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The Ultimate Inflation Hedge May Be in the Mail

Author: Amity Shlaes, Former Hayek Senior Fellow for Political Economy
May 10, 2007


The desire to hedge is universal. People want to hedge inflation—especially this week. They want to hedge market losses, oil-price changes, even wars.

But there are those of us who are also obsessed with betting against a highly specific kind of risk: government waste.

Part of that desire is emotional. After all, the Internal Revenue Service, the U.S. Department of Agriculture and other bureaucracies act with little consequence. They are rarely held to account for the national deficits or personal hassle they generate. You don’t have to be a Red State radical to feel cynical about this.

Did I mention the U.S. Postal Service? Next Monday brings a 2-cent increase in the price of the first-class stamp, to 41 cents. We’ve had word this year that the postal service is suggesting that postmasters remove clocks from 37,000 stations. They say it’s to make room for “product information posters.” Perhaps what they really want to do is distract clock-watching customers from post office waiting times.

To all of which the hedging brain responds: Can I at least cut my exposure here?

Not easily. Of course, Treasury bonds offer a general version of such a hedge against government waste. There are even TIPS, or Treasury Inflation-Protected Securities, introduced by Secretary Robert Rubin in 1997—when a first-class stamp cost 32 cents.

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