Forever Stamps Value 2009

Forever Stamps Value 2009

Alternative Investments - Value of the Forever Stamp
By Anupam Kathpalia

Just imagine if you could buy an item today knowing that in the near future, the same product will have continuous rate hikes. For stock market investors, that's a dream come true. In 2007, the United States Postal Service revealed postage called the "forever stamp" which would go on sale for 41 cents. The benefit to postal customers is that the purchase and use of this stamp would mean that they are invulnerable to postage hikes. This sounds like an incredible, cannot miss opportunity, but is it really worth buying a ton of "forever stamps" today to "save" money in the future? In actuality, you're not saving any money at all.

The "forever stamp" is appealing to many because it appears to be a "bargain", but also because of convenience. Since postage rates increase only by a couple cents at a time, postal customers don't have to worry about purchasing one- or two-cent stamps. Besides for the convenience factor, there are no other benefits to mass purchasing the stamp.

In 2006, the Postal Accountability and Enhancement Act was enacted to place a limit on postage hikes. The rate increase cannot exceed the rise in consumer price index. In other words, postal rates cannot increase more than the rate of inflation. Therefore, the government isn't losing any money on a forever stamp. Plus, the government is better off because forever stamp buyers provide the government with more money today.

Therefore, forever stamps would be a sensible purchase if the rate of postal prices increases faster than the rate of inflation. However, the Act is not set to be reassessed until 2016. Even then, the likelihood the government eliminates inflation controls is highly unlikely, especially since it protects the government. Even before the Act was in place, postal rate increases have always been lower than inflation rates since 1971.

In 1981, stamps were valued at 20 cents. If this stamp was purchased in 2007, about the time of the release of the forever stamp, it would be worth about 45 cents. The rate in 2007, 39 cents, is a lot cheaper. The value of the 1981 stamp is more than 10% higher. If forever stamps were introduced in the United States before 1971, then they definitely would have been worth the investment. In 1919, stamps were worth 2 cents, which is equivalent to today's 24 cents.

If you think postage hikes are irrational, think again. In 1975, stamps were worth 13 cents, which is worth about half a dollar today. In reality, stamps are actually getting cheaper. Therefore, forever stamps are worthwhile for convenience, but simple financial valuations and inflation adjustments demonstrate that they are not worth the investment.

Forever Stamps Value 2009