Everyday we have posts from people asking what is the value of this coin or that coin. And everyday we have a flurry of answers. Which got me to thinking about valuations in general, and the illusionary nature of values.
I am not an economist, and to be fair I am rather sceptical of most economic theory, sensing an odour somewhat bovine in origin about most of it, but coin valuations seem to me to be of the nature of market forces.
Take for example the British 50p commemorating Kew Gardens minted in 2009. How much is an example of this coin worth? On the face of it, 50 pence. One can walk into a British bank and exchange one of these for five 10p coins. But how much is it worth to a man living in Delhi? He can not spend it, so unless he is a collector or makes trips to the UK it is perhaps worth nothing. Assuming that he is a collector, how much should he be prepared to pay for it?
If he is an avid collector of British commemorative circulation coins, and he doesn't own an example of this coin he may be prepared to pay something for an example. However, if he is a casual collector of world coins he may be prepared to pay substantially less for the same coin.
Consider, if you will for a moment, your own position. How much should YOU be prepared to pay for an example? If you are British, certainly 50p, anything less would be facetious. If you are not British, how much? Knowing it has a face value of 50p perhaps $1 US? or less? or more?
If I tell you that these coins are scarce,with only 10,000 minted for circulation and a further 50,000 minted for special packs, so only 60,000 in all were produced would that change the amount you should be prepared to pay for one?
Now, if I tell you that these coins have regularly sold on eBay for £6 (including postage costs) or $10 US would that surprise you? Is that more or less than what you were prepared to pay?
At an auction the price finally paid will be dependent upon the number of bidders desiring the coin, and the maximum each of them is prepared to pay. If there are two bidders both of which desire this coin to complement their collection they may bid against each other, while the casual collectors stop bidding at a lower price. Yet, at the same auction, if there are no collectors desperate to own an example of this coin the bidding will cease at a much lower price. The coin is identical, only market forces have changed.
I therefore argue that values are illusionary. Even bullion frequently sells for less than its scrap value at auctions because of a lack of parties interested in buying it.
Krause base their valuations on prices asked by various dealers, but the price asked for an item is also deceptive. Old stock that one is anxious to shift is priced lower than other stock. Choice items which can attract general trade (known as drawing in customers) one is less anxious to sell, and so one may ask a higher price for it. I have seen this at markets and fairs where coins may be displayed on a general stall to attract interest, and thus draw potential customers to other items being sold which the dealer is anxious to shift.
Matt
