Don’t you dare eliminate the nickel

Wait, they already did that. Or rather, the existence of the nickel means that they have already eliminated something else, something better. During the Civil War they abolished the half dime, which was actually called “half-dism” (!). Silver became too expensive as the United States shut down the private economy for the war effort. The half dime, that is, the five-cent piece, was made of silver, one-twentieth of an ounce of it. An ounce of silver was, just like the Spaniards of old, a dollar. When the price of silver doubled around 1862, a twentieth of an ounce became worth much more than five cents. So the government began minting five-cent pieces from a cheaper material, nickel. Buffalo girls, won’t you come out tonight or something? We never saw the half dime again.

Yes, in the Great, World War II, they stamped pennies out of galvanized steel. This was more of a material shortage than a devaluation issue. Copper was needed for the war effort. After Big One we got copper coins again. (Zinc also fell into disrepute after the Donora industrial disaster of 1948.) Similar to the replacement of the half dime with the nickel was Treasury Secretary Henry Fowler’s 1965 ditching of silver quarters and dimes, and soon half dollars and greenbacks as well. The rooms we’ve lived in since 1965, the one in which Helen Keller sits stiffly upright in a chair for Alabama and all the rest, are made of amalgam.

In 1792, when U.S. coinage began that year, the Coinage Act of 1792 – and we certainly cover this topic in our new book Free money– amalgam was the virtually worthless material needed to physically cohere the coin, which was made largely of precious metal. Amalgam ensured that the coin would retain its shape and resist wear and tear. “Grinning, he put the coin in his pocket,” as Strunk & White had put it in their wallets for centuries.

Isn’t it strange that today the government can’t even make money from amalgam? G-man can’t make pennies for less than three cents each, even from amalgam (they can be copper-colored). Amalgam sucks, or always has. Does poverty no longer mean anything? Thimbles full of dirt can now fetch three cents each? What the hell happened?

The first thing that has happened is that the government now makes all the coins, without the participation of the democratic population. This is completely contrary to tradition and the Currency Act of 1792, whose achievements (whatever the fiasco of a halfdism may be) include the monetary system of the Industrial Revolution. As it was always done, someone could bring precious metals, namely gold and silver, to the Mint and have them stamped into coins for free. If you brought an ounce of silver they would stamp it into a dollar with all the markings for you. The only charge was that you gave them an ounce, and they gave you back the coin, which contained a little less than an ounce of metal, because of the amalgam. The Mint pooled what scraps of precious metal remained for its profits.

Again, how has this system done economically? Agricultural and industrial revolutions, that’s how it happened. Massive prosperity. A professional, Federal Reserve, Ph.D. monetary system is better? Totally bushy.

It is not just that the government, through the Federal Reserve, has monopolized the monetary system and put the banks under control. It is also true that the government has monopolized the economy coins system. The currency system had to be a matter of give and take between the population and competing mints. We’ve gotten away from that for… a 34-fold increase in price levels since 1913?

The second general phenomenon that has happened is the now effectively complete dissociation of money from the underlying value of the monetary medium. The remaining coins we have are the final frontier in this saga. Don’t you dare eliminate the nickel (don’t you dare eliminate the penny, I used to say) – for this is now the hold we still hold in this truly eminent tradition. I bet nickel is even worth more than what they make in quarters these days. We can expect the pressure on the FBI (which they are making themselves felt) to increase.

Yes, yes, Bitcoin is going to take over the monetary system and all this will be over soon. But how disappointing it is that the government cannot field an honest competitor when a challenge like Bitcoin arises. Bitcoin clearly comes before the dollar, is here to steal his lunch and pull down his shorts before packing them away for good. When a fierce competitor emerges, you are expected to compete with him, not try to pseudo-outflank him in a hint of prudishness.

Yet here we are as the United States begins to end the elimination of monetary media that has value. Not all is lost. As with everything in government, every day is an opportunity to make amends.