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Just in time for New Year's, here's a long article on the decade in paper money...

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Merry Christmas!  Over and out.

M

Hi Mark
Great article, thanks for posting it.  Murray

Thanks for the feedback!  It means a lot to me given that my article-writing activities have become rather infrequent in the past couple of years.
M

Dr. Marschner's article is very scholarly, thorough and useful and I would recommend printing it out for future reference (I've already printed out my copy). Amongst other things, it presents the best analysis of the pros and cons of TPGing that I've seen to date. As the writer correctly points out, TPGed notes that have been significantly overgraded will be left to languish in their TPG holders while those that have been significantly undergraded will be removed therefrom (this is human nature at play and is therefore to be expected). Thus, the total pool of TPGed notes will become more and more overgraded on an overall basis as time passes. In particular, we can expect to see an increasing number of PMG VF-20 notes in the marketplace in the future as many of those VF-20 notes are no better than Fine according to Canadian (Charlton) grading standards. Another possibility, also alluded to by the author, is that Canadian grading standards will become "Americanized" (i.e., laxer) in the future.

The pricing table at the beginning of Dr. Marschner's article is actually very sobering on an overall basis as many of the selected notes have failed miserably to keep up with inflation over the last 10 years. The ones that have done well are, naturally enough, the rare and perennially popular ones and they will presumably continue to do well. Chartered notes and 19th-century Dominion of Canada notes were not included in the pricing table and it is in these areas where the largest price increases have taken place because this is the domain of the "traditional" (if that's the right word) collector where, generally speaking, condition is of secondary importance to rarity, historical significance and aesthetic beauty. Many such notes are just not available in EF/AU let alone in Unc and Gem Unc yet there is still an amazing demand for them whenever they show up in original unmolested VF or higher grades as confirmed by the numerous well-over-catalogue realizations at the recent Flynn, Angus and Christensen (Spink) sales.

The writer presents some excellent predictions regarding future collecting trends with which I agree. The ever-expanding range of modern "non-discernible" Journey insert notes (about 300 insert serial-number ranges are listed in the latest catalogue) will always be popular within a relatively small group of specialized collectors but, in my opinion, they cannot maintain their current level of prominence in the long term. If you're not convinced then just take a few non-discernible $5, $10 & $20 Journey insert notes that catalogue at $200-$500 each to an established dealer in the US, Britain or Australia (and even to your local coin shop in Canada) and see what their reaction is! However, at the end of the day, collectors will continue to buy and collect what they want to collect and that's the way it always has been and always will be.

Concerning other possible future trends, I foresee increased interest in Dominion of Canada and pre-Multicoloured Bank of Canada notes that have wide "jumbo" margins and are perfectly centered. Also, amongst the chartered series I foresee increased interest in the variations that occur within some of the printed signatures with respect to their size and geometric shape.

I extend my thanks to Dr. Marschner for another one of his thoroughly researched articles that are always worth reading more than once!

Does not get much better than this.

Well researched,well written,well done.
Posted by: Ottawa

[I extend my thanks to Dr. Marschner for another one of his thoroughly researched articles that are always worth reading more than once!/quote]

I agree wholeheartedly.I've read it twice and will again.

Great article Mark, love readong your commentary. Very insightful.

H

Thank you all for the very kind words, and especially Dr. Ottawa for sharing some additional insights and opinion.

It was not my intention to ignore 19th century paper money.  It just sort of happened when I prepared the table of prices since I did not take a deliberate approach in selecting the notes to display.  I find that older notes generally don't follow trends.  Each note type has its own trend, and while better grade items tend to do well, lower grade material is more "hit or miss".  Look at the 1897 green $1 note.  It was listed in the 2000 Charlton catalogue at $400 in Good and $700 in VG.  In the latest catalogue, it's down to $250 and $550, respectively.  In grades of Fine and higher, the 1897s went up in value, so there's a growing gulf between VG and Fine, and it's probably the result of most notes of this issue surviving in VG and lower (coupled with the lack of aesthetic appeal and inherent "problems" like holes and tears in well-circulated deeply soiled low grade notes).  A similar gulf is opening between Fine and VF for the 1878 $1 lettered border notes.  I would be tickled pink if I could sell an 1878 $1 note in Fine or lower at full catalogue.  More significant realizations can be achieved in VF and better, though notes accorded these better grades really need to look good, and that means wide, even borders like you mentioned.  In other words, having an 1878 $1 note in VF or EF doesn't mean you'll get anything close to catalogue if the notes does not "look right".  So much emphasis has been placed on technical grade, especially during this past decade when Third Party Grading made its debut, but to understand the disparities in auction results, one has to examine notes in person to be able to "see" what other bidders are seeing and thus determine why some notes produce a fierce bidding war that pushes the price well over estimate while other notes hardly solicit a single bid at 50% of estimate.

So I totally agree with Dr Ottawa's statement regarding 19th century Dominion and chartered bank notes being the "domain of the "traditional" (if that's the right word) collector where, generally speaking, condition is of secondary importance to rarity, historical significance and aesthetic beauty."  No company, not even PMG, has devised a grading scale that takes into account aesthetics, and this is unlikely to change.  People who are staunch supporters of standardized grading need to realize that there's more to a note than a grade, and that is why the practice of slabbing notes and summarizing their condition with a number between 1 and 70 is of little consequence to a large segment of collectors.  I have seen nice-looking notes in VG and ugly notes in VF.  When so much of a note's asking price is determined by technical grade, I know which note I would rather purchase!  Some of those ugly notes in slabs can stay in slabs, and I would almost be willing to suggest that TPG holders SHOULD be made of plastic containing PVC so that, over time, more overgraded washed and pressed notes will be ruined to the point that they can no longer be passed off as better pieces than they are! 

I extend my thanks to Dr. Marschner for another one of his thoroughly researched articles that are always worth reading more than once!

Yes, thank you again.  I must, however, qualify that by saying this particular article is more opinion than research.  Even opinion based on experience from years of observation does not equate to being traditional research, and I must emphasize that point lest my work should be compared to the work of people who turn aside opinions and seek answers from gathered data.  Of course, with the invention of the Internet, the line between fact and opinion has become a very blurry one indeed!

I really enjoy reading any article on Canadian paper money and this one was a stimulating treat. 

The 10 year Charlton BV comparison chart is quite interesting.  It can be a "sobering" wake up call if one thinks of notes solely as an investment (esp the later series).  I think there is also a lot of subtextual info that can be implied if we try to read between the lines.   As Ottawa noted the BOC issues

that have done well are, naturally enough, the rare and perennially popular ones

  Again, it is the Dominion right up to 1935, and many of the super rare 1954 (* DF's & mods) that have continued to impress collectors with their spiralling upward trends.  We then see many notes (with the exception of a few 1973 test notes) of the post 54 series decrease in value (notably the $2 RS test note).  Although we all know that Charlton is a guide that attempts to reflect upon & or predict current trends it does not necessarily match what people are indeed really ready to pay for a said note (sometimes higher, often lower).  Charlton has never had a more informed panel of contributors than it does now.

I believe that the early high valuations for such notes as the $2 RS test note came about due to the lack of info the Charlton panel had at their discretion 10 years ago (eg how many RS test notes existed on the market).  I think the same can be said for most of the Birds and even for some of the early Journey notes.  What were seeing now is more of a market adjustment as the info becomes more readily available (with online auctions/Internet data bases etc) and the Charlton pricing panel begin to reassess exactly how rare or desirable a particular note might be (eg: 2003 BER).  This is what I think is so interesting about Mr. Marschner's article.  It provokes one to think about such things (alas even how recent and popular eBay is  )

Like "Ottawa" I too was impressed with the analysis of the hot button topic of Third Party Grading (TPG).  Many of us have commented (here) or noted (amongst ourselves during our brief get-togethers at shows) how disparate the US and Canadian grading standards appear, and yet Mark has eloquently demonstrated exactly how loose PMG seems to be.  He uses excellent visual examples and for this alone I recommend you read his article.  There is no doubt that a lack of objectivity in assessing a note's condition has profound consequences for the owner of that graded note.  He predicts that the stricter Canadian grading system will fail.  I tend to think it will become assimilated, or perhaps more accurately, each system will accommodate or influence the other.  BCCS may become more "accommodating"with it's current standards while PMG may re-exam/tighten theirs.  That is ultimately what is in their best interest.  I am not a fan of TPG but we've all seen how it has swooped into our hobby, and I doubt (it being a business venture) that it will ultimately fail even though in its current incarnation seems to be failing those who use it.   

Both Ottawa and mmars (Mark) have made some interesting posts/comments on the

"domain of the "traditional" (if that's the right word) collector where, generally speaking, condition is of secondary importance to rarity, historical significance and aesthetic beauty."

  I have also witnessed how often "traditional" or more established collectors often switch their focus to older, rarer, or, in some instances, to Chartered/obsolete notes.  This suggests that certain notes will develop a certain pedigree of "particularly tough" or scarce to find, and hence become the leaders in future 10 year charts.   I too find it difficult to imagine how the world market (or traditional collector) will be impressed by

The ever-expanding range of modern "non-discernible" Journey insert notes

.  While I'm sure there are more and more new collectors who wish to collect recent (inexpensive) notes in top grade, I wonder how many of them collect the same notes in lower grades.  I have seen low grade radars/inserts practically given away (exchanged for face value) on the forum and yet they still have an inflated BV listed in Charlton that is a far cry from reality (like many of the UNC BV's of recent issues).

Thanks Mark for a most thought provoking read.      

A+

Thank you, walktothewater, for your praise and comments.  Given that a majority of collectors (at least by my observations) continue to prefer raw notes over graded notes, I don't think it really matters if the TPG'ing companies change their standards over time.  The increased popularity of Internet auctions through the past decade has had a far greater influence on price than any attempt to influence grading standards.  The Internet auction has opened up a wealth of material to the open market.  Notes don't get more common with age, they get less common as more are redeemed or lost over time.  But the Internet auction's influence runs contrary to the dissipation of notes among the populace.  Notes that were "hidden" from the market being in private collections or sitting in the inventories of local dealers are now on the market as Internet selling is easy for the average person to grasp.  What has happened to Canadian coins already will happen to Canadian paper money in the sense that the open market will show just how common some material is and prices for these notes will decline.  TPG'ing is just a natural progression on the growing market and the poor standards used by many companies will just hasten the slide in prices.  To balance the slide in prices for common lower grade material, prices in the highest grades will surge as everyone wants to own "the finest known".  Just look at the prices paid for coins in MS-66 and MS-67. TPG'ing just fills the niche.  It doesn't matter if a PMG note in "Unc-67" still has a half dozen creases.  It's the grade on the holder that matters to some people.  Thankfully, those people are still in the minority.  And the gradual progression of collectors toward older notes will limit the demand for Choice and Gem notes because these grades are largely inexistent for older notes, especially 19th century material.

In the end, I think most people who joined Canadian paper money as an investment strategy will be disappointed and will move on.  Paper money tends to go up in value in fits and spurts, but most of the time, prices are pretty flat, thus making for a poor investment.  This past decade got people thinking the opposite is true, present company included, and perhaps the next decade will be much more sobering as collectors take back the hobby.  Many people talk about the hobby like it is an investment, but for the true collectors, it is not.