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Savings bonds and forever stamps in hyperinflation

Posted by John T. Reed on

I completed my redemption of all our EE savings bonds. I also rescued $1,000 in cash that my wife had in our safe deposit box.
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Again, if we tip over into hyperinflation, dollar-denominated assets like cash become worthless quickly. Savings bonds, which took a week of my time to redeem, would have been worth a little the first day, but nothing after a week. But we did not tip over into hyperinflation while I was doing it.
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I put the money into a Schwab 1000 index fund and TC REX, which is a TIAA CREF REIT index fund (owns rental properties). Rental properties are generally hedges against inflation—assuming no permanent rent control is placed upon them.
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Are stocks a hedge against inflation? No. Many think they are. It is unclear. It depends on how each corporation is affected by inflation which varies. During past hyperinflations, stocks went up, down, and sideways.
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So I just got the money out of dollar-denominated assets like savings accounts, cash, and bonds, which I KNOW are horrible in hyperinflation.
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While in the safe deposit box I was surprised at how many forever stamps we have. They ARE hedges against inflation. They are not $ or ¢ denominated. They are denominated in the the form of SERVICE, namely delivering a first class mail #10 envelope anywhere in the US or its territories.
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I started using them as hedges against inflation when the first edition of my book came out in 2010. At that time, a forever stamp cost 44¢. Now, they cost 55¢. So if you bought 1,000 of them in 2010 for $440, your investment would now be worth $550, a 25% return.
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Is there a risk? There are two. If we have DEFLATION, the cost of a new forever stamp will fall below 55¢ or maybe even below 44¢. The other risk is that in inflation, the USPS will RENEGE on the promise. Would the USPS do that?
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During the depression, 9,000 US banks failed and their depositors lost all the money in accounts in them or almost all of it. There was no FDIC insurance then. By the way, they did NOT lose any money in their safe deposit boxes even in the exact same bank where they lost all their account money. At times, when there were runs on the bank, the depositor, upon receiving all his money out of his account, go directly to the vault in the same bank and put it into his safe deposit box. Very smart move.
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But there was one nationwide bank that did not fail: US Post Office Savings Accounts. There was no federal deposit insurance, but because the post offices were federal, the deposits were, in effect, guaranteed by the full faith and credit of the US government.
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The full faith and credit of the US government meant a lot then. The national debt-to-GDP ratio then was just 17%. Today, the full faith and credit of the US government has one foot on a banana peel and the other on possible hyperinflation.
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Post Office savings Accounts disappeared in the 1950s, but believe I read something about bringing them back.
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So the US post office did not renege then. I take some comfort from that they would not renege on their forever promise. I also have some global forever stamps but not a stockpile. I used to use them to mail monthly deposits to my Canadian bank account. I am less inclined to believe that all the nations in the world would honor the forever promise of the global forever stamps. They now cost $1.20 each.
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Note, we buy our stockpile of forever stamps which give you a slight discount. They come in books of 20 which means the books are worth 20 x 55¢ = ¢11 each. I expect when used as money, they would be used as sort of $10 dollar bills, not used individually as half-dollars.

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