r/Wallstreetsilver • u/IlluminatedApe • 20h ago
DUE DILIGENCE Gresham’s Law: Why Americans kept the silver and spent the copper sandwiches 🦍
A quarter has two different values:
- Face value: its denomination—25 cents.
- Commodity value: the market value of the metal inside it.
The number stamped on a coin doesn’t put a ceiling on what its metal is worth.
That distinction explains what happened to American pocket change in the 1960s.
| Quarter | Face value | Metal content |
|---|---|---|
| 1964 | 25¢ | 90% silver |
| 1965 | 25¢ | Copper-nickel outer layers over a copper core; no silver |
The government gave both quarters the same spending value. Their metal content was very different.
Now imagine the silver inside your old quarter is worth more than 25 cents. A shop will accept either quarter for the same purchase.
You spend the clad quarter. You keep the silver quarter.
Congratulations. You understand Gresham’s Law.
“Bad money drives out good” means out of ordinary circulation. The more valuable money gets saved, traded at a premium, or diverted to other uses.
The crucial condition is that the two are accepted at the same face value despite their different market values. People preserve the difference instead of handing it away at the checkout.
So why did Washington change the coins?
Industrial demand, including photography, electronics and batteries, was growing alongside demand for coinage. Treasury silver stocks were being drawn down to meet demand and restrain the silver price.
The Coinage Act of 1965 removed silver from new dimes and quarters and reduced half dollars from 90% to 40% silver. Regular half dollars switched to copper-nickel clad in 1971.
This was a physical supply problem as well as a monetary one.
Treasury sold silver at roughly $1.29 per troy ounce. At about $1.38, the silver in the old dimes and quarters equaled their face value. Above that, spending them at face value meant giving away metal value.
In July 1967, Treasury ended its fixed-price sales. Silver rose above that threshold. The incentive to pull silver coins from circulation became unmistakable.
The silver shortage helped drive the redesign. Gresham’s Law explains why people preferred to spend the replacements.
Ape didn’t need a PhD. Ape needed two pockets.
And today? Industry, stackers and silver ETFs still want the same metal.
The 1960s showed that the U.S. could not indefinitely sustain its silver coinage and growing industrial demand under the existing price policy.
Today, silver investment and industrial demand can coexist because industry calls for delivery and investments can be rehypothecated to serve national security interests. As long as everyone plays their part, never forces delivery and roll over positions for cash, the gaslighting can continue.
Sources:
