-- Posted Monday, 21 January 2013 | | Source: GoldSeek.com
BENSONíS ECONOMIC & MARKET TRENDS
By Richard Benson, SFGroup
When I went to the post office the other day it felt like a ghost town. There was only one person behind the desk and the place seemed darker than usual. Because I was the only customer in line I breezed right through, but it made me think of the old days when we were all forced to wait in long lines to mail a package or buy stamps. You had time to chat with your neighbors in line while watching clerks who had taken classes in moving slowly and had made it an art form. Itís definitely time to start getting nostalgic about the vanishing post office.
As a kid growing up in the 1950ís, I remember when first class letters were $.03 cents and a postcard was a penny. My parents also got me a postal savings account. Back then, you could buy some candy or mail a letter for a few cents, but nickel candybars are up to $2.00 now,and by the end of this month first class stamps will cost $.46 cents, and a postcard will set you back $.33 cents.
Even with postal rates regularly ratcheting up,the USPS is bust and losing over $5 billion a quarter. The postal service is not only behind by $11 billion in paying into their pension fund, but they have maxed out their $15 billion credit line with the US Treasury. In what is likely a futile effort to stave off the inevitable, the USPS is on track to close 3,700 small post offices and to shrink the work force of 574,000 by at least 220,000 by 2015. In using Europe as a guide, even a massively scaled down postal service would need to charge $1.00 to cover the real cost of delivering a letter.
With the advent of email, smart phones and the cloud, every tech-savvy consumer in America, including me, has felt this coming we just didnít realize the impact it would have as letter by letter we leave "snail mail" behind. All of my utilities and routine monthly payments are now set up ACH for direct debit from the bank. My credit cards are paid over the internet three times a month, and all financial statements can be downloaded from the internet. For business, I used to use Priority Mail or Federal Express to send contracts to clients. Now, with MS Word, Adobe PDF, scanner and computer at my disposal, a business contract can be easily emailed, printed, signed, scanned, and a countersigned copy emailed back in a matter of minutes, with the executed legal agreement filed away in multiple secure data files in the cloud. All this is being done for a whole lot less than $.46 cents and the delivery is in minutes, not days. Who needs or wants snail mail for business letters anymore?
What about all the junk mail we receive? Junk mail consists mainly of come-ons for "Medi-scare" insurance, advertisements for anti-aging creams and vitamin supplements, catalogs showing tattooed teenagers trying to sell women high fashion, and department store catalogues. We donít need or want to receive this mail and removing our names from the mailing lists has not been easy, but slowly we are getting the message out to the advertisers. Getting that rubber stamp that says "Deceased" in red letters has been a blessing.
In todayís world, if I want to research something or find out whatís on sale, I can flip open my I-Pad, tap an App, and in a New York minute see what I want to see and not what somebody selling me something wants me to see. On the rare occasion when I do use the post office, it is usually to send business-related materials in a priority mail package from office to office, so I can travel light. People need stuff, not information, delivered! Say hello to UPS and Amazon, and goodbye to USPS and stamps. Even though the USPS continues to provide vital services to business and households and employs hundreds of thousands of dedicated employees, future generations will most likely be dealing with an entirely different postal service. The agency may slowly get away from first class letters and focus on package delivery, a fiercely competitive market but one that could be highly profitable.
In the meantime, though, as the first class mail business continues to decline, the agency will need less and less mail carriers to deliver the mail. For the US taxpayer thatís not good news because all of the currently retired workers (and many more who have earned a pension) will fight to receive their promised pensions. The problem is they donít seem to understand that the pension system is horribly underfunded and it is a mathematical certainty that future postal revenues will never cover costs, much less pay for the promised pensions.
If the postal pensions are not honored, that could leave America with several hundred thousand angry ex-postal workers who could "go postal" on us. Politicians and the public will likely pay as postal workers are unique in knowing how to wear uniforms, march through rain, sleet and snow, and fight off mad dogs. They know where we live, and they have the right to bear arms. My vote is for paying them! In the past, my mailman always came through for me, and he was a part of government that actually delivered something of value!
When the postal service runs a deficit, Congress appropriates the funds to cover the shortfall leaving us, the taxpayer, on the hook to pay the bill. Using the internet may save us postage but it is going to end up costing us as taxpayers and the US Treasury a lot more than anyone could have ever imagined! When you consider that we are already in the hole for $15 billion that is owed to the Treasury, and another $11 billion owed to the pension fund, with the postal deficit continually rising by $5 billion a quarter, by the end of 2013, this hole will have grown to over $45 billion.
As the workforce at the USPS continues to collapse and early retirement kicks in, the going away lifelong retirement party to keep past postal workers comfortable could easily cost the rest of us a minimum of $150 billion over the next ten years. Just donít tell this to the Congressional Budget Office or the US Treasury. If you look at their future deficit projections, youíll see that this problem will come to them as a total surpriseÖÖÖdelivered either by Email, or by several hundred thousand retired postal workers marching in the streets!
-- Posted Monday, 21 January 2013 | Digg This Article | Source: GoldSeek.com
- Richard Benson,
SFGroup, is a widely published author on securitization and specialty finance, and a sought after speaker at financing conferences on raising equity for mid-market companies.
Prior to founding the Specialty Finance Group in 1989, Mr. Benson acted as a trading desk economist for Chase Manhattan Bank in the early 1980's and started in the securitization business in 1983 at Bear Stearns, and helped build the early securitization businesses at Citibank and E.F. Hutton.
Mr. Benson graduated from the University of Wisconsin in 1970 in the Honors Program in Math, and did his doctoral work in Economics at Harvard University. Mr. Benson is a member of the Harvard Club of New York and Palm Beach.
The Specialty Finance Group, LLC is a Florida Limited Liability Company and is registered with the FINRA/SIPC as a Broker/Dealer.
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