1. Rising Silver Prices: The value of silver experienced a significant increase during the 20th century, largely due to its growing demand in industrial applications and increased investment interest. As a result, the amount of silver required to make a single coin became more expensive than the face value of the coin itself.
2. Coin Devaluation: With the rise in silver prices, the value of silver in some coins began to exceed their official face value. This created an incentive for people to melt down coins and sell the silver for its intrinsic value, leading to a shortage of coins in circulation.
3. Gresham's Law: Gresham's law states that when there are two forms of currency in circulation, the more valuable currency tends to be hoarded or exported, while the less valuable currency circulates. In the case of silver and other metal coins, people had a tendency to hold onto their silver coins and use the less valuable paper money for transactions. This further reduced the availability of silver coins in circulation.
4. Monetary Stability and Inflation: The United States adopted a fiat currency system in the early 20th century, where the value of money is determined by the government and not backed by physical assets like gold or silver. This allowed for greater control over monetary policy and helped stabilize the value of currency, making it less susceptible to fluctuations in commodity prices.
5. Technological Advancements: The development of new technologies and materials in coin production made it possible to create durable, cost-effective coins without the use of valuable metals like silver. Base metals, such as copper, nickel, and zinc, became commonly used in coin production due to their lower cost and easier availability.
In 1965, the United States discontinued the production of silver dimes and quarters, and in 1971, it stopped minting silver half dollars. Today, most U.S. coins are made from copper-nickel alloys, with a small percentage of coins made from special metals for commemorative purposes.