Wednesday, March 26, 2008

Terminology - Forever Stamps

United States Forever Stamp

Lately there has been a lot of publicity about so-called Forever stamps. With the United States issuing its first stamp of this type recently, it joins a growing list of countries offering these stamps.

Forever stamps are a type of Non-Denominated postage, which means there is no value listed on the stamp. Instead of a currency value, non-denominated stamps have either a letter, designating a "make-up" rate of an additional value unknown at the time of printing, or a class of mail service, such as first class, printed on them.

Forever stamps fall into the latter category of non-denominated stamps. They (in theory) will pay the postal rate for the delivery of the specified class of mail forever.

You may wonder why postal administrations would want to issue a stamp in which they will have to accept forever. There are several reasons why this type is stamp is offered:

  • The stamps are produced in very high volumes, absorbing some of the setup costs of printing an issue for a limited run.

  • Stamp designs do not have to be changed as often, meaning that the costs typically associated with new stamp creation can be reduced.

  • The postal service saves money by not having to offer "make-up rate" stamps that have to be printed when postal rates go up. These stamps, or similar low-denomination stamps, must be issued so they can be added to existing stamps to make up the new postal rate.

  • The postal service can use the money gained by "front-end sales" and collect interest on it before needing the money for expenses.

Some stamp collectors fear what forever stamps may do to the hobby, because they think that the postal service will issue the one stamp in perpetuity without changing the design or issuing new stamps. It is possible that this will occur; however, definitive stamp designs, such as for forever stamps, will change, if for no other reason than the thwart counterfeiters. Plus, stamp designs often have a political component to them and you can be sure that politicians will get involved and get their pet projects honored with stamps.

In fact, forever stamps may become collectible, if only for their variety. Since print runs of forever stamps will inevitably be large, there may be multiple printers used to fulfill demand. In addition, the stamps will probably be offered for several years at a time, and if the date is on the stamp, each new year provides a different, collectible version. Plus, the stamps will probably be offered as singles, panes, booklets, etc., and come in a variety of forms with various perforations. Eagle-eyed collectors may benefit by examining and noting the differences.

Forever stamps are not new. Great Britain began offering their equivalent, called Non-Value Indicated (NVI), in 1989. These stamps will soon begin their 20th year in existence and have proven to be collectible and very consumer-friendly.

The United States Postal Service offered their entry into forever stamps in May 2007 with a self-adhesive stamp depicting the famous Liberty Bell of Philadelphia, PA. The stamp has a wonderful depiction of the bell, and is as beautiful as it is simplistic. It is captioned "USA FIRST-CLASS FOREVER".

With U.S. postal rates due to go up in May, there are reports that sales of this stamp have skyrocketed, as consumers stockpile the stamp at today's cost.

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Joshua McGee said...

"Non-denominated" and "Forever" are not interchangeable.

The United States, for decades, has released non-denominated stamps, frequently because they need to prepare stamps for sale before the postal rate changes are authorized and the bickering over postal rates resolved. The definitive "E" stamp (small, blue, and with a picture of the Earth from space) is "non-denominated". It cost $0.25 when it went on sale. It is still worth $0.25, and perfectly valid to pay postage -- at the $0.25 value! (As a side note, it used to be that nondenominated stamps were disallowed in the international mails. This ruling has been overturned.)

Forever stamps are different. When the US first issued the Liberty Bell "forever" stamp, it cost $0.41. When the rate goes up to $0.42 later this month, the stamp will have a nominal "face value" of $0.42. Neat, huh?

Imagine that in the future (many, many, many years from now, it is to be hoped) that the United States Postal Service charged $1.00 to mail a domestic First Class single ounce letter. You could pay with one "forever" stamp that you purchased for $0.41 in 2007, as it will now be worth $1. If you use "E" stamps, it will take you a whopping four to make up the rate, because those will still be worth $0.25.

So, why not go out and buy 100,000 forever stamps as an investment? This is a bad idea for a few reasons. One is that the USPS just signed a contract that ties the increases in First Class rates to exactly domestic inflation rates. So your forever stamps will just keep up with the "cost of living". Forever stamps might be better than twenties in a mayonnaise jar, but not much else.

Secondly, if you decide to liquidate at a later point, it will be very hard to find a buyer for 100,000 forever stamps, and you may very well take a significant (say, a 15% percent cut.)

Thirdly -- and this is uncomfortable to think about -- the forever stamp is only good as long as the USPS says it is. With current fiscal strife, the very existence of the USPS, let alone flat-rate national First Class delivery, is under threat. I, personally, think we need to fight this tooth-and-nail -- it absolutely should cost the same to mail a one-ounce letter a couple blocks over in Manhattan as it does from Bangor to Honolulu, because it levels the playing field for all Americans, regardless of where they live. Otherwise, we would have a "rural tax" -- something I'd personally go nuts over.

But the fact remains -- the USPS could demonetize the forever stamp at pretty much any time. Congress would fight this, surely -- but if the USPS succeeded, you would have 100,000 attractive but identifiable decals for your bicycle! Hardly worth $0.41 apiece, though. Wallpaper?

What many people, including policymakers, fail to realize is that there is nothing preventing a "Forever" commemorative. Why aren't the "American Scientist" stamps good at First Class rate "forever", just like the Liberty Bell stamp is? The answer is, the USPS can make more money this way, pure and simple. Many -- sometimes most -- commemoratives are retained, mint, by collectors. Postal clerks have a habit of handing over the most boring stamps they have (including $0.42 denominated definitives -- tell me, what moron would buy those?) even if they are hovering over books of lovely commemoratives? If you do get the commemoratives to mail with, you suffer the rate increase and go buy make-up rate stamps. The USPS is giving you an ultimatum: pay for pretty, or get boring stamps cheaply (as an aside, if the Liberty Bell stamp is produced for many years, there may well be hundreds of identifiable printings of it -- and then I will eat my words!)

What can we do to stop this? Write letters! Write your congress members, senators, David Failor and Jack Potter at the USPS, and urge them to begin issuing Forever commemoratives. The UK has had them for years, with no documented detrimental effects on revenue, as far as I can tell.

Tony Servies said...

Thanks for clearing up the confusion over "non-denominated" vs. "forever" terms. Upon review, I think I will rewrite a bit to clarify. My initial paragraph left it open to several interpretations.

Simply put ... "forever" stamps are a type of "non-denominated" stamps. "Non-denominated" stamps are not a type of "forever" stamps.