"Making" coins - the creation of wealth

dan1ecu

Hi, All -

Much wealth can be created when a coin is slabbed at a high grade by a legitimate grading service. I'm sure that there have been cases where a coin that's been sitting in a draw for many years was sent to PCGS, and it came back worth multiples of what it was raw. Since slabbing and registries began, probably billions of dollars in new wealth has been created, no?

What effect do you think this creation of wealth out of nowhere has on the economy as a whole? Do you think that the coin business even puts a dent in the U.S. economy?

Dan

FatMan

<< <i>What effect do you think this creation of wealth out of nowhere has on the economy as a whole? Do you think that the coin business even puts a dent in the U.S. economy? >>

No

SDCollector

<< <i>billions of dollars in new wealth has been created, no? >>


My guess is no. A billion is a big number and I don't think the impact is anywhere near that for the scenario you described. And compared to stocks, bonds, real estate, etc., I think the impact collectible coins has the economy is minimal.

ccr

Maybe not as much as Tangible assets like property, metals, gems, agraculture ( ie Cattle, crops, etc...). For some, it has made them wealthy. But I can`t imagine it making that many people hundreds of thousands or millions of dollars. As opposed to businessmen/businesswomen, lawyers, and doctors.

DennisH

No again.

In the context of trillions of dollars in commerce each year, I suspect that even a few billion from coins doesn't amount to a drop in the global economic bucket.

dlimb2

The only value something has, is what someone is willing to pay for it.

clackamas

State quarters and the like aid in the Monetization of the debt. The Fed prints/coins money but it does not really stay in the money supply. I believe a big reason behind the changin designs. Well maybe not big but a reason. As for wealth being created, I guess in an internet sort of way.

solid

I suppose you could call the past 17 years or so the "Third Party Grading Revolution"
of the coin hobby. While, before the inception of the companies, the grading of coins
followed published standards, it still varied considerably from dealer to dealer.

One thing that has happened is the common use of all MS/Proof grades from MS60-MS70.
Prior to this, coins were usually described as BU/Unc (60), Choice (63), Gem (65), or Superb
Gem (67).

As much as we all complain about grading inconsistencies, I believe that at least in the
case of the top companies, the hobby as a whole now enjoys much greater stability in
the grading, and thus, value of the coins we love.

There are certainly PQ coins, low-end coins, and over/undergraded coins in slabs, but
it is much tougher these days for unscrupulous individuals bent on greed to peddle
BU coins as Choice, Choice coins as Gem, or even worse Sliders, Doctored, or outright
Counterfeit coins to the unwary.

Another benefit, flawed as it is, is the population reports that have at least been a tool
in determining rarity and establishing values for specific coins/grades.

All of these factors have played a part in arming collectors with more knowledge and more
confidence in participating at higher levels in the hobby. This has created higher demand
and thus, higher prices for the truly outstanding coins.

So yes, I agree that the slabbing of coins has "created wealth" within the hobby.

Ken

dorkkarl

<< <i>probably billions of dollars >>

absolutely, definitely not. its in the millions, & much of that is offset by the plastic fees.

K S

Trime

Wealth is a relative term; it probably means someone who has accumulated much more than you. Coin collecting and dealing is small change in the ecconomic world. For example Samsung Electronics (Korean Electronics company) reported today a quarterly net income of 1.6 billion dollars. A few collectors have some good assets, some may have made a profit but it is not in hardly anybodies opinion a centerpiece of an investment program. I am certain that many dealers make a reasonable living; most could be described as small businessmen/women (most work hard at their job). A few have been very successful and I suspect have accumulated what you might describe as real wealth. Models for the above might be the principals in the certifying companies, big auction houses ( Heritage, Bowers, Stacks, Superior,Goldbergs,etc) and the telemarketing companies. I suspect they find strong places for their profits outside of the coin world.
For most of us it is a fantasy world, better than the lottery and the race track but not as good as the Southern California real estate market or a good mutual fund.
Have fun and dream alot of having the next Benson collection.

agentjim007

absolutely, definitely not. its in the millions, & much of that is offset by the plastic fees.

also offset by the slabs that yielded losses (lower than expected grades, grades that yielded a value much less that coin was purchased at. Of course that would create wealth for the overgrading seller)

coinguy1

I have thought about this before and I question whether wealth is actually created within the hobby under such circumstances.

If a given group of coins goes up in grade and hence price, unless there is more money to absorb those higher priced coins AND all others available for sale at a given time, then I think wealth is redistributed but not created.

What I mean by that is, assuming there is a finite number of coins and a fixed amount of total funds available for the purchase of all of those coins, if some coins go up in price and there are no additional/extra funds to absorb them, I think other coins simply go down in value to make up for it.

Tell me if I'm crazy in thinking that?

nwcs

Mark, that's what I think as well. It's a redistribution.

agentjim007

You know the correct answer to Mark's question is simply that he is crazy.

coinguy1

Jim, THAT ws the easy question to answer, wasn't it?

Pushkin

I don't believe there is a fixed amount of capital. The capital available is a function of many things including variables related to the economy, collectors’ emotions (confidence, fear, uncertainty, etc.). The available capital will rise and fall, and will also be related to interest rates and the overall availability of credit. Wealth takes on many forms, including but not limited to commodities. Passive wealth, such as the millions of ounces of silver stored under mattresses in India, will only become available when certain economic, social and political issues warrant. I don't believe that the pool of capital available for coin purchases is somehow distinct from that available for other investments (securities, works of art, real estate, etc.). The capital available will also expand and contract as the hobby expands and contracts. Wealth is usually "created" from commodities and from "confidence". Then again, this may all be bunk - what if we discover that Mars is 1% gold or that high grade diamonds are abundant on the Moon?

291fifth

The coin business is of very little importance in the overall economy.

cladking

Wealth is created when both parties profit in a transaction it is not created when a coin
is graded for two reasons. The coin existed before it was graded and has the same value
afterward. Yes, it may well be easier to sell since the coin was of little value other than face
or melt to many of those who would otherwise be interested in the coin. But it was not
substantially changed in the grading process. There was wealth created only to the degree
that the submitter profited by having his coin graded and the grader by the degree to which
it could be graded for less than the costs of grading it.

There is a finite amount of wealth at any given point in time but this is in a huge state of
flux and can turn on a dime. When a new dam is built a huge amount of capital is tied up
but the return in the form of water for irrigation and cheap power increases the total a-
mount of wealth which is distributed to those who benefit directly or indirectly from the dam.
(obviously costs can include more than simply the capital required)

There is also wealth which can seemingly be created out of thin air by increasing prices for
stocks, land or coins. This wealth is more properly thought of as value or money since it is
not tied to a real increase in the total resourses available to all people. It is caused primarily
by a change in sentiment and can evaporate as quickly as it appears. It is made possible by
an increase or redistribution of true wealth.

Usually increases in one segment of the coin market have been at the expense of another
segment of the market but this was in the past caused by a static demand which moved from
one segment to another. Today there is increasing demand coming from multiple directions;
the total size of the market is growing rather than just parts of it.