Trivia: “Two Bits”

You know the phrase “Two Bits” ? For example at the end of
“Shave and a haircut- Two Bits” ? Many people know it refers to 25 cents.
But few know why an odd number like 25 cents could be two of anything.

From Collect Source:
“Because America’s First Silver Dollar was often cut into eight pie shaped “bits” in order to make change, the intact coin became known as a “Piece of Eight.” Since the entire Piece of Eight had a value of 8 Reales, each bit was valued at one eighth of the total. Two bits equaled a quarter, four bits a half dollar and six bits three quarters of a dollar. Did you ever spend two bits?—Then you were living the legacy of America’s First Silver Dollar!”

So why don’t we still cut up our coins? Well, first of all, our coins are a lot harder than currency used to be-
today’s quarter is made of nickel and copper, rather than pure silver. Cutting a quarter today requires power tools rather than a hammer and punch.

Secondly, our currency is more representational than it used to be- in the age of the real silver dollar, the metal in the dollar coin was actually worth a dollar, with the value of the US$ tied to the price of the metal. If you wanted to save a bunch of money, you would usually melt down all your savings and have it made into eating utensils or a tea service or something, which is how silversmiths like Paul Revere made their living. Nowadays the metal is worth far less than the face value of the coin, which separates the US$ from the value of gold and silver. You know how it says “In God We Trust” on all our coins? Well you better trust God because since the coin itself is worth nothing he’s all you got to back up your investment in the US Monetary system!

Also note that with the mass production of currency the production cost has to be weighed when minting coins. It costs the US Mint much less than 25 cents to make a quarter, and the difference in production cost and face value (called seigniorage) helps fund the Departmment of the Treasury. According to this Report to Congressional Committees from the United States General Accounting Office, “each quarter produced [in the 2002 minting year] generates $0.21 in profits, or seigniorage” for the Mint.