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The Two-Bit Coin

In colonial days the common folk did their reckoning with large silver coins known as pieces-of-eight (usually the Spanish Milled Dollar). A piece-of-eight was split into eight pieces called bits. Many of these coins were old and warn. Some dating back to the 1400s.

In practice one could buy a pint of ale for one bit. Two-bits would buy a plate of grub and four bits would secure a bed at a lower end hotel.

In 1792, the new United States Congress sought to create a national currency. Alexander Hamilton instructed the treasury to weigh a sampling of pieces-of-eight in circulation. Congress set the value of the new US dollar to that weight (371 4/16 grains of silver).

The founders sought to create a decimal currency. The Coinage Act of 1792 created a half dollar, a quarter, a disme, a half disme, a penny and a half penny. The copper penny was worth one percent of the dollar. The disme was worth a tenth of a dollar. People took to calling the disme a dime.

In this sytem, the half dollar was worth four bits and the quarter worth two bits. The bit itself was worth 12.5 cents. Folks used to reckoning in the common currency did most of their there transactions in the two bit coin ... though some accepted the disme as a short bit.

The California Gold Rush flooded the market with gold and caused silver to trade at a high premium to gold. In 1853, Congress reduced the size of the quarter from 6.68 grams. It is currently 6.25 grams. As of 1853, the two-bit coin no longer had two-bits of silver. Four silver quarters weigh 25 grams which is 93.5% the weight of a dollar (26.73 grams).

In 1857, Congress made the dollar the sole currency of the land. Even after this act, people continued to refer to the quarter as the two bit coin. It was not uncommon for a two-bit diner to offer a special for a quarter.

In 1913, the United States created the Federal Reserve and adopted an inflationary monetary policy. Inflation reduces the value of the dollar each year. As the dollar declines in value, the two bit specials offered by diners got smaller and smaller, and the term two-bit took on a negative connotation.

In 1964, Roger Miller wrote King of the Road which sang of a hobo staying in a four-bit room in Boise. "Trailers for Sale or Rent, Rooms to Let Fifty Cents." By 1964, the best one could get for a half dollar was an eight by twelve room in a trailer.

After 100 years of inflation, we find that the 2011 dollar has the purchasing power of just a few 1913 pennies.

We associate the term "two-bit" with devalued currency, but the price of the silver in the old two-bit coin still buys a plate of food. The silver in a dime still buys a draft beer. Four-bits secures a bed in a hostel.

By offering a plate priced to the silver value of the old two-bit coin, restaurants connect us with the past in a positive light.

Pricing the Two Bit Coin

A bit is technically one eighth of a silver dollar. Two-bits is a quarter of a silver dollar. So, I believe it is correct to say that the value of two-bits is one fourth the melt price of the 1792 US silver dollar. This dollar contains 371.25 grains of pure silver. There's 480 grains of silver in a troy ounce. (371.25/480)/4 = 0.193359375. So, I multiply the spot price for a troy ounce of silver by 0.193359375.

Coin dealers buy and sell silver quarters according to their melt value. The sllver quarter weighs less than a quarter of a dollar. It officially weighs 6.25 grams and is 90% silver. A troy ounce is 31.1034768 grams. Our conversion factor is (6.25 * .9)/31.1034768 = 0.18084795.

In 1986 the US Mint began producing the Silver Eagle dollar coin. This coin contains one troy ounce of 99.9% silver. A bit is an eighth of the silver dollar. If the current silver dollar is exactly one troy ounce of silver, then a bit is one eighth an ounce and a two-bit coin is worth a troy ounce divided by 4.

The table below shows three possible calculations for "two-bits" for silver trading at $29.77 at close on 2012-01-15

eBay Auctions

A two-bit coin is a silver quarter. The melt value of a quater is about 5.38 You can see what people are will to pay for the two-bit coins on eBay below