Category: economics

Going Postal on Inflation

Going Postal on Inflation

I like collecting stamps. My grandmother got me started in 1969 with a six-cent stamp [1] honoring explorer John Wesley Powell, who went down the Colorado River through the Grand Canyon. Here’s a picture:

A few months ago, talked with a friend who is sorting his father’s old stamps. My friend observed that it costs a lot more to mail a letter these days. I agreed and filed that fact away. A few weeks ago, I read that the first-class letter rate increased from 58 to 60 cents. Wow, mailing a letter has risen by ten times since I started collecting in 1969!

I decided to quantify this rise using Postal Service data. I looked at what it cost to mail a one-ounce letter via first class mail from 1885 to 2022. I plotted the first-class postage rate versus time using a logarithmic scale; that makes it easier to view change over time. Note: You can scroll into this plot to see the dates and rates. The formatting and weird spacing after the plot – that’s due to my poor knowledge of WordPress.

I first noticed how flat the left side of the plot was. It cost two cents to mail a letter from 1885 to 1932 except for one interval around World War One; the rate was increased to three cents from 1917 to 1919. So, the rate stayed flat for most of 47 years.

The first long-term increase was from two to three cents in July 1932 during the Depression. This rise of 50%was a decision by the Hoover administration. Now, we might think it was just a penny but keep in mind that the value of a penny in 1932 was equal to about 21 cents in 2022. [2]

First-class postage jumped to 4 cents in August 1958; this was 26 years after the last increase. Another way to think about this is the doubling time, which was 73 years to double from 2 to 4 cents.

Our next doubling of rates from 4 cents to 8 cents happened in 1971, just 13 years. The plot is starting on an upward trend. The increase from six cents in 1969 to 8 cents in 1971 coincides with a significant change for the Post Office, which moved from a government department to an independent United States Postal Service as defined in the Postal Reorganization Act of 1970. President Nixon said: ““Our present postal system is obsolete; it has broken down; it is not what it ought to be for a nation of 200 million people.… And now is the time to act.“ My take is that you might want to hold on to your wallet when a President decides to tinker with the postal system. [3]

Our fastest doubling of postal rates took only seven years during the stagflation years of the 1970s, under the Nixon, Ford, and Carter administrations. [4] These were tough times for the United States; we experienced high inflation with high unemployment. Sadly, the 2020s look like they will mirror the 1970s.

We had another 13-year doubling period in 1991. The inflation-fighting of Fed Chairman Paul Volcker had tamed inflation. We reaped the benefits of lower inflation for the next 30 years; it took that long for postal rates to jump from 29 to 58 cents. The table below summarizes the doubling data, I have added a column for Consumer Price index (CPI) data as a reference.

July 1, 1885273.17.99
August 1, 1958473.128.9
May 16, 1971812.840.3
May 29, 1978157.064.5
February 3, 19912912.7134.8
August 29, 20215830.6273.57
Summary of First Class Postage Doubling Interval, 1885-2021

Now, any bets on the time it takes for postage to double from the 58-cent rate of 2021? My best guess is seven years since we just entered what looks to be another period of epic inflation.

Notes and Sources

[1] “John Wesley Powell, the noted geologist who explored the Colorado River, was honored on a 6-cent stamp issued August 1, 1969. Powell led an 1869 expedition down the Green and Colorado Rivers, a 1,000-mile, four-months’ journey.” Image and text from US Bureau of Engraving and Printing via Wikipedia accessed 25 July 2022

I should mention that the John Wesley Powell stamp made me realize I wanted to explore the Grand Canyon. I got my first look at the Grand Canyon, from he North Rim, in the summer of 1978. I have now hiked around and across many times. I still hope to raft the Colorado some day.

[2] The Consumer Price index (CPI) was 13.60 for July 1932. The CPI was 292.3 in May 2022. the ratio 292.3 / 13.6 is 21.5

Source U.S. Robert Shiller data set, Stock Markets 1871-Present and CAPE Ratio

[3] The Nixon quote is from Ryan Ellis, he provides a good description of the background behind the Postal Reorganization Act of 1970
The Birth of the USPS and the Politics of Postal Reform by Ryan Ellis accessed 25 July 2022

[4] Doubling the 8 cent rate of 1971 would require a 16 cent rate. I chose the closest rate of 15 cents in 1978, which isn’t quite double. I also chose 29 cents in 1991 as the next closest rate from 15 cents. While not perfectly accurate, I think they make the point.

Transcript of Charlie Munger Interview 3 Nov 2021

This is my version of a transcript of Charlie Munger discussing current economic events with Matt Egan of CNN on 3 November 2021. The full talk can be found at CNN “Billionaire Charlie Munger praises China for being smarter than America at handling economic booms” which I listened to on 7 November 2021.

Here’s the transcript, any errors are likely due to my poor hearing and typing.

Matt Egan > What do you think of the framework for Build Back Better?  This 1.75 trillion-dollar spending bill that the Democrats have put out calls for taxing share buybacks, putting a 1% surcharge on share buybacks. Is that a good idea?

Charlie Munger > I think it’s insane. Literally insane. 

Matt Egan > Why? 

Charlie Munger > I think it’s so irrational and I think it sort of destroys the whole system once you start tinkering from Washington. I don’t think the dividend policies of American corporations should be determined from Washington. 

Matt Egan > Do you think that the criticism that buy backs have some cases  got out of hand;  is that criticism fair?

 Charlie Munger > No.

Matt Egan > I’ve got to ask you about some of the comments you made recently to CNBC about China praising the regulators there in China, their financial regulators.I’m just wondering whether or not you regret any  of those comments regarding China?

Charlie Munger > Regret it? I would regret not making them. China, recognizing the horrible troubles that come with letting booms get too big;  steps on a boom in the middle of it instead of waiting until the very end and the big bust. Of course, I admire that.  In that one respect, they are wiser than we are. 

It amuses me that communist China is being smarter about handling booms than capitalist America. But I know a lot of people that are smarter than I am. Should we not have a nation sometimes that’s smarter than ours in some respects?

Matt Egan > Aren’t there also problems when it comes to China with respect to human rights and just the undemocratic system that they have there?

Charlie Munger > Well, it’s true that I prefer my own system. But considering the problem that China had I would argue that their system has worked out better for them than our system has for us.

They had a horrible overpopulation problem and they had dire poverty. They had a problem we didn’t have. They have needed tougher methods than we could use in our own Constitution and I would argue that they were lucky the government system they had at the time they had their overpopulation problem. I don’t think we should assume that every other nation in the world no matter what the problems are, should have our type of government. I think that is sort of pompous and self-centered.

Ours is right for us but maybe there’s is right for them you know it’s one of the most remarkable achievements in the history of the human race what the Chinese have accomplished in the last 30 years.


I was primarily interested in Munger’s remarks regarding China. I have to agree with Charlie Munger, the transformation of China into the second largest economy in the world is quite remarkable. I have included a table of all the countries in the world with a 2021 GP that’s estimated to be greater than one trillion US dollars along with a map. It makes me wonder, why the List of Nobel Memorial Prize laureates in Economics has no Chinese economists?

English: World map of countries by nominal GDP in 2019. 
RankCountryGDP (USD)
1United States22.7
5United Kingdom3.1
2021 GDP (Trillions of US Dollars) based on IMF data

Additional Sources

GDP Image Getsnoopy, CC BY-SA 4.0, via Wikimedia Commons

GDP table was based on data from Wikipedia List of countries by GDP (nominal) accessed 7 November 2021 My expertise using tables and images in Word Press is poor. In particular, I was unable to include the color coded captions from the Wikipedia image of GDP by country and so I included an additional table.

Review “Making Sense Out of Dollars” by Brian Shellabarger

This is a very good, simple, short economics tutorial. There are a number of simple examples that will help a general reader understand supply and demand, the value of money, inflation, debt, trade deficits, and bubble economics. The author writes primarily about the US economy from a conservative perspective. Here are a couple of passages I found useful:

“Now that we know what inflation actually is, we should probably spend a few minutes at least trying to understand what causes it. Make sure you’re sitting down before I give you the answer to this one, because you’re not going to believe it…….   Are you ready?  The answer is:  We don’t really know. ….
There are a few things, however, that we know for sure will cause inflation.  We’ll talk about two of the big ones:  printing money and trade deficits.”

“Hyperinflation is a huge problem because of what we talked about above – inflation is only okay if you can keep wages in-check with the increasing prices of goods. If hyperinflation is occurring, this is impossible, and resources, such as gasoline or food, become very scarce, or very expensive (usually both).”

The author is a realist; not an alarmist. He also isn’t trying to preach a particular set of answers. His closing section was my favorite:

“I would encourage you to always ask yourself the question of “why” when someone in power makes a decision. Why are they doing this? Who will benefit? Are there other possible motivations they may not be talking about? If you don’t understand something, often times asking yourself these questions will lead you to an answer.”

There are some problems with this book. I read the Kindle version and the graphics were quite difficult to read. Also, this book was written in 2010 and I read it in 2021 so some of the material is dated. It would be great to see a revised copy.  Overall, I would still highly recommend “Making Sense Out of Dollars” to readers who are trying to make sense of economics in 2021. There’s a lot of complexity in the US economy but the fundamental issues discussed by author Brian Shellabarger are still highly relevant.