High inflation is coming for the beaver on your money. How long can the nickel last?

A lot of Canadians may not realize that the country's famously busy rodent holds an illustrious place, not just as an early trade good and national symbol, but as our first actual unit of currency killed off by inflation.

But now, the same phenomenon that is making grocery shopping feel like a trip to the jewelry store, means one of the last vestiges of the beaver's place in Canada's monetary history may soon disappear from your pocket and change purse.

The demise of the Canadian five-cent coin bearing the image of the industrious critter — still called the nickel, though actual nickel ones are increasingly rare — has been widely predicted.

Bye-bye, beaver

"The time will come when the nickel will have to be taken out of circulation," said a report from Desjardins in 2016. "We can already start planning for this change so as to see it materialize within about five years."

That prediction, which would have seen the end of the nickel in 2020, was made back when prices were rising at less than two per cent a year. But this year's surge in inflation is eroding the value far more rapidly of what, since the penny disappeared, has become Canada's lowest-denomination circulating coin. 

In 2023, it will be 10 years since we lost the penny. With inflation hovering just below seven per cent, can the nickel be far behind?

For many Canadians, whether the nickel continues to exist may seem unimportant. According to the Bank of Canada, the vast majority of us really don't use much cash anymore. 

As recently as 2009 more than half of all transactions were in cash. By 2017 that had fallen to one-third. Over the same period, all money transactions, a figure that includes larger block transfers, declined from about one-quarter cash to 15 per cent. An outbreak of germophobia early in the pandemic only increased non-cash payments.

"The COVID-19 pandemic ... led to greater use of debit and credit cards," said Ron Morrow, the Bank of Canada's executive director of retail payments supervision, last month. "About 85 per cent of merchants now accept these electronic forms of payments."

Rogers crash and cash

But cash still has a value, as we learned during the past year's Rogers service outage, when alternative payment methods crashed. And by choice or necessity, for anyone who uses cash — and until we have a foolproof and universal alternative — change back from your five remains essential.

The question is, as the value of the nickel coin shrinks, exactly how fine-tuned does that settling of accounts needs to be?

When the end does come, Winnipeg coin collector Bruce Taylor will be sad to see the nickel coin go. Taylor has every five-cent coin going back to 1900. Except one.

"The one I really want is a 1921, which really isn't nickel, it's silver," said Taylor in a recent phone conversation. "The one that I want and the grade that I want is probably around $9,000."

Unlike the nickel in your pocket, the value of collector coins like the one Taylor covets keep rising in value.

The actual nickel in solid nickel coins that you can still sometimes find in your change, called the "melt value," is worth about three times the coin's face value, although that fluctuates with metal prices. Since 1982, the Royal Canadian Mint has been withdrawing those nickel coins from circulation for their metal, increasing their collectors' value.

But will the mostly-steel nickels now in circulation increase in value once they are discontinued? Taylor is suspicious they won't.

A $5 coin?

"The penny didn't," said Taylor, who said that for people with metal detectors, the penny coin is one of the most common things to find. They had become so valueless that kids just throw them away, he said, and with high inflation, he thinks the nickel is heading in the same direction.

"I don't think I was disappointed when the penny was gone, but if they keep doing that what are we going to be left with," he asks. "The five-dollar coin?"

So far the government has been close-mouthed about when and whether the mint will replace the Queen's profile with that of King Charles III, but that could be a moment to decide the nickel is more trouble than it is worth.

Maybe because they remain money-makers for the mint, small value coins often stay in circulation long after the retailers, forced to keep them on hand to use as change, find they have become a burden.

In a comical recent exchange, I paid cash for a small fries that cost $5.07. To avoid a pocketful of change I fished out a dime, and the counter clerk returned a nickel to add to my collection.

Nickel now worth half a cent

As 2023 begins, the nickel has fallen a long way from when it was first minted. Even just looking back to 1960, today's nickel is only worth the equivalent value of half a cent, according to the Bank of Canada's inflation calculator. In other words in 1960, all transactions were rounded to a 2023 dime.

Such fiddly fine-tuning in our pricing is a historical anomaly, according to some recent research by Dalhousie University historian Shirley Tillotson on the 1960s Prices and Incomes Commission. The commission was charged with investigating a burst of inflation that had reached four per cent.

"This was one of the huge issues of the day," said Tillotson. "Inflation had gone from being relatively unimportant in public opinion to what they called 'the number one problem'."

Tillotson said the goal of the commission was to try to inspire people with the idea of "voluntary wage and price restraint."

"At two per cent a year, the value of the dollar is reduced to 50 cents in about 47 years, while at 4.5 per cent this happens in about 16 years," said a 1970 article in Maclean's Magazine titled Don't Be Fooled. In The Long Run, Inflation Cheats All But The Very Clever And The Very Rich.

As part of that effort, one advertising company suggested that rather than going with highbrow economics, the commissioner should appeal to the "ordinary Joe" with images of the traditional five-cent cigar.

Inflation's historic disappearing act

The commission's concern over four per cent inflation seems disproportionate when we know what was coming. In the 1970s and 80s, inflation soared to between 10 and 13 per cent, gobbling up the spending power of workers and people on fixed incomes year after year. By 1990, a dollar would only buy what had cost 25 cents in 1970.

Inflation takes away, and even when it goes down again, it doesn't give back. Cigars will never be a nickel again, and once it's gone, the nickel that first bore an image of the beaver in 1937 — and with rare exception every year since — won't be back.

But inflation is not a modern invention. According to Brain Gettler, author of Colonialism's Currency: Money, State, and First Nations in Canada, it also applied to Canada's very first currency, called the "made beaver."

"The evidence we do have is that really quickly, in fact, the value of the made beaver diverges from the value of the actual beaver skin," said Gettler.

The made beaver became a true abstract currency with an abstract value, he said, the same way that the British pound sterling is no longer worth a pound of sterling silver.

Indigenous people also occasionally used what were called "tally sticks" or metal tokens struck by the fur trade companies to represent the made beaver units. But mostly, said Gettler, people kept their accounts in their memories.

Inflation good for the company

"There's sort of a universal recognition on the part of traders that the Indigenous people they're trading with have remarkably good memories and that they're honest," said Gettler.

"But what we see is that the value of the made beaver is inflated in the spring and early summer when indigenous people come in to sell their furs," which was always to the advantage of the fur trading companies, he said.

When loggers and settlers arrived with hard currency, first pounds and then dollars, the Indigenous trappers gravitated to it quickly "because that is a standard of value that is outside of the control of the companies," said Gettler.

Thus ended the made beaver as a unit of Canadian currency, destined to be driven out of existence by inflation, like the beaver nickel today.