Saturday, February 5, 2011

Counterfeiting and the Tragedy of the Commons

It does not take much research to read far too much about the glut of counterfeit numismatic materials manufactured in China and sold on eBay.  Chinese counterfeit factories purchased old U.S. Mint equipment, old dies, and other tools.  Their work destroyed the markets in Seated Liberty coins and Trade Dollars, but any coin, even the most common, is a potential target.  Not surprisingly, some have faked the certifcation holders of PCGS and NGC. At conventions and shows, numismatists display educational exhibits of counterfeit coins in real holders and bogus coins in  bogus holders.  The federal government does nothing. 

On the other hand, ahead of the Super Bowl, enforcement against phony NFL gear is vigorous.
So far this year, Immigration and Customs Enforcement (ICE) and other agencies participating in "Operation Interception" have confiscated 36,273 counterfeit trademarked items nationwide, with more expected through the weekend. The value of the haul thus far: more than $3.56 million.   (Full story from for February 5, 2011, is here.)
This is an example of the tragedy of the commons.  The NFL trademarks belong to someone.  Those someones are also wealthy.  So, they get the government to pay attention when they are victimized, and rightfully so.  With collectible numismatic material, no one owns the images and designs.  (One exception is the Sacagawea Dollar, owned by artist Glenna Goodacre, and licensed to the U.S. Mint.)

Of course, counterfeiting an old silver dollar is also a federal offense: money is money; and all federal money is the lawful obligation of the U.S. Treasury, no matter how old it is.  With some exceptions, such as Gold Notes, all U.S. money is legal tender.  But, of course, no one spends rolls of 1872 Seated Dollars or even 1922 Morgans.  So, the actual threat to the govenment is minimal: individual collectors take the losses.  The real threats are from counterfeit paper money; and the Federal Reserve is a private institution.  By comparison, the Bank of England is also like our Fed, nominally private, with a government-appointed board of governors.  Bank of England money carries a copyright notice.  Counterfeiting is a crime, not so much because it wrong to defraud people - though there is that - but mostly because it transgresses the intellectual property of the banks.  Since no banks issue Bust Dollars or Capped Bust Half Dollars, enforcement is lax.

This story from About.Com exposing a Chinese counterfeiting factory dates to April 2, 2008.  The Collectors Universe message board (NASDAQ symbol CLCT) for September 27, 2009, carried a summary (read here) of Dr. Gregory V. DuBay's talk at that summer's ANA convention in Philadelphia, revealing more about the depth and breadth of numismatic counterfeits from China.  His system for classifying Chinese dies was included as an appendix in the first edition of the  Red Book Professional Edition, but was deleted from the second edition.  I spoke on the same subject at the ANA convention in Pittsburgh in 2004.  The information I presented was not new or original with me: I only gathered examples from others... and all too easily... 

This is a known problem.  Nothing is done because no one owns it. 

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