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By Richard Bloch

Let’s say that you happen to have 375 pounds of copper and 125 pounds of nickel downstairs in your basement.

The copper would be worth about $1,578 and the nickel would be worth about $1,388 – or a total of $2,968.

Each U.S. nickel contains 3.75 grams of copper and 1.25 grams of nickel. So if you happened to have 46,000 nickels in your basement, that would be the equivalent of about 375 pounds of copper and 125 pounds of nickel.

But the face value of that many nickels is only $2,300, roughly $668 less than the value of the metal itself.

So essentially a nickel is worth about 6.54 cents in terms of its metal. That doesn’t sound like much of a difference, but it’s still about a 30% premium.

Of course, getting your hands on that many nickels wouldn’t be all that easy, and besides, it’s illegal to melt them down or even export them. Furthermore, the energy required to separate the nickel from the copper in the alloy might not even be worth the investment.

Steel nickels ahead?

Still, I can’t believe that the U.S. Mint isn’t aware of Gresham’s Law, which holds that money with no intrinsic value drives out money that does have intrinsic value. So if this trend continues, nickels could conceivably be hoarded.

The same thing happened to 90% silver dimes and quarters back in the mid -1960s. When those coins finally became worth more than their face value, it didn’t take long before the new copper/nickel “clad” dimes and quarters drove the 90% silver coins out of circulation (with the rare exception, of course).

If the price of copper and nickel keeps rising, the U.S. Mint might decide to make nickels out of something else. That’s what the Royal Canadian Mint does. They’ve been using mostly steel nickels for the past decade or so.

This seems sensible to me. Even Thomas Jefferson, who’s very face is on the nickel, would probably agree to end the practice of spending more than 6 cents to put 5 cents into circulation.

So that’s my prediction for 2011 – an end to the nickel, at least in its current form. And that may be a good reason to start saving your nickels. 

Source: The 6-Cent Nickel: Gone by 2012?