Why did they stop making coins out of silver, copper, etc.?

Discussion in 'US Coins Forum' started by andrgo, Oct 27, 2006.

  1. andrgo

    andrgo New Member

    Just curious, why did they stop making dimes/quarters/halves out of silver in 1965? Why did they go from a penny being like 98% copper to like 98% zinc?

    Was it all done for cost-cutting?

    Are the metals they're using now ever going to be "future silvers" (like what they're making coins out of now, will it ever be worth more if they decide to make it out of something else again in the late future?)

    Sorry if these are stupid questions.
     
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  3. 09S-V.D.B

    09S-V.D.B Coin Hoarder

    You know what they say, the only stupid question is the one not asked. And you're correct, the Mint took silver out of circulating coins dated after 1964 to save on costs, similar situation with Lincolns (Now Zincolns) in 1982. Already, the costs of producing cents and nickels are over face value - so yes, it's only a matter of time until cent and nickel compositions/weight are changed. Or, the government may decide to stop minting cents and nickels completely.
     
  4. Drusus

    Drusus Pecunia non olet

    I assume it is because the metal prices were worth more than the coins face value...

    I know in early america (and indeed other nations) some early silver coins they minted were shipped off to be melted down because the price of silver was more than the face value of the coin so they had a hard time keeping them in circulation...it is like in late rome where the money slowly becomes more and more worthless in is metal value and its worth is determined by decree. Fiat in Latin means "Let it be done". The money is issued on the authority of the government and they say what it is worth.
     
  5. GDJMSP

    GDJMSP Numismatist Moderator

    Yes they stopped using silver and gold to mint coins because it was worth more than the face value. But they also saw what was coming in the near future - there wasn't enough silver and gold on the planet to back all the currencies of the world. And to be quite honest, there wasn't much reason to do so any longer.

    The only purpose that money has is to make commerce convenient. So all that was necessary was for the nations of the world to agree upon a starting point for currency conversion and go from there. Money can be anything as long as everyone agrees as to what that thing is. And once they did - silver & gold were no longer needed.
     
  6. johndo

    johndo New Member

    I understand about the cost of the Gold and Silver to make coin's, but did the fact that the two metal's are soft and would wear considerably faster play a part in it also?
     
  7. Krasnaya Vityaz

    Krasnaya Vityaz Always Right

    Someday, when KPDR blows up bomb over S. Korea and Iran take out Israel, that gold and silver money all that matters. You have paper - you starve and die.
     
  8. ranchhand

    ranchhand Coin Hoarder

    IMO no, they did add copper to the silver and gold to "harden" it.
    off the top of my head, old gold coins where around 90% gold, the rest was silver and coper.
    As to the silver coins, they where also a composition. Silver is actually pretty durable.
    I think the main reason was that the metal in the coins was worth more then the coins denomination.
     
  9. ranchhand

    ranchhand Coin Hoarder

    Keep your metal, I have guns and cows. ;)
    If we end up in a mad-max world look me up, 1 ounce gold = 1 pound of beef.
    ;)
     
  10. Moen1305

    Moen1305 Mysticism and Tyrants

    You guys have a pretty dim view of the future and it's post-apocalyptic certainty. Look at the hard times of the past such as WWII, WWI, the Dark Ages, etc., and you realize that no matter how bad things get, the future ends up being a better, brighter, and more enlightened place. It seems that people are always jonesing for the the end of civilization inspite of all the proof history has provided to the contrary. I'll never understand this need to predict the human race's ultimate doom and destruction. Coins, cows and combat wouldn't amount to a hill of beans if anything really occurred on a grand scale anyway. In other words, precious metals, toxic farm animals and small arms aren't going change the future events for anyone one iota.
     
  11. ranchhand

    ranchhand Coin Hoarder

    I was being sarcastic Moen... ;)
    If you ever get a chance to watch Penn and Tellers show Bull (expletive deleted) on showtime they have a great episode on the end of the world... very funny. They basicly say "if any of this end of the world stuff happens, we will probably end up dead. so lets enjoy not being dead right now"
     
  12. 09S-V.D.B

    09S-V.D.B Coin Hoarder

    Moen,
    Hopefully the human race won't end up gone, but a certainty is that the United States will. And with that, the U.S $ will end up only worth its weight in paper. Then, precious metals and useful products will be the only valuable items.
     
  13. Foster dollar

    Foster dollar Coinguy

    The rising price of silver
     
  14. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    It's a little simplistic to say that they stopped using silver in the coins because the price went up. What really happened is that the federal government desired to spend much more money on the Great Society programs and Viet Nam war, and there was no way to do this by taxing the amounts required from the public because nobody would stand for it. So they choose the alternative and simply created the money they needed out of nothing through the combination of Treasury borrowing and Federal Reserve monitization of the debt. In this sort of situation, the currency is debased and loses its value because it is unbacked by anything tangible. So what we really experienced was not a rise in silver prices, but the slow motion collapse of the dollar which continues to this day. Another way to prove this point is to consider the fact that the dollar was originally defined as a specific weight in silver, 371.25 grains. By this definition, the dollar price of silver can't increase because the dollar isn't a price, it is a weight. But this restriction prevented the government from pursuing the spending growth they desired, so they convinced people that currency didn't have to be an asset, and that it is merely a unit of information. That is about as concisely as I can explain it.
     
  15. Vroomer2

    Vroomer2 Active Member

    When I'm elected president, I will put gold and silver back into our coinage. None of this "fiat" and clad crap anymore. We will have a more accepted ("real") value to the coinage.

    But that's when I'm elected president.
     
  16. johndo

    johndo New Member

    In doing that, won't it invite more people that hate the USA over here?
     
  17. GDJMSP

    GDJMSP Numismatist Moderator

    Let's just suppose for a moment that you were elected and that you did reinstate precious metals in coinage. Do you realize what would happen if you did ? Every coin would be pulled from circulation and hoarded away just as fast as they were released - Gresham's Law in action.

    That is the simplistic scenario, the specific scenario would be a thousand times more complicated because in today's world we have a planet wide economy, not just a national economy. And before the first coin was ever struck you would discover that it was impossible to revert back to a precious metal coinage.
     
  18. Conder101

    Conder101 Numismatist

    I could buy that as an explanation for the old recall in 1933 since the government knew it was going to need to inflate the money supply for all the new government programs to try and get us out of the depression. They problem was in order to create more money they needed more gold since by law the two were linked. So the recall gave them the extra gold and then the official revaluation of it in effect doubled yet again the amount of money they could produce.

    The argument for the Great Society programs doesn't hold up becuase the free market price of silver had already reached the point where the coins were worth more as metal than as money and they were already disappearing into private hoards.The composition was changed because every coin produced was costing the government more than the face value to make. There was no sign that the rise in silver prices would stop anytime soon so just lowering the weight or fineness would only have delayed the inevitable. So they simply removed the silver completely.

    I don't think so, many times in the past societies have switched back from a fiat currency to a precious metal one.

    It can be done. The key is to make sure that the value of the precious metal content is sufficiently below the face value of the coin. Here's a simple example. Start with a revaluation of the dollar say 100 old dollars equals one new dollar. This makes gold around six dollars an oz. Now I take about a half oz of gold and make a coin with a face value of ten dollar (Basicly use the old standard for an eagle) Now sure you could hoard that coin away but you'd be losing money to do so. If you just want the gold you could buy the same amount on the open market for three dollars, but the coin you say would be hoarded is ten dollars. Yes Greshams law would still work, but the gold bullion would be the good money forced out by the "bad" overvalued precious metal coinage which would circulate. Under this set up Silver is nowabout 11 cents an oz. A silver dollar would have about 8 cents worth of silver in it and a face value of a dollar. But it would have the purchasing power of 100 of todays dollars. All the rest of the coins would be inproportion. A "new" cent would have the buying power of todays dollar. Go to the vending machine, a coke is now one cent. We might want to bring back the half cent piece.

    And I haven't really changed anything other than revaluing the dollar. Sure everyones income goes down 100 to 1, but so do your bills. So 10 dollars in your new income goes just as far as 1000 dollars did in your old one. All it has done is restored the purchasing power to the dollar that it had a century ago. And other countries shouldn't care because what do they care if they get 100 dollar or one new dollar as long as it buys the same thing.
     
  19. 09S-V.D.B

    09S-V.D.B Coin Hoarder

    Isn't this just another type of fiat money? The intrinsic value of the coin is X, but the government says the value of the coin is 2X. The [greater] value still rests on the governement's promise that the coin is worth 2X.
     
  20. bama guy

    bama guy Coin Hoarder

    I miss the days of the silver coins. the sound they made when you "toss for the wall" for quarters brings back fond memories of my younger days. Last week someone at work ask me to exchange quarters becouse the vending machine would not take it . being the nice guy I am , I did. Turnerd ouf to be a 1960 washington D quarter. The machine did not like it but i did . It is so much cheaper to to print money than to mine gold or silver
     
  21. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    Workable plans to convert back to a silver standard already exist and can be taken "off the shelf" at any time. The problem isn't that nobody knows how to execute the conversion, they just don't have the will or vested interest to do so. Mexico is currently going through the debate about whether to do this since they have enough silver to make the conversion if it is deemed desirable to try to eliminate some of the enormous poverty of the working class by giving them a currency with actual intrinsic value. Federal government and central bank are against the plan. The state and local governments and businesses generally favor it. It is unlikely to be implemented in my opinion.

    The basics of the plan involve permitting silver and clad coinage to exist side by side. The silver coins will be struck as a weight and not as a value, for example, as one ounce legal tender coins. The currency value of the coins will be posted and changed periodically by the government the way interest rates are today. Only three things are required to make this plan work. First, the initial value of the silver coins must be set above the current price of silver, say at $20 per one ounce coin [in US dollar terms]. This makes it uneconomical to melt the coins while at the same time providing a coin with an intrinsic value greater than the clad coins. Second, if the fiat price of silver ever rises above that amount, the official excange value of the silver coins will be increased to or above the new exchange amount. Third, once increased, the legal tender exchange value of the silver coins can never be decreased under any circumstances. The revaluations will be all in one direction, up for silver. The hoarding argument is frequently raised, but is really a non-issue. Of course people will exchage the clad and save the silver. But since the entire purpose of silver coinage is to permit people to own and save monetary units with actual value that cannot be easily eroded by inflation, this is a positve feature and not the negative feature envisioned by some. The primary opposition to the plan will always be the Federal Reserve in the US and central banks everywhere, because silver coinage is a powerful competitor to their primary product, paper money with no intrinsic value that can be created in unlimited quantities at will.

    The argument that there isn't enough silver [or gold] in the world to use as money may or may not be true. The goal doesn't have to be to replace the existing currency in its entirety, but only offer a substitute to trade side by side that cannot be destroyed by government mismanagement of the currency. To a certain extent, this is what is going on anyway as people collect gold and silver bullion coins. Also keep in mind that a relatively small face value amount of currency can support a very large amout of commerce. The $11trillion GDP US economy is supported by about $900billion in fiat currency [or something in that range, which I didn't look up for this post]. There is also the alternate argument proposed by some people that the market price of silver and gold would be many many times higher than today if restored as coinage, thus requiring fewer ounces to replace the fiat currency than is required at current exchange rates.

    But it's never going to happen so the entire possibility remains pretty theoretical, but interesting.
     
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