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Record note price signals more to come

NN editor studies trend of increasing prices for rare paper money pieces.
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One of the hats I wear here is as editor of Bank Note Reporter. It is a sister publication to Numismatic News published monthly. Naturally enough, its focus is paper money. I have done this for almost 17 years now.


From my editor’s chair, I have seen a remarkable growth in the paper money hobby since I received the assignment in early 1989. “Remarkable” might even be an understatement.

You might remember the front-page story in the Nov. 8 Numismatic News. We reported the first $1 million piece of U.S. paper money. It was a Grand Watermelon note, so named because the zeros on the back in the denomination look like watermelons. “Grand” comes from the slang term for $1,000. It is rarer than a 1913 Liberty Head nickel. One of those nickels sold for $4.15 million in May. One of the three known Grand Watermelon notes sold for $1,092,500 in late October. Such a milestone deserves some commentary.

It used to be that the great U.S. paper money rarities would sell for approximately one-tenth the level of U.S. coin rarities. Where coin rarities were going for $500,000 to $1 million 17 years ago, the paper rarities were in the $50,000 to $100,000 range. Price rises since then are due mostly to the increasing participation level in the paper money hobby.

This relative positioning of values seemed natural enough because a good rule of thumb is to remember that the size of the paper money hobby is about a tenth the size of the coin hobby. Some 17 years ago that tenth was probably achieved by rounding up. Nowadays, it is definitely achieved by rounding down. One day soon I am going to have to change my rule of thumb to 20 percent. This note selling for more than a quarter of the value of a 1913 Liberty Head nickel might just be a signal.

The next generation of hobbyists will undoubtedly have a higher opinion of paper money and a greater attraction to it than my generation did. When coins caught my eye, paper money seemed unbelievably expensive. It wasn’t, but I fully admit that this was a judgment made by a child. It didn’t stop me from saving a note now and then, but my focus was on coins.

We all tend to collect what we like. What we like tends to be that which we became acquainted with at some point in our past. Nowadays you have to be over 40 to remember when coins had any significant purchasing power. That McDonald’s “Change Back for your Dollar” campaign was over 30 years ago. Younger Americans know only paper money as having significant value. It is value that helps create those first impressions. Kids nowadays are receiving $5s, $10s and $20s as easily as I once received dimes, quarters and half dollars. A good part of this is due to inflation. Prices of daily needs are six times higher than when I started collecting. The rest comes from the fact that we are richer as a society.

Coins, of course, have a huge built-in advantage – at least until my generation passes from the scene. The prime collecting years are ages 50 to 60. With the Baby Boom generation just hitting the top number, we have ever growing numbers entering the prime collecting years for the next decade. For most of them, coins are it, but for what I expect to be an ever growing percentage of hobbyists, paper is going to take center stage. That means higher paper money prices.

It is not just rarities that are being bid up. Paper money prices across the board are rising. Pre-1929 notes, called large-size notes, have really exploded in value. Notes introduced since 1929 are the current size and are called small-size notes. These prices are frisky as well.

I used to put sets of notes together that we offered as subscription premiums for Bank Note Reporter. Sets from 10 to 15 years ago now cost multiples of what we once paid. That’s not bad. More price gains will come. As more and more people enter the paper money field, they will collect what they remember. That means the small-size notes.

If you have never looked at paper money, now might be a good time to do so. Waiting to broaden your hobby interest is likely to cost much more in future.