The Trump administration is planning to sell the U.S. Postal Service (USPS). From the Trump point of view, it is just another government bureaucracy running in the red with little chance of achieving a profit for taxpayers. With FedEx, United Parcel Service (UPS) and Amazon delivery service, who needs the U.S. Postal Service (USPS) anyway? Why not sell off your local post office to become a convenience store, such as a candy store, or, better yet, a fast food delivery service already equipped with a pick-up counter in the front of the store?
At first it might seem like selling off so many post offices around the country would be a huge task. However, hedge funds have plenty of experience buying up and selling off the assets of large firms. Hedge funds know how to take a little of their own money, more money from investors and a lot of borrowed money to buy up firms and sell them off in pieces for a handsome profit. But who would buy so many individual post offices? No problem. There are plenty of property management companies running local shopping centers and a few other commercial properties here and there. They often have to find new businesses for some of their properties from time to time, so finding a buyer in each city and town would be no problem.
Without competition from a government controlled postal delivery service, the private delivery companies could make mail delivery much more efficient. Why not charge a higher price for delivering a single letter to some location out in a rural part of the country than delivering that same letter to a location in the middle of a dense urban or suburban location where many other letters are being delivered daily? Efficient resource allocation requires that higher prices go with the higher costs of time and gasoline consumption while lower prices correspond to lower costs.
But there is another way of off-loading the administrative expenses of the U.S. Postal Service (USPS) so that the taxpayer could completely off-load the expense and yet still get all the benefits of the current system as well as fulfill all the pension obligations to postal workers. Turn the whole thing over to the Federal Reserve. The Federal Reserve Bank earns billions of dollars in the New York financial markets as well as from money it earns from the Federal Reserve’s twelve regional banks. It doesn’t need taxpayer money. In fact, the Federal Reserve often donates billions of dollars to the U.S. Treasury in years when it earns more money than it knows what to do with. Why not keep all the benefits of the current system but drop the taxpayer burden of paying for it? Who can argue with getting something for nothing? In return for paying for our postal delivery service, the Federal Reserve could get a new, more effective tool to stop inflation quickly and efficiently.
To give the Federal Reserve the new return-on-savings tool to stop inflation efficiently and effectively when turning the Postal Service (USPS) over to the Federal Reserve, Congress would need to reissue the Postal Savings Act of 1910. When I was a little boy in the 1950s and 1960s, many people had savings accounts at their local post office. In response to excessive inflation, instead of using its cost-of-borrowing tool and punishing people for inflation by raising the cost of loans when too much money was chasing too few goods, the Federal Reserve could create a return-on-savings tool by posting a sign at every neighborhood post office offering ten percent (or more) on savings to reward people for saving money when too much money is chasing too few goods causing inflation.
As was done under the Postal Savings Act of 1910, post office savings could then be reinvested in whatever nearby private banks were offering the best interest rates. The Federal Reserve could easily afford to eat the difference between the high rate it offered and the somewhat less generous private bank interest rates to stop inflation quickly and effectively.
Ironically, it would make the free enterprise system more efficient, because, in reality, without the post office signs offering a high rate, many people pay little attention to the interest rate on their savings or on their certificates of deposit after they have made their initial investment. The rates often drop dramatically over time without them noticing, but they are much more likely to notice the signs offering high rates in their nearby neighborhood post office. The Federal Reserve would make sure that the money got reinvested in the private banks that were offering the best rates and move that money around as necessary to always get the best rates offered by the private banking system. Once the excessive inflation subsided, the Federal Reserve could lower the post office savings rates to simply match the best available local private bank rates, or, in the face of economic downturns, lower the rates even more to encourage spending to avoid recessions.
The Federal Reserve has relied too long on its old cost-of-borrowing tool where it raises the interest rates on loans and mortgages to try to stop excessive inflation. But raising the interest rate on loans just transfers the inflation from things that require a loan to less expensive things that don’t require a loan. In addition to discouraging people from buying a house or replacing their old beat-up car with a new car, it causes farmers, who borrow money to plant more crops, to cut back on production just when an increased supply was needed to stop inflation where too much money is chasing too few goods. Many retail establishments that typically borrow money to allow them to run in the red through most of the year until the holiday season at the end of the year when they cover their costs and make a profit would have to cut back or stop when facing higher loan rates. This ultimately does stop inflation but by suppressing both supply and demand as worker hours are cut back or workers are laid off. Since they can’t spend money they don’t have, the workers cut back their demand for goods and services dramatically at such times, and that does finally stop excessive inflation.
However, a return-on-savings tool such as with the post office savings accounts would be much more effective and efficient in stopping inflation. People who ordinarily don’t save much due to the rather low interest rates on savings could switch gears and start to save more when offered a savings rate significantly higher than the rate of inflation. Moreover, getting people to save more money creates an automatic stabilizer for the economy as a whole. Less debt and more savings is exactly what is needed to allow people to ride out economic downturns without having to cut back on their essential expenditures.
Now is the time to contact your Congressional representatives to tell them to turn our neighborhood post offices over to the Federal Reserve instead of selling them off to become candy stores or who-knows-what.