US Coins

Bowers: How gradeflation encourages resubmissions

The Joys of Collecting column from the Oct. 3, 2016, monthly issue of Coin World:

In recent weeks I have discussed grading and that, in my opinion, with 11 official American Numismatic Association grades each from Mint State 60 and Proof 60, to Mint State/Proof 70, I have never met anyone who can consistently apply those numbers.

Indeed, part of the grading milieu for a long time has been the mutually profitable system of resubmitting the same coin to the same certification service and having it returned with a higher and thus more valuable grade.

Through gradeflation, a grading service earns multiple fees instead of just one, and a collector or dealer holding an About Uncirculated 58 coin who now has it graded MS-62 benefits as well. 

Connect with Coin World:  

The two leading services today are the Professional Coin Grading Service, established in 1986 by David Hall and dealer associates, and Numismatic Guaranty Corp., established in 1987 by John Albanese.

A problem developed early on and some submitters threatened to boycott certain services for lack of consistency. To answer criticism about the imprecision of grading and numbers moving around, PCGS announced this in an advertisement in The Numismatist in June 1988:

“The reality of coin grading is that perceptions change, but coins don’t change. To establish a truly permanent grading standard you need permanent physical examples of the grades. You need a set of grading examples. … You need a permanent grading set. PCGS is now rapidly expanding its permanent grading set. … The goal is to have $500,000 worth of coins by the end of 1987 [sic] and $1 million worth (at today’s prices) by 1990. … So how does the PCGS permanent grading set benefit you? Quite simply, when you buy a PCGS coin you are buying a coin that has been graded according to a grading standard that will not change … EVER! The current standards used by PCGS are the same standards PCGS will use in 1992, 1997 and even 2002 because the coins in the PCGS permanent grading set are the coins that will be the grading standards for PCGS in 1992, 1997 and 2002. The days of changing grading standards are over forever.”

In the same issue John Albanese also asserted that NGC standards would not change either:

“Numismatic Guaranty Corporation’s strict grading standards have brought stability and credibility to the coin industry. Every coin we grade is evaluated by a team of three to five graders, then sonically sealed in a specially developed holder. But with the Numismatic Guaranty Corporation, your investment value remains in the coin itself, not in its plastic holder.

“Because we are the most trusted name in coin grading, NGC-graded coins are often bought sight unseen. Market makers and coin services know that NGC-graded coins are not subject to fluctuating grading standards…”

In the 1980s an investor who had paid $100,000 for a Proof 68 Morgan dollar did so as it was the only one in the entire world that had received this grade from a leading service. Recently, I checked the population reports and found that PCGS and NGC have graded over 350 Morgan dollars as Proof 68 or better. Do we want to revert to strict interpretation of standards with reference coins that can be examined — just as the Bureau of Standards has reference weights? Or do we all love gradeflation? I will leave it up to others to establish stability today, if indeed people want this done. Most people having a coin for sale that was certified as MS-64 10 years ago and could be certified as MS-66 today would resubmit it. I would.

The above said, next week I will give my opinion on the many positive aspects of certification. 

Community Comments