This discussion was originally published in the International Bank Note Society Journal. It applies to military payment certificates just as it does to all other things that people collect.

The following actually happened. I had the pleasure of delivering the very first copies of a new catalog (book) to a major show (all identities being carefully avoided here). The catalog was eagerly awaited by many. Two knowledgeable and respected dealers were studying one copy of the catalog. Dealer C says to D, "Look up item N." Dealer D did and reported to C what the list price was. Dealer C then started laughing. Dealer D politely laughed a little, and asked "High or low?"

"What is it worth?" is not an easy question to answer. There are many very different ways to look at the issue of value. The most obvious difference is that it depends upon whether you are buying or selling a given item. If you see a note in a dealer's case being offered for sale at X and you offer the dealer a virtually identical item, you know that the dealer must pay less than X (how much less will mostly be left for discussion at another time). Suppose that the dealer offers you Y for it.

This difference is the wholesale/retail spread. It exists for all commodities, it is lurking back there all of the time. We all know that it exists, and most of us use it in some way in our professional lives to make a living. The big difference in collecting (virtually all collecting) is that the retail buyer is also involved in the wholesale business by selling material to the retailer. This is a strange situation in retailing. I doubt if many business colleges discuss this when teaching marketing.

Anyway, you decline the dealer's offer. Another person sees your note and asks "What's it worth?"

How do you answer that? You might say X, or you might say Y. or you might say Y +(.5*(X-Y)).

Here is an even more bewildering twist to the above scenario. After receiving offer Y for your note and declining, you walk around the bourse floor and find dealer B selling another virtually identical item at Z which is somewhat lower than Y. You could buy it, carry it to dealer A and sell it for Y making a profit of Y-Z. By the way this has been done many times at shows. What is it worth?

Many people respond to the question by quoting the value given in a catalog for the item. Such information is certainly interesting and often important, but it does not answer the question. Most numismatists (I am avoiding the term collector here, which might exclude dealers) say that they understand why catalogs and markets have different values for given items. The most quoted reason is that there may be a substantial time between the submission of the values and the actual publication of the book. Then there is the time difference between publication and use of the book. These time lags are certainly there and do make a difference. The discrepancies caused by time lapses are far from the only reasons. They are good reasons to talk about because all are victims of time and time is neutral.

Dealer Mel Steinberg has commented publicly that catalog values are different from market values because "the process is flawed." The biggest flaw is that we have people doing all parts of the task. People prepare the catalog listings (not the values), send the lists to other people who estimate the values, and return the estimates to the same people who sent them out. These people then compile (and perhaps evaluate) the estimates, enter the results, and have other people type the results into computers.

All of these people can and do make human errors. However, beyond that, they all have different perspectives on the matter. They also have very different experiences even with similar material. The vast majority of people who submit values for catalogs are dealers or active collectors. It is unrealistic to expect these people to ignore self interests when they attack these tasks. Indeed, even if it were possible to disregard self interest, it is impossible for them to disregard the emotions and feelings that they will have about some of the notes. Yes, emotions and feelings. In the example above, dealers A and B priced the same item substantially differently.

Mel also pointed out the difference between theory and reality. It is one thing to evaluate a note among hundreds or thousands for catalog listings. It is quite another thing to hold it in your hands and make a judgment. Suppose that yesterday you carefully evaluated rare note R (among many others) for a catalog listing. You have not seen one of these notes in a long time if ever and could not find any sales records. You then carefully compared it with similar issues of the same era from the same and or perhaps similar countries. In all good conscience you entered price P for the note.

Then by the miracle of microcomputers and physics research the catalog was published the very next day and the day after that you are at the Memphis paper money show. A collector comes to your table carrying an example of the note that you had evaluated at P. After commenting that she had bought it for P-500 units a few years ago says that she wants P+500 units for it.

The fact that she paid P-500 for it a few years ago seems to substantiate your estimate of P for the note. It was an estimate after all. Therefore the asking price of P+500 seems like too much. At that moment you are probably quite willing to pay P for it expecting that it should not be hard to find a collector to pay P+200 for it, but can you pay P+500? If you pay that price were you unethical or mistaken when you evaluated it at P?

In this situation, there is a very good possibility that you will pay P+500 and you were certainly not unethical and probably not even mistaken when you entered the price in the catalog. You have just experienced the difference between theory and practice.

Most catalogs purport to list retail values for the items described, although they almost never use that term. The value listed is supposed to be what a collector should expect to pay a dealer for the item. For many years Western Publishing Company has published two different catalogs of United States coins. One is supposed to be a dealer's buying price, the other the dealer's selling price. I do not suggest that the system works even for United States coins, but it is interesting, and it has sold a lot of books.

About this time in any discussion, someone usually suggests that auction results are the ultimate means of determining value. For every complex question, there is an easy and obvious answer that is also wrong.

Auctions can and do provide much interesting and useful information in listing values, but they are far from the final answer. In theory, if a legitimate auction is held, and all of the willing buyers are present, the "right" price will be reached. Well, wait a minute. Suppose that the above auction occurred, and you are responsible for entering the value of an item in the ultimate catalog of that type material. The auctioneer hammered down one price, but the buyer paid a higher price because of commission, sales tax, and possibly other fees too. Of course the seller received a lower amount than any of these. What number do you enter in the ultimate catalog?

Now change the scenario a little. It is still an ethical auction, but all of the possible buyers are not there. This now looks much more like the typical auction. You are watching as a cataloger. The following things happen.

Two collectors fight it out to the end for item T.
Two dealer's fight it out for item O.
Two dealer's fight it out for item U. but it sells "to the book."
Dealer A buys item G for X.
Dealer B buys the very next lot, item H. for X-50. (Consider also that T might have sold for X+50, and that in either sale some of the participants might have been collectors instead of dealers).

Just suppose for the moment that you have solved the issues of commissions, sales tax, shipping charges etc., what values do you put on items T. O. U. G. H?

If that is not enough, you visit the bourse floor within minutes of the auction and you see the following things happen.

Dealer C sells an item identical to T for a price less than that realized in the auction to the collector who lost out in the bidding.
Dealer A delivers item U to a collector and receives a commission for having executed the bid.
Later still, the "buyer" of U returns it for grading or other reasons.

What values do you place on the items?

Does it make a difference if the owner of the material is allowed to place minimums and or bid on his own material? These possibilities bring in many more variables. If an item does not reach the minimum, is it reported or does it appear to be a sale? If the owner (or the auction house on the owner's behalf) bids, is a commission paid?

None of the above situations is hypothetical. I have observed all of these things and many others take place in the marketplace. "What is worth?" is NOT an easy question.

Different systems have been attempted to determine catalog values. There is at least one catalog from the 1960s that listed items with values like $3.66, and $2.43. This author took a pure arithmetic average of the values submitted by a few friends.

Quite recently, a publisher decided to use technology to solve the riddle. A formula was developed to evaluate multiple criteria that already existed in the catalog, and a computer dutifully generated values. These were probably the most consistent values ever entered in a catalog, but collectors screamed!

All of the above was not meant as an excuse to have wild and completely unfounded values in a catalog. The material in the approximately $100 - $800 level should be relatively easy to evaluate accurately. Pieces in this price range trade frequently enough to have a track record and are valuable enough that everyone involved is careful about the transactions. There is room for errors here too, but a good catalog should be able to represent a good value. If the true value (whatever that is) of note N is Z. the listed value should be Z plus or minus D where D is much less than Z. Of course there will still be many "mistakes" made within this price range too.

After completing all of the above, I read that the publisher of the major stamp catalog in the United States (Scott) is changing its valuing philosophy. This is the second major change in just a few years. The first was to reflect actual market price. This change is to reflect the world retail value for the stamp instead of the "retail" in the United States where the catalog is published.

The first interesting thing is that Scott stated such a policy and then changed it. To my surprise, I found that in the forematter to the Pick catalog is a statement to the effect that the values reflect the retail level in the United States. This is the philosophy from which Scott changed. It is really an interesting thing.

The underlying point is that home markets for many (most?) countries are stronger for their material than in the United States. It certainly has not always been so. Add currency exchange rates to this situation and it is quite a mixture.

I cannot go on too long about this aspect, but I cannot help but point out that such factors have been active in numismatics for a very long time.

During the colonization of North America, many marvelous coins (perhaps some paper too) were shipped to England at the request of collectors there. Virtually no collectors wanted them in North America, where they were more focused on clearing farm land and such chores. Later the home market developed and the coins were bought (and brought) back "home." In a really unusual twist, there was a short time in the 1980s when some of these very same coins were taken to Japan by collectors there who wanted them more than any collectors in the United States.

Finally we should be careful not to focus too much on the issue of value. Many experienced and sophisticated collectors have pointed out over the decades that the opportunity to buy something is often much more important than the price. That is a difficult concept to understand until you have passed a few items because of the price, then regretted it for years-and decades. I can attest to this from personal experience and have many stories to tell along that line (but I will spare you for now).

All of this seems like the world's longest disclaimer as an introduction to a priced catalog. If we cannot determine what something is worth, what good is a value guide? Guides fulfill several needs. Probably the biggest and most often cited function is to serve as a guide. Hopefully, this and most guides are impartial and a neutral estimate can be very useful in negotiating for buyers and sellers. Next the guide should be quite good at showing relative market values. Finally, in an interesting twist, value guides that purport to report market conditions, often influence the market! The most obvious effect is to move the market price of a piece up or down. This effect on mature and robust markets should be minor but they are undeniable. A somewhat more subtle, but generally more profound impact is made by the editorial decisions about what to list or not list. Varieties listed in catalogs almost always trade for more than similar varieties that are not recognized by the catalogs.

The International Bank Note Society (IBNS) developed and adopted the following grading standards for all paper money. In general they apply to MPC, but there are a few special and supplemental considerations. First, military payment certificates were printed by surface means. Therefore, uncirculated pieces will be flat. There is no possibility that they will have the waves sometimes found in uncirculated, but engraved notes. Secondly, because the fractional notes are significantly smaller than the norm, it is possible that the standards described here will not apply exactly. Specifically, a fractional piece can be much dirtier than normal for a note with no folds or fewer folds than would be expected for the grade.

Finally, specialists in United States paper money frequently recognize three different grades of uncirculated (gem crisp, choice crisp, and crisp). The significant difference is the centering of the note with "choice crisp" being average. The IBNS standards do not recognize these differences and even disavow them. However, the realities of the market are that there can be a difference in the price of two certificates based on centering.

Uncirculated: A perfectly preserved note, never mishandled by the issuing authority, a bank teller, the public or a collector. The paper is clean and firm, without discoloration. Corners are sharp and square, without any evidence of rounding (rounded corners are often a telltale sign of a cleaned or "doctored" note.) An uncirculated note will have its original, natural sheen. Note: Some issues are most often available with slight evidence of counting folds (creases). Many collectors and dealers often refer to such notes as AU-UNC.

About uncirculated: a virtually perfect note, with some minor handling. May show evidence of bank counting folds at a corner or one light fold through the center, but not both. An AU note cannot be creased, a crease being a hard fold which has usually "broken" the surface of the note. The paper is clean and bright with original sheen. Corners are not rounded. Note: Europeans will refer to an about uncirculated or AU note as EF-Unc or as just EF. The extremely fine notes described below will often be referred to as GVF or good very fine.

Extremely fine: a very attractive note with light handling. May have a maximum of three light folds or one strong crease. Paper is clean and bright with original sheen. Corners may show only the slightest evidence of rounding. There may also be the slightest sign of wear where a fold meets the edges.

Very fine: an attractive note, but with more evidence of handling and wear. May have a number of folds both vertically and horizontally. The paper may have minimal dirt, or possibly color smudging. The paper itself is still relatively crisp and not floppy. There are no tears into the border area, although the edges do show slight wear. The corners also show wear but not full rounding.

Fine: a note which shows considerable circulation, with many folds, creases and wrinkling. The paper is not excessively dirty but may have some softness. The edges may show much handling, with minor tears in the border area. Tears may not extend into the design. There will be no center hole because of excessive folding. The colors are clear but not very bright. A staple hole or two would not be considered unusual wear in a fine note. The overall appearance is still on the desirable side.

Very good: a well used note, abused but still intact. Corners may have much wear and rounding, tiny nicks or tears may extend into the design, some discoloration may be present, staining may have occurred, and a small hole may be seen at the center from excessive folding. Staple and pinholes are usually present, and the note itself is quite limp but NO pieces of the note can be missing. A note in very good condition may still have an overall not unattractive appearance.

Good: a well worn and heavily used note. Normal damage from prolonged circulation will include strong multiple folds and creases, stains, pinholes and/or staple holes, dirt, discoloration, edge tears, center hole, rounded corners and an overall unattractive appearance. No large pieces of the note may be missing. Graffiti commonly seen on notes in good condition.

Fair: a totally limp, dirty and very well used note. Larger pieces may be half torn off or missing besides the defects mentioned under the good category. Tears will be larger, obscured portions of the note will be bigger.

Poor: a "rag" with severe damage because of wear, staining, pieces missing, graffiti, larger holes. May have tape holding pieces of the note together. Trimming may have taken place to remove rough edges. A poor note is desirable only as a "filler" or when such a note is the only one known of that particular issue.

Other defects
Notes with physical defects that are out of character for the grade as it would otherwise be assigned must receive additional attention. They first must be graded according to the standards above without regard to the defect. A description of the defect must then be added to the grade of the note. The words "pinholes," "staple holes," "trimmed," "writing on the face," "tape marks" etc. are examples of the qualifiers that must always be added to the description of a note. This is done rather than attempting to adjust the grade to account for these defects.

Virtually all experienced collectors and dealers will agree that you should not attempt to wash or clean MPC or other pieces in your collection. It is tempting to try to upgrade a very fine certificate to extremely fine or better by washing. The easy answer is that you should not try, because it cannot be done. Advanced collectors can recognize notes that have been washed (or otherwise "doctored"). A washed very fine note looks like a washed very fine, not an extremely fine and all collectors prefer the natural, unmolested piece. Unfortunately, it is not so easy for beginners, and we do not have any fool proof methods to offer.

If you really want to get carried away, cut some common notes in half. Label one set of halves and put them aside. Then wash, press, bleach, starch, and otherwise experiment with the other halves. When you have done your best work, get out the control group and compare.

To make things more complicated, some alterations are accepted and there are times when more serious steps should be taken. If a previous owner of a certificate wrote a price lightly in the margin in pencil, it is acceptable to erase it. However, to use a chemical to remove the same annotation in ink is not. The difference is that the chemical probably altered the paper in addition to removing the ink whereas the eraser probably caused no permanent damage.

Finally, notes that have been seriously damaged by tearing or with tape may be restored by professional (or even amateur) conservationists. This is accepted practice, but the restoration should be pointed out in all sales transactions. Such restorations will generally only be done on valuable notes because professional restoration can be expensive.

As is the custom with most paper money books, we have assigned catalog numbers to the various issues. The purpose of catalog numbers is to allow precise communications among collectors via fax, e-mail, snail mail and other means. Frankly, numbers for MPC are less useful than in many other areas because the issues lend themselves to concise description. Series 61 15› or just 611 5› is nearly as concise as listing #xyz and probably more concise than listing Schwan number xyz. However the numbers do provide a convenient means of referencing the book and are especially helpful for identifying varieties.

In this case, the most important use of the numbers probably is to identify varieties. The numbers have been adopted from World War Il. Remembered with cooperation of the publisher. This has the undesirable effect of changing the numbers from Military Payment Certificates, but it has several advantages. First, it coordinates the numbers between two current works. It also facilitates using this book with that larger and broader work. A number cross reference including the above books and others is included as an appendix.

Finally, the numbering system includes uniform identification of varieties. The following suffixes to the catalog numbers are used:

a-e ... minor varieties
p ..... proof or unfinished
q ..... counterfeit (queer)
r ..... replacement
x ..... cancelled
s ..... specimen

I asked Fred if I could include this great article out of his book The Catalog of Military Payment Certificates. This is a new book by one of the foremost authorities on MPC, military items, and other collector books in the U.S.

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