Adam Crum – Monaco Rare Coins

Critics Believe Second Round of Quantitative Easing By the Fed Will Further Devalue the Dollar and Create Inflation

Federal Reserve Chairman Ben Bernanke has been quoted as saying he would fly over the United States and drop dollars from a helicopter should it be necessary.

Sans helicopter, for the time being at any rate, the Federal Reserve has announced that it plans to breathe new life into the economy with additional quantitative easing, a series of Treasury purchases starting with $600,000,000 that may ultimately total $1 trillion or more according to some sources. With the U.S. economy expanding at just 2 percent annually in the third quarter of this year and the jobless rate apparently stalled at about 9.6 percent, the Fed was pressured to do something to stimulate the economy.

Bernanke explained to students at Jacksonville University that a second round of easing will enable the Fed to accomplish its two Congressional mandates, ensuring full employment and stable prices while preventing deflation and generating some “good” inflation.

Critics say the dollar will weaken and create inflation

Critics believe that the dollar will weaken as these purchases (accomplished by printing money) increase the Fed’s balance sheet. Inflation is fueled by a weaker dollar as the real price of goods and services becomes more expensive. Using past research and her own models, Goldman Sachs strategist Robin Brooks suggests the dollar will need to drop a great deal more than the Federal Reserve thinks in order to meet the central bank’s inflation target.

“Substantial additional monetary stimulus is needed for the Fed to meet its dual mandate on inflation and employment,” wrote Brooks after the Fed’s announcement. She has raised her estimate for the total size of this second round of quantitative easing from $1 trillion to $2 trillion. “If indeed the Fed sees the dollar as one of its key policy levers for preventing inflation from staying below its mandate for a prolonged period, the dollar needs to fall a lot further from here,” says Brooks.

The big question is when Bernanke discovers that the plan isn’t working, how much farther could the dollar fall? This controversial plan of additional quantitative easing takes the Fed into essentially uncharted waters and puts the dollar at risk of crashing. Frankly, these additional bond purchases could be more destructive than critics even think if inflation is ignited when the economy finally comes around. (more…)

by Adam Crum – Monaco Rare Coins

Two years ago‚ a company that performs financial research and analysis on commercial and government entities and has a 40% share in the world credit rating market warned the United States government that it risked losing its triple A rating if it didn’t get its finances under control. That company was Moody’s and the warning was motivated by the future of healthcare and Social Security costs and long before the present financial upheaval.

Does our government deserve a triple A credit rating?

While the U.S. government has had a triple A credit rating since 1917‚ there are those who feel that if the United States were any other country‚ its coveted top-tier credit rating might have been stripped away by now.

“For too long‚ the U.S. has delayed making the tough but necessary choices needed to reverse its deteriorating financial condition‚” David Walker‚ chief executive of the Peter G. Peterson Foundation and a former comptroller general of the United States‚ recently wrote in the Financial Times. “One could even argue that our government does not deserve a AAA credit rating based on our current financial condition‚ structural fiscal imbalances and political stalemate.”

“The triple-A rating is undeserved‚” suggests Peter Morici‚ a professor of international business at the University of Maryland. “If Washington were a state capitol‚ we would have lost the AAA with the current budget.”

Here are just some of the reasons Mr. Walker and Professor Morici would make such statements:

* Equal to about 80 percent of total output of the United States‚ the Treasury Department recently reported that the total U.S. government debt is $11‚270‚547‚397‚564.64.
* With the U.S. relying on foreign buyers to keep its borrowing costs low‚ China and Japan alone hold more than $1.4 trillion of U.S. Treasury bonds as of March‚ according to U.S. Treasury data. A sovereign downgrade would certainly alarm at least some of those buyers.
* The Fed is now burdened by the same kind of toxic paper that has been plaguing private U.S. banks for several quarters.
* Leveraging its capital 48-to-1‚ Fed banks are holding total capital of just $45.7 billion against the sum total of $2.19 trillion in assets. Two years ago the ratio was only 27-to-1.
* The government’s $787 billion economic stimulus package and $700 billion bank bailout fund have strained the country’s resources and the jury is still out as to whether any of this will actually make a difference.
* The International Monetary Fund expects the debt-to-GDP ratio to hit 97.5 percent next year. Standard & Poor reaffirmed its AAA sovereign rating for the United States in January; however‚ the ratings agency also cautioned that the hundreds of billions of dollars committed to bailing out the banking sector would lead to a “noticeable deterioration in the U.S. fiscal profile.”
* The Chinese premier and the head of the People’s Bank of China have expressed concern over America’s long-term credit worthiness and the value of the dollar. China has also called for the creation of a new international reserve currency to replace the U.S. dollar.
* With a loss of 5.7 million jobs since December 2007‚ the number of workers collecting unemployment checks increased to a record of more than 6.6 million in the week ending May 9‚ the highest level of unemployment since 1983.
* The present economic situation in the U.S. is taking a huge chunk out of tax income‚ reported to be down 34%.
* Manufacturing in the U.S. Mid-Atlantic area shrank in May for the eighth straight month.
* States like California have been hit hard by the credit crunch and are struggling to arrange backing for municipal bonds and short-term debt.

(more…)

News and Analysis regarding scarce coins, coin markets, and the coin collecting community #12

A Weekly Column by Greg Reynolds

After covering rarities in the upcoming Boston auctions for weeks, I saved the most awestriking collection for last. Dr. Steven Duckor’s collection of Barber Halves is the greatest of all time for this series. Please read the two part series that I wrote about the importance and depth of this set. Click here to see Part 1, which was published yesterday. Part 2 will be posted soon. As those articles deal with the collection as a whole, with discussion of only a few specific coins, I will mention some additional Barber Halves in the Duckor collection in my columns, including commentary on the 1893-O and 1895-S below.

Just recently, I noticed that one of the most interesting Liberty Head U.S. gold coins will be in the upcoming Stack’s auction, which will be held on Sunday, Aug. 8 at the Boston Park Plaza Hotel. It is an 1853-O Eagle that is NGC certified as ‘Specimen-61.’

I. Specially Struck 1853-O $10 Gold Coin

This 1853-O Eagle (U.S. $10 gold coin) is incredibly interesting. I very much enjoyed examining it. I have never seen another coin that very much resembles the texture and other characteristics of this 1853-O Eagle. I wish to thank Adam Crum of Monaco Rare Coins for enabling me to spend considerable time viewing this coin in 2008. It is one of five or so 19th century gold coins that has received a Specimen designation from the NGC, and the only Liberty Head Eagle to be so designated.

As far as I know, the only other Branch Mint gold coin that has received a Specimen designation by the NGC is the 1856-O Double Eagle that has been certified as SP-63 by both the PCGS and the NGC, and has a CAC sticker of approval. It sold privately for $1.8 million in March, as I reported in my inaugural column. It is important to point out, though, that 1856-O Double Eagles are Great Rarities overall, and any 1856-O Double Eagle is worth more than $150,000.

There is a unique Proof 1844-O Eagle, though that coin merits a separate discussion. Earlier this year, I wrote an article about the Proof 1907-D Double Eagle.

The late researcher Breen strongly believed that this 1853-O Eagle is a ‘Branch Mint Proof.’ Breen is probably the foremost U.S. coin expert of all time. In my view, however, it is not a Proof, but is fairly termed a “Specimen” striking.

Breen declared that this 1853-O Eagle is a Proof in two different books, which appeared more than ten years apart. In 1977, is encyclopedia of Proof coins was published, and, in 1988, a giant book was published that covered Proofs and business strikes, and other strikings, of all U.S. coins plus many colonial and territorial issues. Many of the coins that are listed as Proofs in 1977 are not listed as such in 1988. Breen never saw a good number of the coins that he listed as Proofs in 1977. Later, he changed his view of the status of some of these when he actually saw them or when he heard more about them from reliable sources. Moreover, between 1977 and 1988, he may have changed his mind about the Proof status of some coins that he had seen before 1977. Breen certainly did not change his mind about this 1853-O Eagle. He was certain that it is a Proof.

It is true that most experts now have come to believe that some of the coins that Breen labeled as Proofs in 1977 are really just Prooflike. Coins that are clearly not Proofs yet have mirrored surfaces are often termed ‘Prooflike,’ especially if such coins are well struck and/or have extra-smooth fields.

Prooflike coins are usually early business strikes from new dies or later business strikes that were struck from worn dies after they were extensively polished. Even though this 1853-O Eagle clearly has reflective surfaces, Prooflike would not be a correct attribution for it. The dies employed to strike it were not just polished; they were prepared much differently from the ways in which dies were prepared for routine strikings.

This 1853-O is very sharply struck. Quite a few other New Orleans Mint Eagles of the period are sharply struck as well. The characteristics of the design elements of this 1853-O, however, go beyond being sharply struck. Many of the design elements are in relatively higher relief than the corresponding design elements on business strikes. (more…)