Where have all the coins gone..? by Catman
Coin Dealers like Max Methal had nice stocks and they bought and sold coins on a small margin of profit. As time left the 30's, a large influx of new collectors came into the hobby with the invention of the "Penny Board".
Things dropped back when World War II began as people were too busy to collect a whole lot of coins. However, there were a few die hard collectors hanging in there looking for the $750.00 1913 Liberty Head Nickel and other such rarities.
Well, in 1945, we had another big shot in the arm of new collectors when everyone in the country was now looking for the elusive 1943 copper penny. An offer to pay as much as $3000.00 to anyone who could find one appeared on the back of matchbook covers. While offering to buy this rarity, the advertiser also offered to sell a variety of other coins.
While all this was going on, these new collectors were buying and collecting the inventory of the old time dealers. New dealers came into the market and a buying surge began.
Still, most people didn't understand coins or their value. These new dealers would travel to small towns, run big buying ads in the local newspapers, and end up buying beautiful coins at a quarter of what they were worth. A lot of new coins entered into the market at this time.
Around 1955 is when I became a coin collector, Boy am I a happy camper, Coin collecting was becoming a social event with "Coin Clubs" popping up all over the country. These clubs effectively killed the dealers that were buying coins for almost nothing. It seemed everyone had a friend who collected coins and would just go ask them what their coins were worth.
As the numismatic hobby grew, it was discovered that the rare coins became more rare. The demand went up but, of course, no more of these coins were being produced. This started a price hike. Then the hobby got another big jump of new collectors. Someone discovered the 1955/55 one cent coin.
Again the promotion was on and everyone in the country was looking for the 1955/55. As the number of collectors rose it gave life to the Numismatic Publications. Coin World was seen and now you could order coins from anywhere in the county you lived. Coin clubs were putting on coin shows. Immediate hit. All this time more and more collectors were asking for more and more coins. However you still could buy a double Eagle for about $75.00. Then 1960 arrived.
John F. Kennedy was elected president. The youngest in our nations history. America was Bee-Boppin' to the top tune of the day, "itsy, bitsy, teenie, weenie, yellow, polka dot bikini". Coin collecting had gained a sound collector base in the 1950's and had progressed to a serious full fledged hobby. Our first major coin publication, Coin World, hit the ground running.
Collectors could now expand the collections more easily than ever before. Mail order coins started its trek from infancy to a million dollar industry. Collectors were using the B&D grading book as well as the dealers to buy and sell through the mail. Through this media more people became aware of the value of coins and went searching through Grandpa's old stuff looking for that one rare coin that was going to make them rich.
Its interesting to note that the postal service did not allow money to be sent through the mail. To get around this the post office defined "money" as current coin and currency of the realm used in day to day transactions. Since rare coins were sold for an amount above face value they were classified as merchandise. The post office set itself up to make millions.
Little did anyone know what was cooking behind the scenes. By early 1963 the U.S. Silver certificate's had been replaced by the Federal Reserve note. The U.S. Government had wanted to eliminate the circulating silver certificates through attrition.
Bang..! On November 22, 1963 a shot that was to shock the world was heard. President John F. Kennedy was assassinated. The southern states were in turmoil with civil rights. California was setting a trend with the Hippie movement. It was a time to put flowers in your hair and head for the Haight-Ashbury district of San Francisco. It was drugs and free love. Congress was talking about making a commemorative coin for President Kennedy. They didn't want to remove Lincoln or Washington and they thought the nickel and the penny were too small. The half dollar had not run the required 25 years yet. Almost without opposition, congress passed a special law that would create the Kennedy Half Dollar. The coin went into production in 1964. The popularity of Kennedy brought many new collectors into the hobby. After seeing the half, they wanted more and different coins.
It was now 1965. The government dropped the bomb on the American people. They announced that they were eliminating the silver in all U.S. coins except the half dollar which was only reduced. This movement killed the ability of the half to circulate. Even though the government said the silver coins and the clad coins would circulate for years to come, the silver ones disappeared almost instantly. All the half dollars were being grabbed which forced the population to use two quarters in stead. The half dollar has never recovered and doesn't circulate much nowadays. The rush for silver coins brought even more collectors and some real investors into the coin market which was now growing by leaps and bounds.
By 1968, the Viet-Nam War had reached its peak. The 1964 Civil Right amendment received it first challenge in the U.S. Supreme court and won. The Hippie generation was dying out in San Francisco and those that had been practicing free love found that they could really score if they sold it instead. The government dropped another bomb on the collector. They announced that the were setting a time limit on accepting silver certificates for silver. June 28, 1968. After that date the government would no longer give out silver for silver certificates. As the time drew close long lines outside the Federal Reserve Bank began to form. The government ran out of silver coin and started handing out packs of granular silver for small amounts and silver bars for the larger amounts. They created the third major silver melt the nation had gone through. More and more collectors were joining the hobby the collector base was growing real good. Seeing the prices going up at steady rates didn't slip by the investors. A few of them began to move into the hobby.
The move of the investor into the hobby began to create problems with grading. The investors really didn't take the time to learn to grade. Dealers found they could "Push" the grade and make a whole lot of money from people who couldn't read or understand the B&D grading guide. By 1972 an author named James F. Ruddy introduced a new concept in grading. He published the first "Photograde". Here was the first new guide since the 1950's. It was a grading system that used Photographs instead of line drawings like B&D. It was an instant success.
One can't talk about the 1970's without discussing the impact that the Hunt Brothers had on the coin market and the available coins. It was 1970 when the Hunt brothers first decided that they needed to buy silver. At first it was a hedge against inflation. The oil rich countries were playing games with the oil supplies and Libya nationalized the oil companies owned by the Hunt brothers. Then came 1973. Gas lines were around the corner with many stations running out on a regular basis. The Oil embargo was here and America was paying the price. Some stations started gouging the consumer until the Federal Government stepped in. The Hunt brothers began investing in silver in a big way. In 1970, they were buying silver at $1.50 per ounce. By 1980, the price hit the $50.00.
In 1977, Jimmy Carter took office and had to fight a runaway inflation rate of over 20%. The stock market boys were making so much money they didn't know where to put it all. Their eyes turned towards the coin market. Here was a virgin area that no one had tapped and has a record of steady price increases since the 1950's. The buying began. Dealers were selling everything they had at prices that were above market value because they were really pushing the grades. It didn't take long for the investors to get disenchanted. First, they couldn't tell if a coin was real or not. They couldn't tell its grade and didn't have a clue where to sell it when they were ready. Their only interest was in return on invested dollar. However coins continued to soar in value and disappear off the market to take up residence in a bank vault or dealer's storage locker.
In 1985 a group of well known Numismatists formed what they called the "Professional Coin Grading Service". At first, they were set up to serve these stock market boys. Now coins could be bought sight unseen and the PCGS would guarantee the grade and authenticity. Now the stock market kids were again off to the races.
What no was noticing was that the real collectors were dropping out of the market like flies. There were no young numismatists entering the hobby. Coin collecting had really changed into a hobby for kings. No one else could afford it. Silver Dollars that 10 years ago sold for $2.50 was now selling for $50.00 and this was for a common circulated one. Collectors just got disgusted with what was going on. Some sold their coins while others just put them away and closed the door on their hobby.
This went unnoticed by most of the dealers and the big time collectors. At the show, if a junior would walk up to a table and ask to see a coin, he/she was ignored. They weren't worth talking to since they didn't have any money. Prices continued to grow and now coins were "slabbed" by the thousands. Since being put in these little plastic holders you could no longer put the coin in your album, we lost more collectors. Most important, the hobby was losing its collector base. There was nothing holding the market up. It was teetering, getting ready to make a fall.
Now the dealers didn't like having to buy and sell by the grade listed on the slab. It was claimed that some slabbing companies were giving higher grades to their larger customers showing favoritism in their grading. Dealers were claiming grades were wrong and offering lower buy prices yet selling the same coin for the grade marked. This expanded their profit line. When the investors went to sell the coins they bought, they started to lose money hand over fist.
The Hunt brothers went broke and silver dropped to $5.00 per ounce. You could now buy a common silver dollar at $6.50 each. The collectors that were left got angry again and more of them left the hobby.
The coin market began to fall like a cow pie heading for a flat rock. The collector base was gone and there was nothing to hold the values up. The price of coins started to fall looking for a base where it could settle. An almost 80% fall resulted before the base was again reached. But now, how could they keep it from falling even more? Once the collectors who were left bought what they wanted, who was going to buy the rest? There were no up coming young collectors to fill the spots. The hobby had to start all over again.
The coin clubs began to address the young collectors again and the hobby was heading for a recovery. It wasn't until the 1990's that the hobby again enjoyed a good collector base. New collectors were coming into the hobby and even some of the older collectors returned. The slab companies had to justify their existence to a whole group of people who did not trust them because of their past activities.
It's 2005, and we again have a strong hobby. I am concerned that we still don't have a commonly accepted grading system that is accepted across the board. I hope that it will work itself out.