Why is the face value of a coin greater than its intrinsic value?

Answer 1

Otherwise the coins would be melted and sold to make a profit.

MoreBecause coins cost money to produce their intrinsic value can't normally be equal to their face value, let alone greater. The difference between a coin's face value and intrinsic value has the technical name seigniorage and is effectively the profit that a government makes when the coin is put into circulation. For example a US dollar coin costs about 10¢ to manufacture but it's "sold" to the general public at $1, so there's an automatic 90¢ gain for the Treasury.

On occasion metal prices change enough that a coin IS worth more than face value, so as the previous poster noted people will remove them from change, melt them, and sell the raw metal at a profit. That happened in the US during the 1960s when the price of silver was deregulated. Quarters that could be "bought" from a bank at 25¢ each could be melted and sold for $4 or $5, so the government in effect lost about four-fifty on each 25-cent coin! That led to a serious coin shortage so starting in late 1965 dimes and quarters were converted to the cupronickel-clad composition still in use.

A similar problem exists today with cents (worth about 1.8¢ in zinc) and nickels (about 8¢ of copper and nickel), but pending legislation to change the coins' compositions, the government has conveniently "solved" the problem of hoarding by making it illegal to melt them as well as forbidding metal dealers from buying the resulting scrap.