Lending money is a topic that has been in the news a lot in the past year or so. The subprime mortgage crisis seemed to catch a lot of people by surprise.
This seems a good time to offer a pat on the back to David Hall. The name is familiar to readers as the man who revolutionized the hobby with the founding of the Professional Coin Grading Service, the first commercial third-party grading firm. His firm went on to become Collectors Universe.
But it is words he spoke at the beginning of 2007 at the PCGS lunch at the Florida United Numismatists convention that ring in my ears this week. He had a great deal to say, but he issued a warning to people who were buying coins with borrowed money.
I was surprised at the statement. It isn?t the usual kind of public statement from a major figure in numismatics. But I duly mentioned the point in my coverage of the event.
Borrowed money makes the numismatic world go round, but perhaps not quite as much as for the rest of the economy. Many individual coin dealers have built their business carefully year by year and do not get into their bank lines of credit in any dangerous way. But credit there is.
What had changed in recent years was the fact that firms were advertising in this paper and elsewhere that they were lending money. This was a much higher public profile than I have ever seen before. Here was a major figure in the industry warning people against the excessive use of credit. This was a full six months before the credit bombshell burst on Wall Street that began the chain reaction, almost a panic in slow motion, that ultimately claimed Bear Stearns and is still causing problems in innumerable ways for many Americans and others around the world.
But up to now, the credit crisis has had no discernible impact on the numismatic business. Did market players heed Hall?s warning and scale back their borrowings? Certainly the market for coins slowed in the months that followed. It cooled off from red hot to merely hot.
If the Hall warning had no effect, does that mean that people in the numismatic industry are better business people in the first place and that they didn?t need a warning?
As much as I believe the hobby is a cut above the rest, I don?t believe that we are somehow superhuman and completely above the problems affecting the rest of the economy.
Are the loans that may be problems in this business yet to be called because the lenders still see numismatics as an island in the stormy credit sea? This would mean we aren?t better handling margin calls. We just haven?t gotten the notices yet.
Financial prudence is always a good thing to practice, but it is a boring topic to mention very often. I bring it up here because enough time has passed since I heard Hall?s words to come to believe that even though we in numismatics are not superhuman, we do have some incredibly gifted and intelligent people in it who from time to time share their foresight with the rest of us and that is a very good thing as far as I am concerned. I hope you think so, too.