Numismatics – the study of coins – is a massive field. It spans thousands of different varieties of coins minted anytime during the last 2700 years, from the 7th century BC to the present day. These coins were struck in empires, kingdoms, sultanates, provinces, colonies and nations all over the globe. But there is a little known observation about coin prices and GDP that can be of tremendous importance to everyone from the casual collector to the most well-heeled investor.
The general price level of old and obsolete coinage from a country is directly related to that country’s GDP (gross domestic product). GDP is defined as the value of all the goods and services produced in a country during one year. In other words GDP is the size of a country’s economy, with richer nations having higher GDPs than less wealthy nations.
Interestingly, a country’s coin prices have a direct relationship to its GDP. Simply put, the higher a country’s GDP, the higher the price of its antique coins. This is due to the fact that a developed nation’s economy is able to support many collectors. And more coin collectors translate directly into more demand, which naturally leads to higher prices.
But there’s a catch. Coin collectors are most likely to collect coins from their native country. Almost everyone is interested in their own country’s history, culture and art. So U.S. collectors tend to collect U.S. coins, while British collectors are apt to collect British coins and Japanese collectors naturally gravitate towards Japanese coins. This tendency isn’t ironclad of course. Some collectors do branch out into “foreign” coins, foreign being relative to the collector’s home country.
So this little tidbit of information allows us to draw some broad conclusions about coin prices and GDP. Old U.S. coins usually have the highest prices and largest market share in global numismatics because of the United State’s massive GDP (estimated at over 18 trillion dollars for 2016). Coins from other developed nations – aka high GDP countries – like Japan, Great Britain, France and Germany also have relatively high prices.
On the other hand, emerging market countries with much smaller GDPs are only able to support relatively small collector bases. Predictably, prices for coins from these emerging economies concentrated in Africa, the Middle East, South America and South Asia are, as a general rule, much lower than for developed nations’ coinage.
Exceptions always exist of course. China is one of them. Its GDP has grown so large, so quickly that it still has a relatively underdeveloped middle class and, by extension, collector base. Therefore, prices for Chinese coins are still lower than its prodigious GDP would initially indicate. As time goes on and its native collecting community grows, however, that is likely to change.
Another quirk of the relationship between coin prices and GDP is that it only applies to modern coins. Modern, in this case, means coins struck anytime after circa 1700 AD. The reason for this is simple. Many people from all over the world are interested in ancient and medieval history, mythology and lore. Legends, myths and archetypes are usually cross-cultural. This interest ultimately manifests itself as broad-based, international collector demand. Therefore, ancient and medieval coins, being tangible repositories of this mythos, are attractive to a broad swath of collectors, regardless of country of citizenship or nationality.
Let’s look at ancient Greek coins as an example. Where does the collector demand for these coins originate? Well, ancient Greek coins are widely considered to be numismatic masterpieces. These impressive coins are held in prestigious private collections and fine museums all over the world. Demand for them is truly international. In fact, I would wager that most ancient Greek coin collectors today are (non-Greek) Europeans or Americans. Contemporary Greeks may love their heritage, including their country’s ancient coinage, but their purchases make up only a tiny portion of the total demand for ancient Greek coins.
I should note that the year 1700 is not a decisive dividing line between medieval and modern coinage either. It is really more of a general rule, with lots of gray area on either side. It does help that most countries struck coins by hand before 1700 while converting to more mechanized production methods afterwards. But 1700 is still a rather imperfect date, subject to a great deal of variation.
Japanese coinage is a good example of this. Japan was ruled by the Tokugawa shogunate from 1603 to 1867. While Europe was rapidly industrializing, Japan pursued an isolationist foreign policy. Because of this, Japan during the Tokugawa shogunate was really structured like a medieval kingdom with a classically feudal society. This means that Japanese coins struck during the Tokugawa shogunate – the era of the samurai – have broad appeal outside of Japan and, by extension, a widespread foreign collector base. Demand and prices aren’t tied directly to Japan’s GDP as it is with Japan’s more modern, post-Tokugawa coinage.
The relationship between coin prices and GDP has two major implications. First, it should be obvious that a savvy investor can exploit this situation to lay bets on individual national economies. For example, if you think India’s economy is going to do exceptionally well over the next decade or two, then assembling a collection of high quality, modern (post 1700 AD) Indian coins makes a lot of sense.
The corollary to this theory of coin prices and GDP is that ancient and medieval coins are the blue chips of the numismatic market. Their prices don’t rely upon good economic performance in any one country. Instead, ancient and medieval coinage is more of a wager on the growth of global GDP. Under this scenario, it doesn’t matter who is prosperous or where they live. All that is important is that a certain portion of that global prosperity will predictably materialize as demand for ancient and medieval coinage.
