not change, the price increase probably reflects an increase in the value of beef. This is not inflation. Describing it as "beef price inflation" is a mishmash of two factors.

True, the factors cannot ever be separated any more than anyone can say with certainty why a stock goes up in price. But inflation can, and I think should, be used only to only describe a lowering of the "price" or value of money. I once started a collection of the various and conflicting definitions, and the wide variety of points supported by changing the definition to suit the situation, but was quickly overwhelmed.

Suffice to say that I think the most honest definition is the simplest: a lowering of the value of money. With regard to the stamps, if the value of delivering a letter does not change, buying "forever" stamps is a hedge against inflation, sort of like holding dollar stocks (39 cents of dollars) while also repeatedly buying call options on the price of the dollar, with the price of the calls equal to the opportunity cost of not investing the money elsewhere.

As the price of delivering a letter is simultaneously taxpayer subsidized and a protected monopoly, the actual value and its change over time is hard to judge, much less predict, as there has been no actual price data available since the government monopoly was started. The excuse was that it was necessary to thwart spying during the Civil War. Changing technology since then makes it hard to judge the change in value.


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