In theory...wouldn't coin buying be bad for the economy?

[Iamme]

I happened to think about this while watching the CSN cable channel late last night, listening to the snalke oil slaesman try to hawk coins. It was quite entrancing listening to the guys gift of gab.

Isn't it ironic or (what's the better word?) that people would buy money...with money? Isn't there something odd about that? What function does that serve in helping run the economy...to employ people and all that? Aren't you just tying up money that otherwise could be spent on goods that have to be made? Even if you invested in the bank or stock market, you would at least be helping to fund other endeavors. But what does hoarding coins do?

Buying stamps, and cards, and paintings, and other such stuff is sort of like that too, I guess. But I think buying money itself is extra strange.

 

[Antiquehunter]

Well, I don't know the context of the TV ad for coins - as a coin collector / occasional dealer and a member of the American Numismatic Association, I can tell you that in general, no serious coin collector would buy something advertised on TV.

I don't know what he was offering for sale, but dollars to doughnuts whatever was being sold is available on Ebay at a significant discount.

Like any other commodity that is valued for its artistic merit (paintings, stamps, antiques, fine jewellery) truly rare coins have a tangible marketplace. Indeed, with the advent of 'certification' for coins, certain US coins are traded sight unseen on the strength of their identification and grade.

What is all this doing for the economy? Well, in the case of coin dealers and auction houses, they are providing a commodity to a buyer - nothing more. People collect stuff - from airsick bags to zippo lighters. What are they doing for the economy? Probably not a whole lot, but they are deriving pleasure from spending money on their collection. In some cases they are able to buy low, sell high, and turn a profit - which generally funds further expansion of their collection.

In the case of snake-oil salesmen on TV, I suspect they are selling a drastically overpriced commodity to the uninformed. In the early 80's when gold speculation drove up the price of gold, many unscrupulous dealers made a fortune selling gold and silver coins at many times their actual retail value to unsuspecting people in the marketplace. With the current activity in the gold and silver markets, I suspect we're starting to see the same thing again.

-Oke

 

[Mycroft]

I happened to think about this while watching the CSN cable channel late last night, listening to the snalke oil slaesman try to hawk coins. It was quite entrancing listening to the guys gift of gab.

Isn't it ironic or (what's the better word?) that people would buy money...with money? Isn't there something odd about that? What function does that serve in helping run the economy...to employ people and all that? Aren't you just tying up money that otherwise could be spent on goods that have to be made? Even if you invested in the bank or stock market, you would at least be helping to fund other endeavors. But what does hoarding coins do?

Buying stamps, and cards, and paintings, and other such stuff is sort of like that too, I guess. But I think buying money itself is extra strange.

What it does is transfer wealth from those who have a surplus (and thus can afford "collectables") to those who are willing to provide the service of locating these coins and packaging them in nice display sets.

As for the money taken out of circulation, that's a wash. Money taken out of circulation adds its value to the money left in circulation

 

[RandFan]

Coins are a commodity in the market place. Raw materials are processed to make a finished item and are then sold on the open market to provide goods to the market place and a profit to the manufacturer. Most money has a bit of a different purpose than most commodities and is introduced to the market a bit differently. The face value of currency is also usually different than most other commodities. However those facts do not negate the fact that money is a very real commodity. It is a benefit for those who manufacture coins and those who use it regardless of their purposes and intent of use of that money. Thus there is a market place for people to collect and speculate in money. That is the reason for the state quarters and the new collectable coin dollar that will be released in the near future.

So to sum-up the answer. No.

However, if it were not possible for us to continue to manufacture coins or paper currency then there could be some problems. However, even if that were the case, which is silly, we are fast becoming a society that can live without paper and coin money. I rarely use the stuff. My ATM/Debit card is good just about anywhere. Visa, I don't leave home without it (Visa Debit that is).

 

[Beerina]

My dad collects the state quarters, but I wouldn't buy bags of them expecting some gigantic return. So damned many Roman coins were produced, you can get them at malls for $10-15 two thousand years later.

So in 2000 years, don't expect those quarters to be worth too much. Yes, the equivalent of $10.00 is a 4000% increase, but over 2000 years that's about a 0.09% interest rate, hardly above inflation.

As for being bad for the economy, the government is hoping you collect those quarters and take 'em out of circulation. As the unique coiner of money, the government gets to add one quarter to it's treasury every time they stamp one out. But it works both ways -- every time they melt one down, they have to subtract a quarter. Which they don't want to do for budgetary reason, obviously. 400 million useless, "not accepted by the public" Susan B. Anthony silver dollars sit in a warehouse, still legal tender, for just this reason.

So I guess one could argue collecting coins is good for the government, but possibly bad for the economy in that inflation is mildly prompted by the government spending money into the economy that isn't real money in the sense that it isn't really worth anything and isn't collected back and taken off the books eventually.

 

[delphi_ote]

I thought for a second you might be talking about buying change to do laundry. Nothing is worse than being forced to use coin operated laundry machines. I can remember sometimes needing one last quarter to dry my clothes... and offering to buy one for a dollar in my lonely desperation.

 

[RandFan]

So I guess one could argue collecting coins is good for the government, but possibly bad for the economy in that inflation is mildly prompted by the government spending money into the economy that isn't real money in the sense that it isn't really worth anything and isn't collected back and taken off the books eventually.

It has been more than 20 years since my economics classes so forgive me if I get this wrong. Isn't inflation only an issue when governments print or mint too much currency or coin and the public loses confidence in the value of that money. The collecting of coins would have zero effect on inflation so long as coin in circulation didn't rise at a greater rate than GNP.

 

[Charlie Monoxide]

Heck, I buy money with money all the time. Typically this is done in monetary pairs such as Euros and USD's. I do this on the forex (foriegn exchange).

Charlie (international man of bad trading skills) Monoxide

 

[Antiquehunter]

It has been more than 20 years since my economics classes so forgive me if I get this wrong. Isn't inflation only an issue when governments print or mint too much currency or coin and the public loses confidence in the value of that money. The collecting of coins would have zero effect on inflation so long as coin in circulation didn't rise at a greater rate than GNP.

Interesting economic question. All banknotes and coins issued by the US Government and the Canadian government (as two examples) are STILL legal tender. For example - you can take an old US $10,000 note (yes - they exist) and cash it in for $10,000 even though a collector would probably pay $12,000+ for one even if it was in crappy condition. Ditto early silver or gold coinage. You can take your $20 St. Gaudens gold piece and swap it for a yuppie food coupon - even tho the melt value alone is just a hair under 1 oz spot gold value. Canada produced a $25 commemorative banknote in 1935 for circulation. A well-worn example today is worth around $1000. But any bank will take one at face value if you happen to find one in Grandma's attic and take it to the bank.

So - in order for someone to assess the economic impact of coin collection, one would need to look at the figure of all US currency ever printed vs. what has been returned to the US Treasury and destroyed / recirculated and have a look at what is currently 'outstanding'. Its a substantial amount - there are major hordes of US silver and gold coinage being kept by collectors. Look at the Ted Binion hoard that came to light after his death (over 7 figures in face value silver coinage) Not to mention what is currently overseas. Here in Afghanistan a LOT of OLD US currency is being reintroduced into circulation by the local money traders - since it is not as well trusted as the more modern / counterfeit proof banknotes. I have received a number of 1957 US $1 silver certificates and 1963 series notes in change from local vendors in the bazaar. The US Dollar is accepted widely around the world as currency, and is used AS currency by a number of countries, East Timor for example. Does anyone REALLY know how much is in circulation?!?!?

 

[Mycroft]

Interesting economic question. All banknotes and coins issued by the US Government and the Canadian government (as two examples) are STILL legal tender. For example - you can take an old US $10,000 note (yes - they exist) and cash it in for $10,000 even though a collector would probably pay $12,000+ for one even if it was in crappy condition.

Which I've heard used as a dodge to get around taxes on gift money.

 

[shanek]

Isn't it ironic or (what's the better word?) that people would buy money...with money? Isn't there something odd about that?

No. What do you think a currency exchange is?

What function does that serve in helping run the economy...to employ people and all that? Aren't you just tying up money that otherwise could be spent on goods that have to be made?

No, because someone's going to get that money, and they're going to use it to consume items that they need.

Even if you invested in the bank or stock market, you would at least be helping to fund other endeavors. But what does hoarding coins do?

You're storing value, as a hedge against future inflation, for one. Assuming the coins are made of gold or silver or some other commodity.

 

[shanek]

So in 2000 years, don't expect those quarters to be worth too much. Yes, the equivalent of $10.00 is a 4000% increase, but over 2000 years that's about a 0.09% interest rate, hardly above inflation.

Keep in mind that there was no sustained inflation for most of those 2000 years.

 

[shanek]

It has been more than 20 years since my economics classes so forgive me if I get this wrong. Isn't inflation only an issue when governments print or mint too much currency or coin and the public loses confidence in the value of that money.

Not quite. It has nothing to do with public confidence (although public confidence can spur on hyperinflation). It has to do with more money chasing after not as much stuff.

 

[shanek]

For example - you can take an old US $10,000 note (yes - they exist) and cash it in for $10,000 even though a collector would probably pay $12,000+ for one even if it was in crappy condition. Ditto early silver or gold coinage.

It doesn't even have to be early. For example, quarters made before 1964 had silver content and are worth 3-4 times their face value just from the silver content.

If you want to see if a price has held up under inflation or not, just compare how much silver you'd need to buy it today vs. how much you would in 1960. Most products--milk, movie tickets, even gas prices--track very well with the price of silver, at least in the long run. So those prices you complain about are due to inflation. With a silver-based commodity currency, you'd be paying the same amount as you would have in 1960 for all of these items.