Originally, the United States issued full-bodied coins with face values equal to the value of the underlying metal content. However, the rising price of silver relative to gold, as well as other factors, created several challenges for the Federal Reserve. See why the U.S. stopped using silver in its coins.
How Was Silver Used initially in the U.S.?
Shortly after the founding of the United States, the country operated on a bimetallic system of gold and silver. In fact, the founding fathers established that gold and silver were both acceptable forms of currency in the Constitution. However, consumers used silver far more often because it was more widely available.
Silver Coin Shortages in the United States
In the mid-1800s, the price of silver began to climb relative to gold because of several discoveries of large gold deposits, including the California Gold Rush of 1848-55. Because silver coins in the U.S. contained 90% silver, their bullion value soon surpassed their face value. This imbalance led speculators to hoard and melt down silver coins, which lead to frequent coin shortages. As a result, Congress passed the Coinage Act of 1853 to reduce the silver content of nickels, dimes, quarters, and half dollars by 7%.
The Downfall of Silver Coins
Numerous new uses for silver were discovered in the 20th century, including film for photography, electrical components, and batteries. This caused the demand for this precious metal to swiftly outpace its global supply, which led to further silver coin shortages. Though 26 million silver half dollars were minted in 1964 to honor the recently assassinated John F. Kennedy, over a third of these coins were hoarded and never entered circulation. President Lyndon B. Johnson coordinated with Congress to pass the Coinage Act of 1965, which eliminated the use of silver in dimes and quarters and reduced the silver content of the half dollar. A few years later, silver was also removed from half dollars. The metal content of dimes, quarters, and half dollars shifted to a combination of nickel and copper. Today, these coins have intrinsic values that are significantly lower than their face values.
These shortages show that people have long considered silver bullion and coins to be a wise investment. Atlanta Gold & Coin Buyers is the premier coin dealer in the Atlanta area, and we offer every client transparent, professional services. If you would like to schedule an appointment with our experts, call (404) 236-9744 today.