The Rise and Fall of Silver in Circulation

For most of United States history, the hollow, metallic clink of change in your pocket almost certainly meant silver. Dimes, quarters, half dollars, and dollars carried value as both inscribed on the coin and inherent within its melt value. But the presence of silver coins has been in steady decline in the United States for several decades. Since the mid-1960s, all silver coins – especially those boasting a 90% silver alloy – have vanished from circulation. Why? The answer is a complex and intertwining dance of economics, government policy, and an age-old economic rule known as Gresham’s Law.

Silver Circulating Coins

Silver coins have been part of the United States monetary system since the early days of the republic. In 1792, the nation’s emerging coinage was made from silver and based on a bimetallic standard. The link between coins and precious metals, especially gold and silver, had long been an important part of an economy of trust. A close look at the role of silver in United States currency reveals just how much has changed.

Coinage Act of 1965

The Coinage Act of 1965 changed the nation’s currency in two big ways. The 90% silver alloy in dimes and quarters was removed in lieu of copper-nickel clad, while the half dollar saw its silver composition decrease from 90% to 40%; the half dollar also saw implementation of a copper-nickel clad alloy beginning in 1971. The price of silver had been increasing relative to the face value of silver coins for several years due to market conditions, including industrial demand and price increases in the international marketplace. After the Coinage Act of 1965, silver coins (including half dollars) were quickly removed from circulation by hoarders and collectors.

Gresham’s Law Explained

Sir Thomas Gresham, a 16th-century economist and financial agent to Queen Elizabeth I, described this rule of economics and money supply simply: “bad money drives out good.” In a nation where two circulating forms of money with the same face value, but one with a higher melt value (silver coins) and one with a lower intrinsic value (the newer clad coinage of copper and nickel), the population will hoard the more valuable and spend the other. This is what began to happen in the United States during the late 1960s.

Old coins were suddenly a different class of currency. Hoarded by collectors and investors, circulated and common-date examples of coins like pre-1965 Roosevelt Dimes, Washington Quarters, and Franklin Half Dollars became known by some as “junk silver” in the numismatic marketplace and continue to be collected, despite their years of wear.

Silver Coins and Collecting

Waiting for the next time someone breaks out a big roll of silver coins to pay for lunch? It’s probably not going to happen… But thanks to collectors and investors, acquiring 40% silver Eisenhower Dollars represents a relatively easy first step for bullion investors and serves as a collectible reminder of the days when U.S. coins were made of more than just base metals.