When coins lost
their silver
On 23 July 1965, the United States removed silver from its ten- and twenty-five-cent coins. Not by aesthetic choice, but by arithmetic: the metal inside a coin was coming to be worth more than the coin itself.
Money worth more melted than spent
Since 1959 the United States had been short of coins. Demand for silver, both for coinage and for industry, was pushing the metal toward the ceiling of about $1.29 an ounce that the Treasury held by selling its own reserves at that price. Yet a pre-1965 quarter contained a little over five grams of 90% silver. The calculation became plain: once the price passed about $1.38 an ounce, the silver in a dollar's worth of coins was worth more melted than spent.
Coins then began to vanish. People kept them, sorted them, hoarded them; the Treasury's silver stocks were draining and threatened to run out as early as 1968. The Coinage Act of 23 July 1965 settled it: no more silver in the dime and the quarter, now struck in copper-nickel, and the half-dollar cut from 90% to 40% silver, before that too was dropped in 1970.
The phenomenon has a name, framed in the sixteenth century: Gresham's law, "bad money drives out good." When two coins share the same face value but one is worth more for its metal, people spend the less precious and keep the other. In 1965 the "good" money, silver, was leaving circulation; the "bad," base metal, stayed behind.
Money is a fragile convention
The episode says something simple and deep: a coin works as money only as long as its metal is worth less than its face value. The day the metal wins, the coin ceases to be a means of exchange and becomes a commodity again, to be weighed and melted. Money is not value; it is the promise of value, and that promise rests on a gap.
This is why states eventually detached money from its metal. By replacing silver with copper-nickel of no notable intrinsic worth, 1965 marks a quiet step toward purely fiat money: money that is no longer worth what it contains, but worth the trust placed in it. The same logic, transposed, lights up many debates today, from gold to bitcoin: what holds up the value of a currency, its matter or the agreement that backs it?
A currency dies the day it pays better to melt it than to spend it.