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thatcoinguy's Blog

20 Jul 2022

Gradeflation

| thatcoinguy

On one of my recent blogs, “No Grade Designations: What Are They?” I got a very interesting comment from one of our members who bought a cleaned twenty cent piece. It came back from NGC and was cleaned. But he sent it back years later, and it got an XF-40 full grade! He asked how this could happen, as it couldn’t have been uncleaned during his time with it. I thought instead of trying to make my answer a comment, I thought it deserved its own blog post, so here it is! And thanks so much to @coinsbygary for the idea!


Gradeflation is not a term I have just pulled out of the air, but rather learned from many knowledgeable numismatists, including graders from both the major grading services. So, let’s go back a while, to where it all started. If you look back on issues of the Numismatist from the early 1970s, there was a lot of talk about creating standardized grading specifications. There was not a standard grading scale, and this was becoming a big problem as prices for coins of varying grades were beginning to skyrocket, and each dealer had their own way of giving verbal grades in their price catalogs. The rest of this story was as told to me by Ken Hollenbeck, who I met at Summer Seminar. On a literally dark and stormy night in the 1970s, a group of the greatest numismatists of the times gathered in a very tall skyscraper. Everyone who was a big name in numismatics was there. Bill Fivaz, Q. David Bowers… you name them, they were probably there. They met in the room, conferred for a long time, and when they came out, they had created the specifications for each grade in a standardized grading service.


Now, as you can imagine, that was a pretty monumental moment in numismatic history. A lot of people don’t know this, but if you look back at Pre-1970s Red Books, you won’t find prices for a MS-63 Morgan Dollar, or an AU-55 Standing Liberty Quarter. Back then, the columns were mainly divided into grades like so: V. Fine, Unc., and Proof. There were no number grades.


And as you can probably also imagine, the grades “The Great Conference Of Numismatics” (which is what I’m calling it) came up with in the early 1970s are not the grading standards today. Overtime, the grading standards have become looser and looser. Here’s an example of why.


Back then when TPG services were becoming popular in the 1990s, they were strictly grading off of the written standards that the conference had come up with. But soon, graders started to notice that this MS-66 looks better than that MS-66. So the better one must be a MS-67! So they had a new standard for MS-67. But soon, a coin they would have graded MS-67 looked better than the original MS-67, so it must be an MS-68! All of a sudden, the coin that the written grade from the conference would have been MS-66 is now in an MS-68 holder! The standards get looser, and the coins get graded higher. There are some collectors and dealers who take advantage of this by buying a Buffalo nickel in, say, a MS-64 holder from 1989, when PCGS started. They crack it out, and send it to PCGS again, and it comes back with a MS-66 holder!


There you have it, Gradeflation. If you have any questions or comments, don’t hesitate to leave them in the comments below, because if you are wondering about something, somebody else probably is as well!


So to answer you question @coinsbygary, it was probably enough cleaning to no grade it back then, but not enough for now where the standards are looser.


Keep collecting,

Thatcoinguy


Comments

Jackson14

Level 4

Good blog. Thanks.

AC coin$

Level 6

During my earlier days within this great website, I recall a sitiation about a member who sent his coins to be evaluated and graded within the trusteable mailing ways available. Grading houses tend to irk me because of not "their handling" but the pathways our valuables sent go thru. Even though this issue has nothing to do with your well brought term "gradeflation", inflation is not the only rough reality for all of us and many more collectors. Great blog, thanks.

Long Beard

Level 5

In a nut shell, the founders of modern third party grading standards refined Sheldon's scale which was based on a monetary value, not the "grade". Meaning an F12 was on average twelve times the price of a P01 and so on up the scale to MS70. Looking through some old auction auction catalogs of the time those numbers were surprisingly close to his scale. Which no longer applies as the intent was forever modified. Which is not a bad thing, per say.

Kepi

Level 6

Great subject! Lots of interesting points. Enjoyed it! ; )

coinsbygary

Level 5

There is so much I could say about this topic! First, I am happy to have inspired someone to write a blog based on my comment. Next, Pandoras Box, rabbit hole, or can of worms are all synonyms for grading as it has evolved since the 1970s. To sum it up, CONFUSION! The wild card in grading will always be human opinion. Seventy points or 100 points, it all boils down to human interpretation. A 100-point scale may be more accurate, but the market learning curve will be very steep. It's kind of like the efforts of the government for us to change to the metric system many years ago. With a new system comes a fear of being ripped off. In particular, when I buy gas by the liter instead of the gallon. People may feel ripped off by a 100-point scale because of unfamiliarity with the new system. Love it or hate it, I know the Sheldon scale. Under the watchful eye of CAC, the market feels comfortable with things the way they are. CAC will have to be a discussion for another day. Have grades inflated? Yes. Over time and with more use and coins to compare, I think gradeflation has plateaued for a time.

thatcoinguy

Level 5

Oh yeah, CAC is definitely something to discuss at some point.

Mike

Level 7

I thought this blog was about sending cleaned coins back and hopefully not get that again. Get a real grade. Hopefully get a number grade. I didn't read anything about the Sheldon scale. Sheldon is not even mentioned!

I. R. Bama

Level 5

Snarky. But the Eagle does not chase flies.

Longstrider

Level 6

Nice blog. One has to remember that all our coins are graded by humans. We have three major TPG and they all have different opinions. Many people are pushing a new 100 point scale. I don't think that will fly now but maybe soon. Many European countries as well as Canada use a 100 point scale. Lets not forget the eye appeal and the "+" and "*" designations. Thanks.

I. R. Bama

Level 5

I think there is a huge problem with the Sheldon scale. It is so asymmetric that it can't possibly have a high level of interobservational validity and reliability. We need to scrap the Sheldon scale and move to a 100 point scale. I mean, knowing that Sheldon was a psychologist, I can see where he got the idea for a 70 point scale. It is an expansion of the Likert scale which has 7 points. But in this application, such a scale does not yield consistent results in grading coins. There is where grade inflation comes from in my opinion.

Mike

Level 7

Thanks for the information. Remember you send it back you have to pay all the fees and there is no guarantee it will come back the way you hope. Graders will tend to stick with there fellow workers. When you send a coin in to be cleaned to remove something from the surface it doesn't mean the grade will go up. I had a token they said they could remove the substance from the token the grade went down one step. There are no guarantees it will go in your favor. Thanks for another good blog!

user_30405

Level 4

Nice blog! I would also suggest Grading Coins by Photograph, it is very interesting to see the differences in terminology, and pickup points

Rebelfire76

Level 4

Interesting blog, with quite the relevance, in the expanding universe of number grades. Also, as I have been learning about grades, the history, and current definitions, I purchased the ANA’s Official Grading Standards. And while some may argue this, what I have learned is that a circulated AU55 maybe graded MS-60 now, and as you noted, a MS-65 may be a MS-67 now, depending on the coin, and others that exist in similar grades. I truly recommend reading the ANA’s Official Grading Standards, as there is more than just grades and pictures of coins in various grades, but a history of grades and grading standards, and it even talks about this specific topic of gradeflation.

thatcoinguy

Level 5

I agree. I got that book with the Summer Seminar course, and it is truly a helpful recourse.

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