What the Forever stamp teaches us about inflation - and the value of a thing

In these low-inflation days, there aren't many businesses that would dare impose an overnight price hike of 10 percent on their best-known product - and that would simultaneously cut prices 29 percent on a similar but less popular product.

What business do you think is doing this? A cryptocurrency corporation? A highflying marijuana-marketing operation? An online outfit baiting and switching the gullible among us?

Nope, it's a well-known, old-line business that touches almost everyone's life.

Give up?

The answer is: the U.S. Postal Service. Yes, the Postal Service.

Let me explain.

This coming January, the price of first-ounce Forever Stamps will rise to 55 cents from the current 50 cents - the 10 percent increase that I mentioned. However, the price of additional-ounce Forever stamps will fall sharply, to 15 cents from the current 21 cents. That's the 29 percent drop.

So much for the idea, which I've been promulgating since Forevers were launched in 2007, that these stamps are the only things you can buy that will never fall in value.

(An aside: Forevers fell briefly to 47 cents from 49 in 2016, which gave my you'll-never-lose thesis a licking - but their price bounced back to 49 cents in less than a year. Additional-ouncers fell to 21 cents in 2016 from 22 cents when they were introduced in 2015, but who noticed? I certainly didn't.)

I was really surprised when I found out the Postal Service, which isn't exactly drowning in money, is cutting the price of additional-ounce Forevers so sharply. What's going on?

The answer involves what I'll call Post Office Math.

The Postal Service isn't allowed to raise its prices by a higher percentage than the consumer price index has risen since postal rates were last determined. This means the Postal Service can't raise its overall first-class rates by more than 2.5 percent next year. But it can raise or cut individual first-class rates any way it wants, provided the total number works out right.

Hence the decision to raise first-ounce stamps by 10 percent, and to help bridge the gap between that increase and the 2.5 percent target by cutting the additional-ounce rate. There are other maneuvers as well, including some that seem designed to make the Postal Service more competitive with its rivals.

It's fun to use Forevers to beat the system - hey, every five bucks you save by buying Forevers before the Jan. 27 increase is five bucks in your pocket.

But you shouldn't treat Forevers as an investment because they don't produce any current income and those of us who are average postal customers can't buy or sell them in enough quantity to make any serious money.

Overall, first-ounce Forevers have done OK financially for their owners - they're up 22 percent in 11½ years and will have risen 34 percent in 11 and four-fifths years come Jan. 27. By contrast, additional-ounce stamps will have been such dogs that you'll be able to hear them barking when you walk by your local post office next year - they will have fallen 32 percent in a little less than four years.

To put these numbers in context, Vanguard's Admiral class S & P 500 index mutual fund has produced 148 percent in gains and reinvested dividends since the first Forevers were issued, and 43 percent since the advent of additional-ounce Forevers.

Your real profit on Forevers consists of convenience and time saving. When you use Forevers, you don't have to wait in line to buy stamps to cover the difference when rates go up. You can just mail and go.

That's why I bought additional-ounce Forevers about two years ago, the first time I saw them in my local post office. That saved me from having to either use two Forevers if I wanted to mail someone a birthday card in an "additional postage required" envelope (wasteful!) or having to keep an inventory of 10-cent and 1-cent stamps around for additional-ounce mailings (annoying!).

Because I've got about two dozen additional-ounce Forevers in inventory, I'll be stuck with a paper loss - you can groan now - of about a buck when their price falls next year.

But I predict that I'll come out ahead by buying a couple hundred additional first-ounce Forevers before their price goes up. You can take that prediction to the bank. Or better yet, mail it there.

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Sloan is a columnist for The Washington Post. He is a seven-time winner of the Loeb Award, business journalism's highest honor.