Last time we discussed some of the practical considerations coin collectors need to keep in mind if they intend to leave their collections to their heirs. This time we’ll talk about whether you should leave all or part of your collection to your loved ones. What are some reasons you might choose to gift or sell it beforehand instead of leaving it to friends or relatives in your will?

Families are complicated, and, sadly, money can cause problems in families. These problems can persist for years after an estate has been transferred. The question of fairness in terms of who gets what and who might deserve it more often comes up in these situations, even when people explain their wishes in person to everyone. If you think there’s a possibility that your heirs will fight over your collection or that hard feelings will arise between them because of it, it might be better to sell the collection ahead of time and leave cash amounts behind in your will. While it’s very satisfying to leave a collection to someone who will value and cherish it, weigh that against any damage that might be done to relationships because someone feels slighted or overlooked.

Coin collecting, like golf, is a hobby people can and do enjoy over a lifetime and one that can grow more enjoyable and satisfying with age (and additional resources). At Mullen Coins we see many older clients, and some of them are at the point in their lives when they are trying to decide what they will do with their collections due to downsizing, investment liquidation, or when making a will. No one enjoys thinking about death, but for many collectors, their coins are personally very meaningful, and so it’s appropriate that they are afforded this consideration.

The first thing that all coin collectors need to decide is if they want to sell all or part of their collections or if they want to transfer them to their heirs. This may be a complex decision if the collection is quite valuable, if there are multiple heirs, or if one or more of the heirs has an interest in coins. For people who are worried about arguments breaking out among family or friends later, selling a collection and dividing the money between heirs is one way to bypass that problem.

While supply and demand are the primary factors in determining the price of most goods, including coins, the price of gold and precious metals is affected by a number of more complex variables. One of these is political or economic instability. The U.S. economy has experienced a great deal of instability over the past decades and was nearly brought down entirely by the Financial Crisis of 2008, the worst economic disaster since the Great Depression. The fear that accompanies these types of events directly impacts the price of gold. This is why we saw the price of gold skyrocket in the years following 2008.

For anyone who has accumulated any wealth, asset security is a real concern. For decades the stock market was seen as a place where one could get a reasonable return on an investment, especially over longer periods of time. After multiple stock market crashes, the collapse of the tech bubble, and the near total collapse of the market in 2008, that is less true. Risk averse investors will now accept a lower rate of return for the assurance that their assets will not disappear overnight, and gold is one of the safe havens they flock to when currency markets are volatile. Gold coins and bullion at least are tangible assets in a way that paper stock shares can never be. It’s hard to have true confidence in numbers on a computer screen. It’s not like holding a bar of gold in your hands.

Did you know that 5-cent pieces haven’t always been called nickels? During George Washington’s presidency, the half-dime was first produced as part of the American money experiment that replaced the pounds-and-shillings monetary system of Great Britain. In 1792 the Coinage Act introduced the U.S. dollar to the world. One silver dollar was worth 10 dismes or 100 cents. The dismes became known as dimes, and half dimes were also struck and became a commonly used piece of American coinage for many years.

We don’t know much about the first half dismes. Legend has it that Martha Washington may have served as the model for the Lady Liberty portrait on its obverse side. George Washington himself may have supplied some of the silver for its first minting. The U.S. Mint in Philadelphia wasn’t even fully constructed at this point, and the half disme was the first American coin struck. Legend says this happened in the cellar of John Harper’s saw-maker shop.

In an earlier blog we discussed the various forms of physical gold that buyers can purchase and invest in and how their value corresponds to the market “spot price” at any given time. Gold has always been valuable, but how valuable it is currently corresponds to any number of factors. In a souring economy or one with unstable investment options, gold can look like a safe haven for the investor. In a booming economy the demand for gold tends to abate somewhat.

While gold is a solid investment choice and Grand Rapids Coins endorses the philosophy of investing 5%-10% of one’s total assets in physical gold and silver as a hedge against the unknown, it’s important to be careful when purchasing. There are many gold scams out there for the untried or unwary buyer. In fact, there are so many that the Federal Trade Commission has a page on its website addressing questions about buying gold, and recently the office of the Texas Attorney General issued its own tips for avoiding fraud in the gold market.

When Minnesota governor signed H1A into law, it was great news for Minnesotans who want to invest in bullion. This is because the bill contained a sales-tax exemption on precious-metals bullion, ushering Minnesota into a group of 35 states that have a full or partial sales and use tax exemption on precious-metals bullion and coins.  

While it may seem against Minnesota’s best interest to collect less in revenues from businesses selling bullion, studies done in other states show that the sales tax revenues from other sources are increased by these kinds of exemptions. Because some states do not charge sales tax, buyers from other states will purchase bullion or collectible coins in those states rather than pay taxes in their own state. This is terrible for local coin dealers in states that border states with exemptions, as was previously the case with Minnesota. The competitive disadvantage for them translates into fewer sales, fewer employees, and less money in payroll and income taxes collected.

We’ve discussed before what a problem counterfeiting is in the coin world. In recent years counterfeit coins have proliferated in America so frequently, many of them imported from China via online sales, that the U.S. Mint has issued warnings. A few years ago, when the stock market was in freefall and real estate rapid lost value, collecting coins became not just a hobby but an investment for many people. The characteristics about coins that make them valuable - origin, condition, scarcity, and history - do not fluctuate much over time and, unlike bank accounts, coins are not hackable (although they can, of course, be stolen). Counterfeiting is a significant threat to collectors, however, and anyone involved with coins has an incentive to stop it.

In April the European Central Bank issued new €50 banknotes they designed to be far less vulnerable to counterfeiting. These orange-yellow bills were designed in consultation with Stanford neuroscientist David Eagleman to so that anyone - not just currency experts - would be able to spot a fake. The usual security measures are present, including watermarks, color-changing inks, threads, and microprinting, but instead of relying on high tech measures, the ECB took a new tack: focusing on face recognition. This is because the general populace doesn’t look at their money very carefully and the human brain isn’t designed to spot inconsistencies in objects that often decorate paper money.

There are many things that make objects valuable. Origin, usefulness, condition, scarcity, and history all make a difference when considering value. We understand this easily when it comes to other items. For instance, a pipe may have value to someone who likes to smoke a pipe and no value to someone who doesn’t. A pipe made from rare or valuable wood might have value as a piece of artistry. The same pipe once owned by Sir Arthur Conan Doyle would be a very sought after item among Sherlock Holmes fans, and if it could be proven that Conan Doyle smoked that pipe while he wrote A Study in Scarlet that item would even more valued for the role it played in the history of an iconic fictional character. The proof that that particular pipe was owned by Conan Doyle and smoked during the writing of a specific novel would be its pedigree. It’s much the same with coins.

We’ve often discussed the importance of scarcity in regard to coin value. Mint origin is also important to collectors who like to locate and purchase all variations of a certain coin. Coins that have never circulated are much more valuable than ones that have. All of these things factor into the determination of value. If a coin has a rare pedigree, this can make a large difference as well.

The coast of Maine

Do you know about the Maine penny? Also known as the Goddard coin, the Maine penny isn’t a penny like the Lincoln Wheat cent but a very old coin that dates to the time of the Norwegian king, Olaf Kyrre, who reigned as King Olaf III between 1067-1093. One of the silver coins minted to honor his reign somehow found its way to the Goddard site on Naskeag Point in Maine almost a thousand years ago. It was discovered in 1957 along with some worked copper, pottery remnants, and other evidence of human habitation.

The Goddard site has been dated by archeologists to 1180-1235, and historians believe the people who lived there were the ancestors of today’s Penobscot Indians. That means that this coin may have been used as metal currency in America some 500 years before the next New England silver coins, including the Pinetree shilling, were minted. What was going on that this coin could have been left behind there?

Previously we talked about the Great Depression and what its effects were on coins minted during that era. However, the largest coin disaster of the 1930s was Franklin Delano Roosevelt’s infamous gold confiscation. His Executive Order 6102 of 1933 strikes fear, or at least anxiety, in the hearts of some coin collectors (and gold bugs) even now. Many coin collectors view the U.S. government’s confiscation of gold with anger and loathing as well as feelings of foreboding for the future. When a government has the right to or enforces a perceived right to confiscate gold bullion and gold coins from its own population, what does that mean for coin collectors today? Well, it’s not as ominous as you might think.

While what happened is a tragedy for historic gold coins and collectors, it’s unlikely to reoccur today because FDR’s confiscation of gold was done to bail out the Federal Reserve which in years prior to the Depression had issued millions more in gold-clause notes than it had gold to back them with. Today the Federal Reserve no longer has to pay back its liabilities in gold. It hasn’t since 1971 when President Richard Nixon closed the international dollar-gold exchange window.  

As we discussed before, during the early years of the Great Depression far fewer coins were minted. An economy in a tailspin meant that coins were circulating less and fewer people were collecting them. The exception to this coin dearth in those early years was the 1932 quarter dollar minted in honor of the 200th anniversary of George Washington’s birth.

Originally, the Treasury Department intended to strike a half dollar, and in cooperation with the Commission of Fine Arts and the Washington Bicentennial Commission, it held a competition. Entrants were to design the obverse of this new coin using the celebrated bust of Washington sculpted by Jean Antoine Houdon as inspiration. Laura Gardin Fraser, talented artist and wife of sculptor James Earle Fraser, was a prolific medalist. In 1932 she designed the George Washington Bicentennial medal, and she entered this contest along with 97 other people. The Commission chose her design unanimously - but the U.S. Treasury declined to use her design on the coins it produced.

Previously we’ve talked about the scarcity of U.S. coins minted during the years of the Civil War. Collectors looking for coins from another historic period - the Great Depression - will also have to search for some of them, particularly the ones struck during the earliest years of the 1930s. What was going on during this period, and why are coins from this era harder to come by?

The stock market crashed in October of 1929, and some of its effects were felt immediately. Fortunes were lost overnight, and millionaires jumped out of buildings rather than face financial ruin. For working class Americans who had not invested in the stock market, it took a little longer for this disaster to affect them, but in time the economic collapse brought them down too. Subsequent years saw unemployment at rates as high as 25 percent.

Last time we discussed the origins of the 1909 Lincoln cent. This coin has been around for over a hundred years in various forms, and we’ve gotten used to seeing it in purses, on sidewalks, in cup holders in cars, and under the cushions of our couches. Have you ever wondered if any of those pennies you’ve overlooked for years are valuable? Many of them are. In fact, the most rare type of Lincoln wheat cent - the 1943-S - sold for $1 million dollars in 2012.

Interestingly enough, the same thing happened in reverse the following year when the 1944 Lincoln wheat penny was stamped on leftover steel planchets. The U.S. Mint returned to using copper for coins in 1944, recycling metal that came from spent ammunition shells. These pennies differed from the pennies minted between 1909 and 1942 which were 95% copper and 5% zinc and tin. Pennies minted from 1944 to 1946 contained no tin so they were slightly different in color than the earlier version, but this is only visible in uncirculated coins now. The 1944 steel cents are worth upwards of $125,000 as well.

Collectors of U.S. coins will no doubt be familiar with the many iterations of the Lincoln cent, but most of the public will go their whole lives without paying any attention to the details of this ubiquitous coin. It’s as familiar to Americans as baseball, and yet it’s completely overlooked, the story behind this everyday object unknown. 

Interestingly enough, the man behind this famous miniature portrait of Lincoln wasn’t American. He was Victor David Brenner, but he was born Viktoras Baranauskas to a Jewish family living in  Šiauliai, Lithuania - which in 1871 was a garrison town on the edge of the Russian Empire. At age 19, rather than be exiled to Siberia, he immigrated to the United States and settled in New York City.

Coin collecting has come crossover with other hobbies like stamp collecting or antiquing in the sense that these hobbies involve people seeking out everyday items that have managed to increase in value over time, no matter their original value.

When a single coin is minted among thousands, tens of thousands, or millions, the odds that it will become very valuable over time are small. However, as we discussed before, coins can be struck with errors, they can be melted down, or otherwise be lost to time, with the result being that a once common coin becomes very rare. People will pay a great deal of money for rare coins. The same is true for everyday objects, and some of them are very coin-like so they have quite a bit of overlap with coins.

We’ve talked numerous times about how coins have historical consequence. Most are designed or minted as a commemoration of an important event or person or are the result of politicking or maneuvering by various people in power interested in maintaining their power. Another way coins have historical importance is that they can be used to date or identify people, places, or things.

Recently archeologists in Kalkriese unearthed eight Roman coins that historians believe may be the key to identifying the site of Rome’s greatest defeat: the Battle of Teutoburg Forest. You may wonder how the site of Rome’s greatest defeat could have gone missing, given the importance of Rome in the ancient world and the fact that this battle was hardly obscure and went on to have far-reaching effects for Rome and greater Europe. It’s an interesting story.

The British gold sovereign is another coin that was designed and minted as a result of a politics.

People unfamiliar with the strife, plotting, unseating, and court intrigue that resulted when Henry of Bolingbroke, one grandson of Edward III, rose up and deposed Richard II, another of his grandsons, might be interested to know that the civil war depicted in the popular television show, Game of Thrones, is loosely based on the chaos of this period - the Wars of the Roses - in English history. For nearly a century, the country saw assassination attempts, imprisoned kings, secret marriages, brothers betraying brothers, and, of course, the famous missing and murdered Princes in the Tower.

People often wonder why certain coins are so expensive and others are worth very little at all. Is there any rhyme or reason for this and can coin collectors in Grand Rapids and elsewhere predict at what prices specific coins will sell or auction for?

The answer is yes - and no. Like most everything in our economy, price is determined by supply and demand. This is a basic principle of economics. If there is an oversupply of bananas at the store, the store will lower the price in order to get rid of its inventory. In the case of bananas, the price will lower faster because of the short shelf life of the produce, but price can drop (or rise) suddenly for non-perishable goods like coins as well.

Most people are familiar with the idea that certain coins are valuable in terms of money. They can be bought or sold and retain value based on their condition, scarcity, and design. However, not as many people think about the ways that coins serve history as evidence of human activity and behavior patterns, how they can establish dates for historians or archaeologists, or what they tells us about humanity’s changing values over time.

We mentioned this before when we talked about the Spanish piece of eight. The success and breadth of influence of the Spanish empire worldwide was partly due to this coin. When they found silver riches beyond imagining in Bolivia, this elevated the status of Spain relative to other countries in Europe in the world because silver was inherently valuable. It could be used to pay soldiers to fight Spain’s wars. It could be used to trade for goods and services other countries couldn’t bargain for. It could finance further exploration. The Spanish took their silver with them in coins wherever they went, and war and commerce followed. Any time a piece of eight is discovered in a dig site far, far from Spain, it tells you more about the might and influence of the Spanish.

Image credit: PCGS.com

Can you guess what the very first commemorative coin the U.S. Mint issued was and when?

If you guessed the 1892 Columbian half dollar, you would be right. This coin was unique in American history in its historical significance, its purpose, and its appearance. Let’s examine these further.