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Now that most economists agree that inflation is not "transitory," how will coin values be affected?
Goldbully
Posts: 16,862 ✭✭✭✭✭
Inflation is real as we end the year 2021. Consumer prices on goods and services are rising to lofty levels as we speak. I'm sitting here concerned about how inflation will 'falsely' raise coin values going forward into 2022. Will they keep up with inflation??? Love to hear from our smart forum members on this matter. I just want to collect coins and not worry about how inflation will affect coin values. What do you think?
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Coin values have been going up all year.
It will be multi tiered. On the lower end, we could see stagnant or even lower prices as folks that dabble in those coins will be in a position where increasing costs for essentials (food, energy, gas ,etc) prevent spending on a hobby (and might even lead to sell offs). On the higher end, prices could easily keep increasing. People wanting to get out of dollars will keep chasing hard assets (and thus pushing prices up). In the middle, I'm not as sure. It really depends how much inflation there is and how quickly real wages erode.
So if you are sitting on cash, spend it (on coins) quick!
Coins I want go up. Coins I want to sell go down. It’s know as the “Just My Luck” paradox
I've seen plenty of that too.
I’ll have 6.7% less to bid at Sotheby’s
Right now we are experiencing a commodity boom - look at cost of wheat ($8 / bu is huge) and corn, and also lumber which has cooled a bit but going higher, and of course food. It really hasn’t hit the precious metals that much yet - they had a wave early covid which has gold and silver higher on average but they’re been a bit sideways since then and even down but I think that will reverse in or around January next year and we will see even more commodities go higher.... what does this have to do with coins? I’m glad you asked - because numismatics often trends higher when commodities go higher and so far that is what we have seen....
(If the economy tanks tho - all bets are off)
Coin prices have been going up all year.
Yes but the price is set based on the current perceived ‘value’... they are linked, although not always rational ... but a correlation nonetheless.
I had to transfer most of my "Coin Money" to "Food and Gas Money" - but I hear the inflation is from this new robust economy..........
"When they can't find anything wrong with you, they create it!"
You are missing one factor. Monetary inflation is not an increase in "value", it is an increase in price even if the value is unchanged. I believe that is the point @BryceM is making.
Is the "perceived value" of gold higher today than in 1980 or lower? In inflation adjusted dollars, the price of gold (perceived value?) was higher in 1980 today even though the nominal price was half what it is today.
Wage inflation will likely not be transitory but raising rates won't get people off the smart phone and into work, nor will it restrain that rabid business climate (?) that exists (?) which is insanely (?) driving up prices (?) like in the late 70s to early 80s (?)
I think how coin values and the coin market are affected remain to be seen. How much money can be extracted from the economy through wages and how much money will be burnt on higher cost of living goods?
Have to say... so far, there seems to be no effect.
I just hope were talking people spending disposable income versus "investing" in coins as newbs.
Inflation generates more tax money in many ways. IMHO this administration wants inflation to pay for all these carrots they are dangling in front of the mases. I still say Capital Gains should be figured on an inflation based number.
Inflation decreases disposable income... that will affect low to mid value coin sales. Those who are flush with high income and cash reserves will still be buying. Cheers, RickO
When dollars become a depreciating asset since they are losing value, many people will want to convert some of their dollars into tangible assets.
Worry is the interest you pay on a debt you may not owe.
Tough to say. Many trade in tandem with BV. If wages for working people rise this should help demand.
Coins don’t pay interest or dividends nor able really compete well with other things like sporting events, strip clubbing (VIP membership), boating, travel. I see many US coins taking down slide vs much cheaper lower pop world anyhow, especially currency. In addition coins have high conversion costs. Many I know badly hosed in coins (89 crash, coins going bad in holder, etc) sold off coins go into stocks.
Coins will remain a domain for wealthy collectors who in relation to the people coming in the bourse room quite scarce. Usually they have one specialized area which shuts the door if you don’t do that.
I'm about expecting everything to go up except gold.
On the bright side the losses in silver should slow down.
I've seen a steady and continued rise in coin prices in just 6 months to a year.
I think that it will hold up, or even continue, b/c throughout history, inflation has never 'receded', so I don't see coin prices falling back to previous levels, either.....Unless the entire numismatic market crashes...Again, I don't see that happening, either.
“I may not believe in myself but I believe in what I’m doing” ~Jimmy Page~
My Full Walker Registry Set (1916-1947)
https://www.ngccoin.com/registry/competitive-sets/16292/
There are long term term inflationary forces at play, with overspending governments leading the charge. There are also long term deflationary forces at play, primarily globalization and technology. And short term, supply chain issues are also driving inflation higher. Long term, it's hard to say how consumer price inflation (CPI) will play out, because these forces could net out in either direction. In other words, the spike in inflation may indeed be transitory.
On the other hand, asset prices, including rare coins (and to a lesser extent, commodities, including bullion) should continue to advance in the long run, because globalization and technology won't give us any more rare coins. (OK, shipwreck coins are a different story.
) That said, in the short run, CPI will drive investor and newbie-collector demand for rare coins, so rare coins could go either way in the short (to medium) run.
Bottom line is that for rare coins I'm not as much of a short term bull as a long term bull.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Another argument for "I should've bought X back when."
Bought my first ever common date $20 libs raw when they were still cheap. 375 was a long time ago.....
Only had 4 raw libs one was a CC not as cheap. Never bought any more.
Could've bought a 1850-O lib at show when i was blind in looking for a 2004 proof plat 1oz never bought one. Had the cash in pocket. Didn't spend that money. Now that New Orleans gold is over $8k now.
Throw a coin enough times, and suppose one day it lands on its edge.
My guess would be further bifurcation. Folks buying "stuff" at the Sunday morning coin show will spend less as they need to keep more of their limited or fixed income to pay for cost-of-living essentials. High net worth individuals who have portfolios that grow as fast as or faster than inflation and for whom cost-of-living essentials is a minor expense will bid-up the five-figure and above coins.
LIBERTY SEATED DIMES WITH MAJOR VARIETIES CIRCULATION STRIKES (1837-1891) digital album
9.6% PPI in November so obviously gold is crashing.
Apparently gold buyers have been expecting far higher inflation than a mere 10%.
At this rate silver will go negative by February.
Numismatic value could go up because they're giving money away for free and people are going to spend it. The intrinsic value could go down as gold/silver tank. Net effect might be no change at all. I don't think there's a 1:1 correlation with inflation and that doesn't imply causation anyways.
I am thinking just the opposite. Bullion Value will continue to rise and collector value will stabilize or even come down, just like what happened in the early 1980's. Bullion value was higher than collective value. BU rolls, even late date Mercury Dime and Walking Liberty halves were no more than melt. I was there, I've seen it with my own eyes. 1980 plays revisited.
A lot more people collect bullion then collect numismatic coins. While a lot of coin collectors collect bullion, not all bullion collectors collect numismatic value coins.
The wealthy are spending like crazy on expensive items to show off to their fellow country club members. (My doctor, who rubs elbows with these folks, commented on seeing this just this past week.) The less well off are looking through the clearance shelf at their supermarket to get deals on dented cans and crushed boxes. The coin market is going to be affected in different ways according to the income levels the coins involved cater to.
Most analysts are like parrots. Echoing another. All of our media outlets are the same.
They will be inflated
Before I answer you have to understand the difference between nominal and real interest rates
A real interest rate is an interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower and the real yield to the lender or to an investor. A nominal interest rate refers to the interest rate before taking inflation into account.
So keeping up with inflation is one thing, Beating inflation in real terms is another.
How to you check? Well don't look at the Stock market, that's a measure of "wealth illusion" , because the cost of selling is much higher than people think! (taxes transaction costs etc). There is a website where you can get prices deflated. For example what is $100 in todays money worth in 1974 dollars. Or Vice versa - by the way the answer to the second question is 100 in 1974 is worth $546 in todays dollar. That's 500% inflation. Now that 1974 mint set doesn't look like such a good investment after all.
Its at the Minneapolis Fed. (using CPI data, not coin prices).
The exact same thing is true with coins and coin collections, but even more so. Coins and collectibles in general are largely illiquid. That is, you cant liquidate without taking some sort of loss. One persons loss is another's gain or so they say. (Dealers say, we screw the other guy and pass the savings on to you!).
I would venture to guess that rare coins have not been a good hedge against inflation, and probably wont be in the future unless Millennials and their kids suddenly get the coin collecting bug. Sadly, In my opinion that takes imprinting the coin collecting mind very young.
Apologies for the technical answer. I worked as an economist in a past existence.
As for the transitory inflation theory, its real, but not all inflation is the same. Commodities like oil and lumber inflate and deflate all the time. So transitory means relatively high, not permanent. As anyone who lived through the 1970's and 1980's can tell you, wage inflation is what drives all others. That is the biggest problem. (not if you just got a big raise though!) The problem is that it sets expectations, since nobody asks for a decrease in salary. Prices rise, people holding bags of pennies are losing value, not cents.
Andy, we are getting to old to be long term bulls.
A general statement will not be accurate. Some will do better than others if demand stays strong.
If demand falls off post pandemic inflation will not matter.
Personally I do not believe inflation will remain high for long.
collectibles tend to benefit from inflation. Question is will they lag, keep up with or exceed inflation. Exceeding inflation is the only option that carries a real, net gain.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Truely desirable and rare coins will continue to increase in value
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You seem pessimistic about coins. For me they not only compete but are far more desirable than sporting events, strip clubbing, boating and travel.
But but but the VIP membership factor!
Bottle service! Seriously traveling right now seems to be a horror show between delays, cancellations, the idea of getting covid away from home, etc. I go to sporting events but I have reached the point where I prefer to watch on my big screen at home. Boating? I am not for anything where I can't leave if I want! Coins compete very well.....
You can leave a boat anytime you want!
Now if you want to leave at a destination of your choosing the key is to be sure you are the Captain of the boat! 
All I know is the few nice collectable coins that I've been wanting to buy keep on increasing in price. Had I bought them 1 or 2 years ago I could probably sell them for a profit today. But I'm not an investor. If I had them I would keep them just like the others I have.
I'm currentlt preparing (saving) to pay the high prices I will need to pay.