The Nickel Is Next: Congress Admits Fiat Has Hollowed Out U.S. Coinage
The penny is dead. The nickel costs 13.78 cents to produce. Congress has passed two versions of the Common Cents Act to reformulate its metal content. This is not a budget story. It's a balance-sheet confession.
The U.S. government killed the penny because inflation made it too expensive to mint. The nickel is now in the same position, and Congress is reaching for the same fix.
Key takeaways
- The U.S. Mint struck its final circulating penny on November 12, 2025, after 232 years, each coin costing 3.69 cents to produce and distribute against a 1-cent face value.
- Each nickel cost 13.78 cents to produce in FY2024 and 13.31 cents in FY2025, against a 5-cent face value -- a cost-to-face-value ratio above 2.6x in either year. The House passed HR 3074 on July 14, 2026, and the Senate passed S. 1525 on August 7, 2026, both allowing Treasury to reformulate the nickel's metal composition to reduce production costs.
- The proposed fix mirrors the 1982 penny playbook exactly: swap out the expensive metal, kick the can. The 1982 reformulation bought 43 years. Inflation is compounding faster now.
The U.S. Mint conducted a ceremonial final penny strike on November 12, 2025, at its Philadelphia facility, with U.S. Treasurer Brandon Beach marking the occasion. "God bless America, and we're going to save the taxpayers $56 million," Beach said. The penny's retirement came after 19 consecutive fiscal years of producing coins that cost more than their face value, per the U.S. Mint's official press release. The nickel is now running the same math.
The Numbers the Bills Don't Fix
The Richmond Fed's December 2025 Economic Brief puts the seigniorage loss on nickels at $1.75 per $1 issued in 2024. The Mint lost $17.7 million producing 202 million nickels that year. In FY 2023, with higher production volume, the loss hit $92.6 million. The current nickel is 75% copper, 25% nickel by composition. In FY2024, the cost was 13.78 cents per coin; in FY2025, it fell slightly to 13.31 cents -- against a 5-cent face value in either year, according to U.S. Mint production cost data.
HR 3074, introduced by Rep. Lisa McClain (R-MI) and co-introduced by Rep. Robert Garcia (D-CA), passed the House on July 14, 2026. The Senate passed its companion bill, S. 1525, on August 7, 2026. Per the bill text, both versions permit changing the nickel's composition from its current copper-nickel alloy to a zinc inner layer with a nickel outer shell, weight range 4-6 grams, with the exact mix left to the Treasury Secretary's discretion. The composition change must reduce production cost and have "minimal adverse impact on machines designed to accept coins."
The two bills have not been reconciled. Both chambers must agree on a single version before it goes to the president.
Gresham's Law, Running in Slow Motion
The U.S. government spent 13.78 cents in FY2024 to manufacture a coin it declares worth 5 cents, and its solution is to degrade the coin's metal content to paper over the gap. This is exactly what happened to the penny in 1982, when the Mint switched from 95% copper to 97.5% zinc. That reformulation bought 43 years. The penny still died.
The proposed zinc-core nickel would be the first permanent peacetime reformulation of the nickel in its 161-year history. Gresham's Law predicts what happens next. People are already hoarding pre-1982 copper pennies because the metal value exceeds face value. When cheapened nickels hit circulation, the existing 75/25 copper-nickel blanks disappear into jars. Real metal gets stored; debased tokens circulate. That pattern has a name, and it has no bottom under a fiat system.
There's a second-order effect worth tracking: the Richmond Fed explicitly models that eliminating the penny increases nickel demand, because cash transactions round to the nearest 5 cents. The government's cost-cutting move on one denomination structurally pressures the next. That's the doom loop in miniature, and it's why stopping inflation from being taxed as a capital gain is a downstream symptom of the same disease as hollow-coring a nickel. The fiat debasement trade shows up in asset markets; it also shows up in the metal content of a coin in your pocket.
What to Watch
The reconciliation process between HR 3074 and S. 1525 is the immediate gating factor. Monitor Congress.gov for a conference report or enrollment.
If the revised nickel's production cost falls to or below 5 cents per coin and holds there over a decade without further reformulation, the debasement-spiral framing needs revisiting. Watch the U.S. Mint's annual cost reports post-enactment. The 1982 data suggests 40 years is the ceiling. Given the current rate of monetary debasement, that estimate is optimistic.
Sources
Frequently Asked Questions
Existing nickels remain legal tender regardless of what Congress enacts. A reformulation applies only to newly minted coins. Prior-issue coins don't change denomination or value, which is precisely why people will hoard them.
Yes. The Richmond Fed modeled this directly: retiring the penny forces cash transactions to round to the nearest 5 cents, which structurally increases nickel demand. Higher production volume amplifies losses if the per-unit cost stays above face value. The FY 2023 loss of $92.6 million versus $17.7 million in 2024 reflects volume, not efficiency. More nickels minted means more losses at the current cost structure.
Twice notably. Pennies went from 95% copper to 97.5% zinc in 1982. Nickels temporarily used a 35% silver alloy during World War II to conserve nickel for military production, then reverted after the war. The proposed change would be the first permanent peacetime reformulation of the nickel in its 161-year history.
