Collectible Paper Currency – Face Value Investing?

Similar Price Premium?

(Note: Paper money collectors, like coin collectors, put a premium on condition. What coin collectors call “Mint State” or “Uncirculated” equates to “Crisp Uncirculated” to a paper money collector.)

Why would collectible paper currency, paper money from the bank obtained at face value, be a sleeper, i.e., have a greater and unacknowledged potential for appreciating in value, than an uncirculated coin you could get in the same way?

Arguments in Favor of Currency Over Coins

The average life of a $1.00 bill is only six months. In that time it will become soiled and tattered to the point that banks will turn them in to the government for destruction. A $1.00 coin will last for who knows how many years. Millions of coins are made each year, and millions of paper notes.

How many of the paper bills that are made this year will still exist five years from now? How about ten years? Or twenty?

There are fewer collectors of paper money than coins.

Fewer collectors means, on balance, fewer collectibles saved. If fewer items exist, this fact tends to push prices higher.

Argument (and Evidence) Against

To satisfy (or at least encourage) my curiosity about the wisdom of face value investing, and the form it should take, I recently checked eBay for prices realized on two examples involving uncirculated coins and collectible paper currency from more than fifty years ago.

Specifically, I looked at Crisp Uncirculated $1.00 bills from 1957, and two Brilliant Uncirculated rolls of 1957-D pennies.

The bills were selling for $7.00 each. The rolls were selling for $11.00 each, or $22.00 for $1.00 worth of the pennies at the 1957 bank teller price.

Would you rather have $7.00 or $22.00?

I rest my case. So much for the paper money sleeper argument!

But wait! Not so fast.

Counter Argument (to Above Argument Against)

Back in 1957, it is true that millions of pennies were minted. But in 2007, billions of pennies are minted. Unlike fifty years ago there are now so many more new coins produced for every person who could use them that it is unlikely that they will ever be difficult to obtain.

Modern coins will remain common for a long, long, time – a bit like the overproduced Morgan Dollars of the late nineteenth century, which finally experienced a notable increase in value a century later in the bullish commodity markets of the late 1970s.

Could that happen with a roll of new pennies put away today? Copper is going up in price isn’t it?

Yes, copper has been going up over the years. So save copper pennies, not the pennies that are made today, which only have a thin coating of copper, and are made primarily of zinc. The last copper (actually bronze) cents were made in 1979.

Meanwhile collectible paper currency - those paper dollars – the nice new ones at the bank – are deteriorating every day. Passing from grubby hand to sweaty palm, six months from now, most will be on their way to a government incinerator.

Which Way to Go?

It’s your call.

Frankly, I’d put away some of each. A few rolls of this year’s coins, and some nice new paper bills in perfect condition, properly stored, will cost you only face value. Years from now you may find that one or the other will have been a good investment, perhaps both.

And if not – your grandchildren will find them intriguing. (Grandpa… show us the money – you know, that stuff you used to buy things with back in the old days when there was a US mint and a Bureau of Engraving and Printing, and credit cards and companies that made them. You know, before we each got implanted with our Certified Financial Service MicroChips…)

Only kidding (I hope.)