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Copies and fakes create problems

By Richard Giedroyc

Why was the Hobby Protection Act enacted?

Replica coins and bank notes are not meant to deceive, but to be sold as souvenirs or examples. Too many entry-level collectors were purchasing these without understanding these replicas are not original. A counterfeiter will ignore the requirements of the Hobby Protection Act to mark a replica coin as a copy. Some unscrupulous persons may attempt to remove the word “Copy” as well. The Hobby Protection Act is meant to accomplish just what its title reads – to protect hobbyists.

View rare national bank notes and much more at the 22nd annual Chicago Paper Money Exposition, held March 18th to the 20th!

View rare national bank notes and much more at the 22nd annual Chicago Paper Money Exposition, held March 18th to the 20th!

A coin dealer recently offered to buy my proof and mint sets, but told me my year sets didn’t have any collector value. What gives?

Year sets are specially packaged uncirculated date sets of coins assembled privately and marketed by individual coin dealers. They resemble proof and mint sets, but proof and mint sets are produced by the U.S. Mint. The privately packaged year sets are of little interest to collectors and are treated as being face value or low value coins by dealers to whom they are offered. Beginning collectors and the general public often misunderstand the difference between these privately packaged sets and U.S. Mint packaged products. Of course, some of the coins in the year sets because of their scarcity or top grade can be slabbed and offered individually. The years 1982 and 1983 come to mind as examples.

Since coins are composed of metal how did we evolve into a currency system in which bank notes made of paper rather than coins dominate?

Paper money (now occasionally made of other materials) began as receipts for coins stored at a bank or other facility. The notes were easier to transport than a trunk full of heavy metal coins. Rather than use the coins for a financial transaction the person holding the note could give that paper receipt to someone else if a financial transaction took place. Each note represented a real deposit. Our current system of fiat money has no such backing.

Our base metal coinage (copper and nickel) is fiat money as well as is our current bank note system. Why would anyone accept this money?

Obviously we all accept it despite it having no intrinsic value or being backed by anything tangible. In countries where some coins have been recalled and demonetized the recalled coins are sold as scrap metal rather than for the face value previously assigned to the coins. We accept coins in change simply because we know people in turn will accept them from us. If a merchant only offered scrap rather than face value the coin would no longer circulate.

I’ve read coin pricing in several publications, watching a value spike or decline for a coin in a specific grade, but not across the board. A price change in one grade doesn’t appear to impact the same coin in other grades, either higher or lower. Sometimes the value of same coin goes in the opposite direction in another grade. Can you explain why?

You have observed the primary weakness in the entire system of valuing coins, no matter who is publishing the values. Published coin values are based on reliable individually reported transactions. Assuming the coin has reasonable eye appeal and is graded correctly the transaction should indicate the current value of that coin, or should it? The transaction could have taken place at an auction, over-the-counter sale at a store, on the bourse of a busy or not busy show, via the Internet, sight-unseen via mail order, or even at a flea market. Each has an audience with a different sophistication towards coins. Was there a shift in the economy or in the spot price of precious metals that influenced that sale? You have a different scenario and audience buying coins each time. Furthermore, you only have raw data on a single or small population of sales for a specific grade from which to assign a value. Is the reported sale an anomaly? Will the value of that transaction impact the later sale of a like coin in the same or in a different grade? We also have a market that  highly values top grades and the lower grades languish.

Are you saying that the coin trade is not a level playing field?

Not only do you have different scenarios through which a coin might be purchased, but not all like coins are identical to each other. The best way to use published pricing information is as a guide. Does the coin you are considering buying or selling appear to make the grade and does it have good eye appeal? What are the coin’s best and worst attributes? After those considerations are measured it will still come down to the negotiating skills of the buyer and seller.

My father collected Wheat pennies in bulk. A coin dealer offered me a flat price per coin, but wasn’t interested in examining the coins by date. Shouldn’t I get a better offer than that?

Checking the date, mintmark, and condition of each Wheat cent is labor intensive with rewards that don’t justify the time of a paid employee. The odds of finding a coin of sufficient value to justify the time committed just isn’t there. If on the other hand someone presents a better date cent worthy of a premium value to a dealer the labor has been done and the dealer will likely pay a competitive price for the coin. That gives you a choice: search the coins for valuable dates yourself or accept the dealer’s offer.

You have spoken of the coin hobby and of the business of coins. What kind of balance is there between the two?

It is basic human nature to want to know the value of your coins regardless of your intentions. There is no way to measure if we have more people interested in collecting coins than trying to make money buying and selling them. The vest pocket dealer at a coin show leaves the impression everyone is out to make money rather than to collect. This is likely a false impression. I am aware of a significant number of coin dealers who also own their own coin collections, which they do not intend to sell. This is a good question, but I’m not sure there is a good answer.

Is there any way to measure the health of the business of coins?

If you speak to a dozen coin dealers at the end of any show you will likely get a different take of the bourse from each of them. The number of people attending a show isn’t going to help either, since there could be many reasons why one show outperforms another. The prices of coins don’t necessarily reflect the health of the business either, since even when the price of the metals of which they are composed declines there are still people wanting to buy. Combine all these factors and perhaps it will give you a better handle on the business, but without all sales being reported to something similar to a stock exchange measuring how the coin business is doing is challenging.

This article was originally printed in Numismatic News.
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