We first hit on this subject last summer in my old blog. One year later and the nickel is worth even less. The details are in this week’s Barron’s (Nickels Are the New Dimes – Subscription Required):
According to United States Mint Specifications, the U.S. nickel must weigh five grams, be 21.21 millimeters in diameter and consist 25% nickel and 75% copper. It’s the latter metallic value that’s of most interest. Earlier this month, the nickel reached a value of 9.7 cents as a result of the rising value of its constituent copper and nickel.
But lest you think of collecting bushels of nickel and melting them for a tidy profit, don’t. The Mint introduced interim rules late last year to head off any such shenanigans and profiteering. Violators can be punished with a fine of up to $10,000, five years in prison or both.
The obvious truth is that the USD, as illustrated so perfectly by the nickel, has been “debased.” But let’s look at the flipside of that argument: since the Dollar is a fiat currency, it is not based on anything tangible such as gold or silver. Therefore, it would make sense for the government to create the currency from the cheapest, most readily available materials, provided they met stringent durability requirements. The nickel just so happens to be made of nickel and copper, which today are very pricey. They could just as easily make the nickel out of clay or pig iron… it would be still be worth 5 cents because the US government says so.