One peculiar aspect of American and Canadian coinage is the fact that the dime is smaller than the nickel, even though it’s worth twice as much. Why would these countries design a currency system like this? The fact is: they didn’t.
The United States first determined the size and denomination of American coins when it passed the Coinage Act of 1792. This established ten different denominations of US coins, made of three different kinds of metals: copper (½¢, 1¢); silver (5¢, 10¢, 25¢, 50¢, $1); and gold ($2.50, $5, $10). The smaller coins made of each metal were the lower denominations, with the values of the coins increasing with their sizes. This made sense, since it cost more money to mint a larger coin, so of course the higher denominations would be worth more.
With three exceptions, the sizes of US coins have changed since 1792. The United States stopped making half cents in 1857, and it stopped making gold coins in 1933. The original 1¢ coin was much larger until 1857, when it was shrunk down to the size of the coin we use today. The dollar coin was the largest coin in circulation until 1979, when a smaller coin was introduced. And the 5¢ coin used to be smaller than the dime.
The 5¢ coin was called a half dime, a mere 15.5 mm in diameter (compared to the 17.9 mm in diameter that the dime has always measured). It used to be a thinner coin, too, sometimes nicknamed a “fish scale”. The half dime wasn’t the smallest coin the United States has ever produced, either. From 1849 to 1889 there was an American gold dollar coin, only 15 mm around, and from 1854 to 1873, there was a 3¢ coin, made of silver, just 14 mm in diameter.
An 1857 half dime, struck at the New Orleans Mint.
During the Civil War, Americans started hoarding silver and gold, as insurance against a volatile economy, figuring their money was safer hidden in their homes than in the banks. This created a scarcity of coinage throughout the country, with all coins worth more than one cent getting harder to come by. To cope with this, postage stamps were sometimes used as currency, as well as tokens struck by local merchants. Most common was fractional currency: paper money in denominations as low as 5¢. But since paper money was widely seen as risky, since most of it wasn’t backed by silver or gold, the government had to come up with a more permanent solution.
In 1864, the United States started issuing 2¢ coins. The 2¢ piece was slightly smaller than a quarter and was made out of copper. This met some of the need for coinage, but not enough. The new 2¢ piece was of interest to Joseph Wharton, an industrialist who founded Bethlehem Steel and who, more importantly, had a near monopoly on nickel mining in the United States. His friends in Congress had failed to persuade the Mint to start making the 2¢ coins out of nickel. Mint Director James Pollock didn’t like the idea of striking coins out of nickel. One problem was that nickel is a very hard metal, and would wear down the dies that are used to strike the coins too quickly. Still, the country needed coins, so in 1865, Pollock was willing to give nickel a try. A new 3¢ coin was issued that year, the exact same size as the silver dime, but made of 24% nickel, 75% copper, and 1% tin and antimony. (The Mint didn’t stop making silver 3¢ pieces until 1873, just in case the new design didn’t work out for some reason.)
An 1867 3¢ piece of the silver variety.
Pollock’s concerns proved to be unfounded, and he embraced the idea of nickel-alloy coins. In 1866, a nickel-alloy 5¢ piece was introduced, released alongside the silver half dime, which would remain in circulation until 1873, just like the 3¢ silver coins. The new coins, whether they were denominated 3¢ or 5¢, were referred to as nickels, since that was the metal they seemed to be made of. (While these coins were mostly copper, they sure didn’t look like they were made of copper, so copper would never catch on as their name.)
The new 5¢ piece was bigger. It could well be bigger, too, since nickel was cheap. It cost a lot less than silver. More importantly, Wharton could sell a lot more nickel if the coins were bigger. The 3¢ piece ceased production altogether in 1889, but the copper-nickel 5¢ piece continued to be produced. This alloy has remained in constant use until the present day, except for when the Mint used a silver-nickel alloy from 1942 to 1945, since the military needed copper for ammunition during World War II. In 1920, Canada, which started minting its own coins in 1870, replaced its silver 5¢ piece with a coin the same size as the American nickel, made of a similar alloy that contained much more nickel. The nickname nickel, never official in either country, caught on in Canada, as well.
An 1866 “shield” nickel—one of America’s first nickel coins.
The United States stopped minting silver coinage in 1964 (except for partially silver half dollars, which it continued to mint until 1970), and Canada abandoned silver coinage in 1968. Each country then started making higher-denominated coins out of the same alloy as their nickels, with a slight twist in America. These would be “sandwich coins”, with two layers of copper-nickel alloy sandwiching a layer of copper. If you look closely at the edges of modern American dimes, quarters and half dollars, you can see the stripes of these sandwich layers. If Joseph Wharton were alive today, he’d be absolutely rolling in money from nickel sales to the Mint. Mr. Wharton died in 1909, and couldn’t take it with him, so he used his fortune to found Swarthmore College and, of course, the Wharton School in the University of Pennsylvania. Wharton’s most significant legacy, however, endures in your pocket change.
Joseph Wharton - the man who made a mint in nickel by making the Mint mint nickels.
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