The nickel is now the smallest denomination coin made for circulation by the United States Mint. At five cents, it is ten times the accounting value of America’s first small coin—the half cent. And “small” is a bit of a misnomer, as the first half cents issued by the United States were 22 mm in diameter, almost as big as today’s 24.3 mm quarters! Made of 6.74 grams of pure copper, the half cent was worth its weight in copper. That was how things worked back then. Coins had genuine value.
The early one-cent pieces contained 13.48 grams of pure copper. Historians and numismatists labeled these large cents because of the 26-29 mm diameter they embodied during their 64-year run. Like the half cent, a large cent was worth its weight in copper.
Unlike our current monetary policy, the philosophy of a coin’s weight containing its stated monetary value in its metal composition was a mainstay of the early republic. In fact, the Coinage Act of 1792 required it! People expected it. This applied to copper for half cents and cents, silver for half dimes, dimes, quarters, half dollars, and dollars, and gold for quarter eagles, half eagles, and eagles. Throughout the 19th century the United States Mint experimented with other small coins, either denominationally or physically, in copper/bronze, nickel, silver, and gold.
A bronze two-cent piece appeared in 1864 to help alleviate coin shortages caused by the Civil War. A silver three-cent piece, known as a trime, America’s smallest diameter silver coin at 14 mm, entered circulation in 1851 and ran for 22 years. A nickel three-cent piece overlapped with its silver counterpart and ran from 1865-1889. The half dime ended production in 1873 after a 79-year run. This overlapped by seven years with the 1866 debut of the nickel five-cent piece that we are familiar with today.
A silver twenty-cent piece saw very brief circulation in the 1870s, having been introduced to help people make change in Texas and the Pacific coast where the Spanish dollar fractions of bits, two bits, and four bits were still common for making change. There was the tiny 13 mm diameter gold dollar coin which began a four-decade run in 1849, and a 20.5 mm diameter three dollar gold coin which ended a thirty-five-year run in 1889. Forty years later, much would start to change with our change.
Once the Great Depression took hold in 1929, the days for gold coins were numbered. Quarter eagles and half eagles ceased production that year. At the behest of President Franklin Roosevelt, the Mint stopped issuing eagles and double eagles in 1933 and FDR ordered everyone to surrender their gold coins to the federal government. Penalties for non-compliance were severe in the extreme. This left us with the set of denominations we are familiar with today. What these denominations will purchase, however, is on the decline significantly!
A penny today buys virtually nothing on its own. There is the occasional marketing gimmick for routine consumer goods of Buy-One-Get-One sales where the second item costs only a penny, but that does not represent true purchasing power in its own right for the penny. For a nickel and a dime, I can get a single 1/4-in x 20 Zinc-plated Steel Nylon Insert Nut from my local hardware store. A quarter will get me a single miniature York Peppermint Patty from a nearby family restaurant. These feel like mere trifles because small coins don’t really have any significant purchasing power anymore. A century ago it was an entirely different story.
Back in 1926, before inflation steadily eroded purchasing power, you could actually buy more substantive things with small coins. A pair of pennies paid for a first-class postage stamp or a daily newspaper. A nickel was still enough to buy passage on a streetcar in some cities. A dime would get you a loaf of bread. A quarter would pay for a gallon of gasoline. A half dollar would be enough for a pound of bacon. A silver dollar covered the movie tickets for a small family. Those examples make me feel like there was genuine marketplace value for small coins.
For nearly a hundred years, from 1794-1889, many of the small coins made in the United States were copper or bronze, silver, and even gold. Precious metals could not withstand the economic pressure of the Great Depression or the rapidly changing world of the 1960s. The last gold coins were minted in 1933 and the last silver coins for circulation were minted in 1970, and even those had been reduced from 90 percent pure down to 40 percent pure just a few years earlier. In 1982, over four decades before the penny’s eventual 2025 demise, it was stripped of any intrinsic value when its composition was changed from containing 95 percent copper to retaining only 2.5 percent copper, with zinc acting as the accomplice in the monetary subterfuge.
Inflation has rendered the one-cent piece entirely obsolete economically, and the nickel seems not too far behind on its path to being outdated. The United States was late to the game eliminating its once cent piece. Canada stopped minting their penny in 2012. A decade earlier, South Africa stopped issuing both their penny and their two-cent piece in 2002. Yet another decade prior, Australia eliminated its penny as well as its two-cent piece in 1992. New Zealand beat them by two years, ending production of their penny and two-cent piece in 1990.
Nickel, alloyed with copper, is now largely the metal of choice for United States circulating coins. This pair of base metals are the workhorses of modern domestic circulating coinage. But even that is at risk. Is it time to kill the nickel too? South Africa stopped minting theirs in 2012. New Zealand ceased production of their five-cent piece for circulation in 2004 and demonetized the coin in 2006. Not only does the nickel retain virtually no purchasing power in its own right, it also costs the United States Mint much more than five cents to produce one. FY 2025 indicates 13.31 cents as the cost to produce the five cent face value nickel.
The decline in purchasing power of our small coins is directly related to inflation and the removal of precious metals from our money supply. Money is not only a medium of exchange but also a record of account as well as a store of value. Sound money protects the economy by linking precious metals—especially gold—to the regulated issuance of coins, or bills secured by precious metals on deposit with the treasury, which America once did in the form of silver certificates and gold certificates.
