Default and Philately

Perhaps the most ridiculous man made disaster of our lifetime is closer and closer to coming about. I have refrained from writing about it as it seemed inconceivable that the United States House of Representatives would actually renege on the debts and legal obligations of the United States. This is the same group who is claiming that the mortgage crisis was caused by the recklessness of borrowers who walked away from their mortgage obligations, but then hypocrisy in politics should never be surprising. A partial default on United States obligations which may occur on August 2, 2011 will have profound effects on the stamp market in direct proportion to the effect that it has on the value of the dollar and the effect on the U S Treasury market. If US and Foreign creditors perceive that there may be a problem getting paid, look for them to flee dollars and US denominated debt securities. Interest rates should spike upwards and the value of the dollar will plummet. Stamps, which have an international market will do well and if history is any guide will rise markedly in price. The question for collectors is whether to sell or not when prices rise and at which point to sell if they decide to. Remember, credit markets are based on faith and playing with people’s faith is like playing with fire. Hopefully once (or if) the United States decides to live up to its obligations lenders will again feel sanguine about lending to us. If they don’t, a prolong period of international instability may occur which may make your stamp collection more valuable than your stock portfolio.