The Coinage Act of 1965 and the End of US Silver Coins

For most of American history, the dimes, quarters and half dollars in people’s pockets were made of silver. That ended in the mid-1960s. The Coinage Act of 1965 replaced silver with copper and nickel in the two smaller denominations and cut the silver in the half dollar. The decision was practical, driven by rising silver prices, but it also marked the end of a long chapter in the history of money.

The problem: coins worth more than face value

The pre-1965 dime, quarter and half dollar were made of 90% silver and 10% copper. As long as the market price of silver stayed below a certain level, the metal in a coin was worth less than its face value, and the coins circulated normally.

That threshold was about $1.29 per troy ounce. Above that price, the silver in a 90% silver coin was worth more than the coin itself. In the early 1960s, silver demand from industry and photography was growing, while the US Treasury’s stock of silver, which it had been selling to keep the price stable, was shrinking. The market price was approaching the critical level.

Hoarding and the coin shortage

By 1964 the United States was suffering a serious coin shortage. Several factors combined:

• The growing use of coin-operated vending machines and parking meters increased demand for coins.
• Collectors and speculators set aside silver coins in anticipation of their removal.
• The release of the Kennedy half dollar in 1964 prompted widespread hoarding.

This was a classic case of Gresham’s law, under which money that is more valuable as metal tends to be hoarded, leaving less valuable money in circulation.

The Coinage Act of 1965

President Lyndon B. Johnson signed the Coinage Act on 23 July 1965. Its main provisions changed the composition of US coins:

The new clad coins have a distinctive copper stripe visible on the edge, an easy way to tell them apart from older silver issues. The coins were designed to work in vending machines alongside the old silver coins, which was an important requirement.

The 40% half dollar

The Kennedy half dollar kept some silver for a few years, in a 40% silver composition, from 1965 to 1970. Hoarding continued, and in 1971 the circulating half dollar also switched to copper-nickel clad. Special collector versions in 40% silver were later produced for some years, including in the bicentennial period, but these were not general circulation coins.

Silver dollars

Silver dollars had not been struck for circulation since 1935. When the Eisenhower dollar was introduced in 1971, the circulating version was copper-nickel clad, while 40% silver versions were sold to collectors. Today, the only silver dollar-denominated coins made in quantity are bullion and collector issues, such as the American Silver Eagle.

What happened to the old coins

Once silver passed the critical level, the old 90% coins quickly disappeared from circulation. Many were melted, especially during the price spikes of the late 1970s and early 1980s, described in The Hunt Brothers and the 1980 Silver Spike. The government also stopped redeeming silver certificates for silver bullion in 1968.

The surviving coins now trade as “junk silver” or “constitutional silver”, valued mainly for their metal content. They are sold in bags by face value, a market explained in 90% Silver Coin Bags.

A turning point in monetary history

The 1965 Act was one of several steps that cut the link between everyday money and precious metals in the United States. Gold coins had been withdrawn in 1933, silver coins followed in the 1960s, and the international link between the dollar and gold ended in 1971, as explained in Bretton Woods and the 1971 Gold Window. Since then, the value of US coins has rested entirely on their status as legal tender.

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