Because Inflation is 'Forever'

The title of this post is not something you're likely to hear from the U.S. Postal Regulatory Commission as their rationale for a bold new approach aimed at stopping the torrent of demand for one and two cent stamps each time they hike postal rates. But that's the reality.

From the Associated Press comes this report of a radical new proposal for handling future postal rate increases.

Postal regulators back 'forever' stamp

Say goodbye to those pesky 1- and 2-cent stamps that used to clutter up desks and purses every time the price of mailing a letter went up.

A new "forever" stamp — good for mailing a letter no matter how much rates rise — was recommended Monday by the independent Postal Regulatory Commission. The panel also called for a 2-cent increase in first-class rates to 41 cents, a penny less than the post office had sought.

In addition, the changes would sharply scale back the price of heavier letters.

"Adoption of this proposal is good for the Postal Service, postal customers and our postal system," commission chairman Dan G. Blair said at a briefing.

A forever stamp would not carry a denomination, but would sell for whatever the first-class rate was at the time.

For example, if the 41-cent rate takes effect, forever stamps would sell for 41 cents. If rates later climbed to 45 cents or more, the price of the forever stamp would also go up at the counter or machine, but those purchased before the change would still be valid to mail a letter.

If the forever stamp ever sees the light of day, get ready for a real, unambiguous indicator of "inflation expectations" from the American public.

The various data collectors who calculate inflation expectations may be able to stop asking people whether they think consumer prices will rise 3.2 percent or 4.1 percent or 2.6 percent in the year ahead and just watch the Postal Service printing presses as they struggle to keep up with demand for the new stamp where mailers can lock in current postal rates - forever.

Courtesy of the autoDogmatic blog comes this story of postal rates and inflation rates with the accompanying chart to better describe the situation. It seems that postal rates are rising much more rapidly than the government's Consumer Price Index.

What could that possibly imply?

Some of you may have the same quandary faced here - the supply of 37 cent stamps with an accompanying store of 2 cent stamps has not yet been worked off after the last rate increase to 39 cents. If rates increase to 41 cents, then the 2 cent stamps will disappear twice as fast.

Please don't raise first class rates by 3 cents!

Consumers could see the rate increase as early as May (the third in five years), however, the forever stamp requires the approval by the U.S. Postal Service board.

They should also check with Ben Bernanke over at the Federal Reserve and maybe even the Bureau of Labor Statistics where they tally the CPI.

Just like the U.S. Mint, offering $700 gold coins with a face value of $50, the postal service appears to be undoing the hard work of the Federal Reserve in establishing "inflation expectations" far different than those that exist in the real world.