Question: This is probably a basic question, but I was wondering why the United States government started making nickel three-cent pieces in 1865 when there were already silver three-cent pieces being made? The same could be asked about the 1866 Shield nickel five-cent piece — why was it made when silver half dimes were already being struck?
Answer: In 1862 the Treasury Department stopped paying out silver coins at par, and kept them in vaults or sold them at a premium. At the time the public hoarded silver and gold. Silver coins did not circulate at par until the late 1870s. Such issues as the 1865 silver three-cent piece and 1866 half dime did not circulate at the time they were made and, thus, were useless to commerce. Instead, paper Fractional Currency notes took their place. The government believed that the nickel three-cent and five-cent pieces would circulate; not being made of precious metal, they would not be hoarded and instead would be spent.
Note: An exception to the above occurred with silver coins minted on the West Coast, which did circulate at par in the 1860s. For this reason, in many years, the mintages at San Francisco were more generous than those at Philadelphia.
