Will the new economy effect the future value of numismatics?

In no way do I intend for this post to be a political statement, nor do I want it to evolve into a political discussion.

I think that the slow, but escalating, elimination of the middle class here in the US will destroy the values of coin and currency collections. Over time, with more collectors being forced to sell to make ends meet, there will be fewer wanting or able to buy, creating less of a demand, thereby deflating values.

There have been many threads here discussing what will happen in the future to coin values and why, but I have not seen anyone bring up this subject and discuss what effect it might have on the hobby.

 

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Many variables in your question...a couple where clarification would be good:

i. Please define what you mean by "slow, but escalating, elimination of the middle class"
ii. What assumptions are you making about consumption and prices of other goods to assume selling a collection would be required
iii. What assumptions are you making about fewer wanting or able to buy, as use of money is a "prioritized" thing, so there is some idea about people lowering their priority for collecting.

And a mathematical note to boot...as long as monetary supply can grow, the gap between $0 and the top $ will continue to expand. Given we use a monetary system that is not based on an underlying physical asset, the supply is endless.

 

Cuts in pay. Reduction of work force. Reduction of unemployment insurance. Employee give backs. Elimination of pensions. Etc.

 

There are statistically more collectors now than in the past because we have more disposable income. That doesn't mean that some contraction will happen - frankly the mortgage meltdown wiped out a lot of people.

But hopefully the "new economy" will not last a long time, but if Japan's banking scandal in the late 1980's is any measure it could take awhile to recover.

 

Cuts in Pay...in a non contracted workforce, cuts in pay will result in people switching jobs, or a rebalance of the payrate, which if it goes down, must have been above market equilibrium rates prior. Cutting pay may or may not impact collecting as the person with less money still must decide where to spend and may very well spend on collectibles. In general, I would agree less spending on collectibles as a whole because folks like food, relationships, and safety more.

Reduction in Workforce...this is a direct result of baby boomer retirements, with a smaller generation behind them. This will create a skill gap, and a demand increase for those that have the skills, and will increase pay as skilled folks switch jobs. These skilled folks will have increased discretionary funds to spend on collecting.

Reduction in Unemployment Insurance...this should not impact the coin market. Most folks cannot live on unemployment as the goal is to be employed. So if unemployed, I doubt there is much spending going to collectibles.

Employee Give Backs...not sure what you mean on this one. May be some changes in employee benefits or contracted labor rates, but I dont know anyone that gives back income.

Elimination of Pensions....been going on for years with a move to 401k and other self funded retirement methods. Many of the younger generation will view collecting as an investment and spend more on collecting because they need to create a retirement nest egg. Especially true with precious metal produced collectibles like gold, silver, and platinum numismatics.

 

I would think you would simply have an escalation of market trends we are already seeing. Higher end stuff keeps going through the roof, as numismatic works of art are priced like paintings, etc. So, I believe high end material will keep going up, the only thing that would stop them would be much higher returns from the bond markets, (better place to put money).

I think the lower middle and lower ends will be more hurt. Also, I think the "key" coins from such sets will also take a beating. Lincoln cents are a pretty popular "cheap" coin set. If fewer people have the money to take up collecting, where will be the demand for the S VDB's? There is only so much demand for 'keys" ONLY because they are "keys". You would think the base demand has to be those wishing to complete sets. Lower the amount of people COLLECTING set, lower value of "keys".

In short, I would not be as nervous holding high grade early 19th century and 18th century material, but would be more concerned about semi key mercury dimes.

 

And ancients are looking good, right? :yes:

 

IDK. They are mostly denominated by Euros since that is where most ancient collectors live. High end I believe they are safe like high end US and world coins, but middle/low end it depends more on Euro exchange and European economy.

Its tough to say, but US collectors aren't the major force in ancients. Our learned brethren "across the pond" are the force in that market.

 

The demographic factor will be greater - most collectors are 60ish, probably similiar in circumstances.
WHEN the Boomers liquidate, it will be en masse. As with stocks, so with coins.

The US coin market looks bleaker than the BRICs, I should think.

 

Agreed.

 

When the boomers liquidate I will be buying, since I am post boomer.

 

I think that if the boomers were inclined to liquidate, it is more likely already been done. Most boomers realize that life eventually comes to an end, and even though they made it to their 60s or beyond, they have either sold for financial reasons or are holding /dispersing for family members heirs. Nothing will occur in mass, no reasons for it to do so.

However the modern 'stuff' being collected today will probably be where the fall out occurs for non-bullion coins. Look at Philately where once stamps after 1940 held value, with a few exceptions, no one wants them. But the 'rarities' such as the Zepp airmails, the 1894 series, etc. still maintain the high value and desirability. Once Bugs and Elvis was on the stamps, Philately was over and the 'twitter' era was here.

 

Over the last few years our "hobby's" value's have remained fairly consistant good investment. Considering electronic, paper stocks, and plastic money as well as defunked 401k's. There will always be a market for hard assets. At this point in time I believe that ANYTHING that's made in the USA will always hold it's value on the world market forever. Take a look at the collectables market, anything old, and or rare, will still bring a good price, maybe not like 10 years ago, but there are always fluctuations in every market. I believe there will always be a new crop of investors, I'm training a few as we speak!

I think next time around people will think differently about the difference between a "job" and a "career". It looks bleek because we no longer have a true industry in this country. That is where we went wrong, and that is what needs fixing. Bring back the $40/hr jobs and we have a chance!

LIBERTY will always be a highly desired commodity!

 

It's an interesting question for sure! There are arguments to be made on both sides.

On the negative side: chronically weak American economy, insufficient interest by the post-boomer generations, and the continued improvement of counterfeits.

On the plus side: There are folks with deep, deep pockets who are paying monster prices for coins. Take a look at some of the hammer prices at the current FUN show. How can that be? Because people with that kind of money aren't generally stupid. It's obvious that tax hikes on the income of the 1% aren't going to make the slightest dent in the United States debt problem. The government will have to get that money from somewhere and it's reasonable to assume they're going to start looking at wealthy estates. Death taxes can only go up and we can anticipate that the IRS may someday be taxing the estates of the living. Collectibles are a potential way to camouflage wealth from the eyes of the tax man.

 

I think the more fearful people become about
their jobs, the more issues they will have with
"buy the highest grade you can afford." Maybe
that EF45 for $75 won't be so horrible compared
to $1,000 for a MS63.

 

Collectibles and their markets shift. Habits, fads and item desirability and values shift. Value often collapses on certain items but others rise to take their place.

Total collapse of all of the above is rare.

Comic books and sports cards are good examples of paradigm shifts. Those hobbies from the 70's and 80's are unrecognizable today. They evolved.

 

Exactly, comic book stores and sports cards have taken a beating. Will coins be next? I don't think so because the majority of customers of coins are normally older than the customers of sports cards or comic books. I would hate to see this hobby take a beating the way sports cards have but if it does, the first area that will be hit will be the US Mint and modern coinage. jmo

 

This is why I rarely buy anything that doesn't have an intrinsic value. I am only mildly numismatic. Almost every time I bought something because it had a numismatic value I have felt ripped off. I will sell things that have a bit of value, however. I think we are in a world where there are few people who want to put much into rarities, but lots of people are figuring out that old coins are real money. That's why the price of silver and gold are going up, while the prices of antiques and collectibles are going down. Sorry, but that's the way I see it.

 

Nothing wrong with that view; I for one collect coins that were or are issued for circulation. The question of what metals they are made of is secondary. And "coins" that are minted solely for collectors I don't find that interesting, but there sure are exceptions ...

Christian

 

the state quarter program brought lot of people into the hobby - some fell away but many took it to the next level. I think it depends more on popular programs like that than the economy