NUMISMATIC - COIN WORLD

Where did the word “numismatics” come from? First documented as an English word in the early part of the 1800s, this word derived from a French adjective, numismatiques, which means "of coins." In turn, that word came from the Latin word for “coin.” The meaning of the word gets even more interesting when the Latin word gets traced back to the original Greek that it was borrowed from. After some iterations, the word came from the Greek nemō, or "I dispense or divide."

How does the bullion market work?: Precious metals basics

The bullion coin market differs from the numismatic market to which many collectors are accustomed. The bullion coin market operates in a tier system structured something like a pyramid, with the issuing authority at the top. The issuing government produces and then distributes the coins in large quantity through a narrow system of large distributors. Dis­tributors in turn sell to wholesalers, who sell to a network of retailers, who then sell to the public. There is, of course, nothing to prevent a distributor or wholesaler from also being a retailer.

At each step down on the pyramid, the field widens. Let’s say, hypothetically, a government sells to 10 distributors. Each distributor sells to 10 wholesalers, for a total of 100 wholesalers. Each wholesaler then sells to 10 retailers, for a total of 1,000 retailers. The tiered distribution system is often referred to as the “pipeline.” 

MORE: CoinWorld.com's precious metals basics

The most important function of the distribution system is in providing a buy-back market. Bullion coins are investments; investments must have a degree of liquidity. 

Governments sell coins into the pipeline but will not buy them back. Selling the bullion coins through a network of private dealers enables a ready two-way market. 

Large distributors absorb buy-backs while at the same time they hedge their positions in the marketplace and hold the coins until the market turns favorable. A small dealer, such as a coin shop or local bank, would place a serious strain on its liquidity if it were compelled to buy and hold coins from an investor taking a profit. And investors would not likely purchase coins for investment that could not be resold for profit.

The above is an excerpt from the eighth edition of the Coin World Almanac, published by Amos Media Company in 2011.


Community Comments

Numismatics is about more than just coins.

While many people use numismatics as a general term to refer only to the study of coins, this word actually refers to the study of all kinds of money. As such, it includes the study of coins and also paper bills, tokens, and other related objects that have been used as currency by various people throughout history, as well as noncurrency items like medals. Some kinds of money used at different points in history might surprise novice numismatists; for example, a culture might have used shells as a currency. 

Barter, or the trade of objects and services for other objects and services, has long been used in the marketplace and continues today. In some cases, the line between barter and currency still provides a topic of debate, but in most cases, articles about numismatics cover subjects like coins and paper money. Numismatics might become easier to comprehend by understanding the numismatic values of coins and paper money, and this refers to the value of a coin or note that is higher than the intrinsic or face value. In other words, this could also be called the collectible value. For example, a historical gold coin has an inherent value that is based upon its bullion value. It may also have a face value, or the actual value of the money assigned by the country that produced it. However, that same coin might be worth much more than the gold or the face value because it is rare, historically significant, beautiful, and/or designed by a famous artist.

Ultimately, understanding numismatics really depends upon understanding the nature of money. In the past, money might have been shells, gems, or precious metals. Today, most societies rely upon coins and paper money, but in this digital age, even that has begun to change as billions of dollars get exchanged every day electronically without the need for physical currency. Even more revolutionary, there are new digital currencies that have never been based upon any nation's physical currency. As it has in the past, it is likely that the study of numismatics will continue to evolve as currency evolves.