Now that the United States Mint is doing away with the penny, is the nickel next? That question arises in the Interest Rate Observer, which is none too confident as to the future of dimes or quarters, either. Editor James Grant moots as an inflation indicator “the propensity to stoop and pick up coins of successively higher nominal denominations,” noting: “The ground is so far away, the value of the money so corrupted; why bother to bend?”

The question is likely to take on greater resonance, Mr. Grant avers, as “the population ages and the dollar cheapens.” Seen through the lens of the dollar’s debasement, it would seem that the demise of the penny is akin to the canary in the coal mine. That’s partly why these columns were alert to calls to drop the penny from the roster of America’s coinage. After all, we explained, the penny, “with its glint of copper, is our last vestige of honest money.”

Feature the fact that the penny, alone among our circulating money, retains at least some of the original metal, or specie, that the Framers’ generation assigned to the coin back in the Coinage Act of 1792. That law mandated the mint to strike “coins of gold, silver, and copper.” It was the era of sound money, and the coins were as valuable as the metal out of which they were fashioned. Yet that would prove to be the coins’ undoing in the age of fiat money. 

That’s because under a fiat money regime, currency loses any relation to the value of the circulating medium. The cost of the metals that now comprise a penny — mostly zinc, with a dash of copper — now exceeds the face value of the coin. “The demise of the penny,” a former Treasury official, Alex Pollock, a Sun contributor, tells Mr. Grant’s newsletter, “is a pointed reminder of the Federal Reserve’s unrelenting depreciation of the U.S. currency.”

Mr. Pollock takes 1950 as a point of comparison to explain the penny’s fate. In the 75 years since then, he says, “the purchasing power of a penny has dropped by 93 percent,” meaning that today’s coin “is worth about 1/13 of a 1950 penny.” He traces the penny’s doom to the fact that “nobody in 1950 thought they needed a coin worth 1/13th of a cent and we don’t need a coin of such little value, either.”

Following this logic, Mr. Pollock adds that “a nickel in 2025 is worth about 3/8 of a 1950 penny, and a current dime is worth 25 percent less than the former penny.” Is the writing on the wall for these coins, too? “With the Fed’s earnest promise of perpetual inflation, we soon won’t need nickels and dimes,” Mr. Pollock reckons. “Meantime, the current quarter is worth 1.8 pennies of 1950,” he adds. 

So it is that, in Mr. Pollock’s telling, “the Fed has transformed two bits into less than two cents.” He marvels that “continuous inflation has remarkable shrinking power.” It marks the vindication, too, of a warning in 1966, in the twilight years of honest money, by National Review’s William Rickenbacker. He lamented how America had just removed the silver from its coinage, “practically unchanged from the birth of the republic.”

“Silver was never the backbone of our monetary system,” Rickenbacker wrote in “Wooden Nickels,” but its removal from coins served “to measure the speed of our monetary debauch.” Now, he said, America “is on a completely fiat basis.” That is to say, “for the first time since 1792, we are on a money backed by nothing better than the politician’s pledge.” Quoth Rickenbacker: “We cannot bid farewell to silver without profound foreboding.” 

Which brings us back to that victim of inflation, the penny. That so few were willing to expend the energy to pick up the one-cent coin, Mr. Grant’s account suggests, could have proven a harbinger of its elimination. One can imagine a similar fate for nickels and dimes — and even the debased quarter. Mr. Grant goes so far as to doubt the viability of another coin, the half dollar, “and finally the inconsequential green dollar bill itself.”