For a long time, coins were supposed to contain enough valuable metal to be worth their face value. This intrinsic value was intended to create trust in the coins and, thus, facilitate transactions for a smooth-running economy. But this hasn’t always worked out well.
- Coin issuers had strong incentives to dilute the value by adding less-precious metals or reducing the weight of the coins.
- The value of the underlying metals could fluctuate quite a bit, leading to more fluctuation in the price of goods than some liked.
- There’s the chronic big problem of small change—the high costs and degree of difficulty to produce the coins.
Today, the most-used U.S. coins are made of nickel, copper, and zinc. The FRED graph above shows that the value of these metals still fluctuates a lot. But that’s not as important now, since nobody expects these coins to have the metal value to match their face value. (Their role is to facilitate change, not really to store value.) But the coins still have some metal value, and the FRED graph below shows that value for quarters (blue), dimes (red), nickels (green), and pennies (purple).
It may be surprising that the most expensive coin is the nickel, whose metal value frequently exceeds five cents, whereas the penny rarely goes over a cent. Note that these are just the raw costs of the metals. The actual manufacturing on the planchets and their minting adds cents to the cost for each coin.
Suggested by Christian Zimmermann.