When Did Silver Dollars Stop Being Silver?

The presence of precious metals in coinage instilled a tangible sense of value in currency. Silver played a significant role in the United States monetary system, with its weight and purity directly backing the purchasing power of coins. This intrinsic value fostered public confidence in money, linking it to a physical commodity. Over time, economic pressures led to a fundamental shift, moving away from commodity-backed money towards a system where value is primarily derived from trust and government stability. This transformation redefined the composition of U.S. coinage, including the silver dollar.

Early United States Silver Dollars

From their inception, early United States silver dollars were designed to embody substantial metallic worth. The U.S. Mint began producing silver coins, including the silver dollar, which contained 90% pure silver and 10% copper. This composition ensured the coin’s durability for circulation while maintaining a high precious metal content, with their value tied directly to the metal they contained.

Throughout the 19th and early 20th centuries, examples of circulating silver dollars included the Morgan Dollar, minted from 1878 to 1904 and again in 1921, and the Peace Dollar, issued from 1921 to 1935. Both maintained the standard 90% silver and 10% copper alloy. The production of these 90% silver dollars for general circulation ceased in 1935.

The Transition Away from Silver

The shift away from silver in circulating U.S. coinage occurred with the passage of the Coinage Act of 1965. This legislative action altered the metallic composition of dimes, quarters, and half dollars. The Act eliminated silver entirely from dimes and quarters, replacing it with a clad composition of copper and nickel.

For the half dollar, the silver content was reduced from 90% to 40%. While the Coinage Act of 1965 did not immediately introduce new clad dollar coins, it prohibited the minting of standard silver dollars for a period of five years. This prohibition meant that no new 90% silver dollars were produced for general circulation after 1935.

The Eisenhower Dollar and Beyond

Following the changes enacted by the Coinage Act of 1965, the dollar coin was reintroduced in 1971 with the Eisenhower Dollar. Most Eisenhower Dollars produced for general circulation were made of a copper-nickel clad composition. Special collector versions of the Eisenhower Dollar were minted with a 40% silver content, but these were not intended for everyday transactions.

Subsequent dollar coins, including the Susan B. Anthony, Sacagawea, and Presidential dollars, were all produced without any silver content, utilizing a fully clad composition. While circulating dollar coins no longer contain silver, the U.S. Mint continues to produce commemorative silver dollars, such as the American Silver Eagle, for collectors and investors. These modern silver dollars are not intended for general commerce.

Economic Drivers Behind the Change

The decision to remove silver from U.S. coinage was driven by significant economic factors. By the mid-1960s, the market price of silver had risen to a point where the intrinsic value of the silver in coins began to exceed their face value. This phenomenon, often explained by Gresham’s Law, led to widespread hoarding and melting of silver coins. Individuals found it more profitable to sell the metal as bullion rather than use the coins as currency, creating severe coin shortages.

The U.S. Treasury’s silver reserves were rapidly dwindling as it attempted to meet the demand for coinage and maintain the price of silver. The government needed to ensure a stable and sufficient money supply for daily transactions. This expedited the transition towards a fiat currency system, where the value of money is derived from government decree and public trust. The move also allowed the government to generate seigniorage, the profit derived from the difference between the face value of money and the cost of its production.