Before our five-cent coins were known as “nickels,” the US Mint actually produced silver half dimes. These half dimes were produced in a variety of designs from 1792 to 1873. However, the story of the nickel as we know it today begins shortly before the Civil War.
Amid inflation in the 1850s, the composition of most US coins was changed to reduce their value. The weight of silver coins was simply reduced. The penny was both reduced in size (the “small cent,” in 1857) and its composition changed from all copper to an alloy of 88% copper, 12% nickel.
Amid the outbreak of the Civil War, even base metal coins were hoarded. The economy suffered greatly from the lack of circulating coinage, which choked ordinary commerce. While private actors issued their own tokens, the US government attempted a number of its own initiatives. Paper currency notes were issued in denominations as low as three cents. In 1864, the composition of the penny was changed again to eliminate its nickel content and reduce its weight further, thus lowering its value in an effort to get that coin to circulate.
Philadelphia-based industrialist Joseph Wharton controlled most of the nation’s nickel production at that time. Understandably, he was displeased with the decision to remove nickel from the penny. He lobbied Congress aggressively for the introduction of other coins containing nickel. He succeeded in getting a three-cent coin approved at the very end of President Lincoln’s first term; Lincoln signed the bill into law just minutes before his second inauguration. The new three-cent coin was made of 75% copper and 25% nickel. It proved to be a popular substitute for the fractional currency notes.
Wharton continued his push for additional copper-nickel coins. His case was bolstered by an embarrassing episode involving Spencer M, Clark, head of the Currency Bureau. When a new five-cent fractional currency note was approved in 1864, it was supposed to bear a portrait of Clark (presumably William Clark, the explorer). Congress was horrified to discover that Spencer Clark instead put a portrait of himself on the new note!
Wharton gained an ally in Mint Director James Pollock, who was persuaded by the success of the “three-cent nickel,” as it came to be known. In early 1866, Pollock proposed a five-cent piece of the same copper-nickel composition. The resulting coin was the Shield nickel, named for the Federal shield on its obverse side. The same bill that authorized the Shield nickel also discontinued fractional currency denominations of less than ten cents.
The next design, the Liberty Head nickel (or “V” nickel, named for the Roman numeral on its reverse), was even more popular in circulation. Vending machines grew in popularity in the 1890s. When this design was replaced after 1912, a handful of 1913 Liberty Head nickels were clandestinely produced; these coins are among the rarest and most valuable in all of US coinage.
The Buffalo nickel replaced the Liberty Head nickel and was produced until 1938. That year, it was in turn replaced by the Jefferson nickel, which continues in production to the present day. Even today, the nickel retains the same weight and composition it has had since 1866.