Two Bits

TWO-BITS, FOUR-BITS, SIX-BITS, EIGHT…by Leon F McClellanHave you ever wondered why a United States quarter-dollar is called “two-bits”? Or, a half-dollar “four-bits”? Do you know why we call our basic monetary unit “dollar” instead of something else?Two-bits, four-bits, six-bits and eight-bits make reference to the eight-reales silver coin of New Spain and Mexico. It is also called piece of eight and circulated in the English Colonies and freely in the USA following the Revolutionary War. As a matter of fact, the eight-reales coin was legal tender in the United States until 1857 and was the world’s most used coin at one time. It is the renowned piece of eight that became part of the Spanish Main pirate lore.The coins minted until 1734 technically, are called a cob coins, because they were originally made by hand stamping “tail ends of bars” or “cabos de barra”, which were sliced as planchets from rudely cast, more or less round, bullion bars which were assayed and carefully weighed. “Cabo” might well have given us the name of cob, although it does mean a lump or small mass (as of coal). The second definition comes from the Dutch “kubb”.Cob coinage was made at the first mint in the Americas in Mexico City, established in 1535. Hern n Cort�s was authorized by a Spanish Royal Decree dated 14 September 1519 to melt, cast, mark and put aside the royal-fifth of the gold and silver being collected from the Aztecs in Mexico City (Tenochtitlan). He used the palace of Axay catl (father of Moctezuma II) for the task. This may be considered the first foundry of New Spain and of all North America.When Cortes moved into a home in 1521 in what is today the Mexico City suburb of Coyoac n, he established the second foundry in order to meet the demand for currency and produced “more than 130,000 castellanos”, according to information in documents collected by Francisco Antonio de Lorenzana. “Castellano” (Castilian) was the current coin of the time. These were the first cobs of the New World. The royal fifth was faithfully sent to Spain in the Spanish galleons.When the Viceroyalty of New Spain was established by Spanish Royal Decree signed by the Queen of Spain the 11th of May of 1535, the Casa de Moneda (house of coin or mint) was formally established. Beginning sometime in April of 1536, according to the best estimates, the first mint of the Americas started coining operations.Cobs did not start pouring-out into world marketplaces until the reign of Phillip II, after 1556. These crudely minted reales (literally, royals) of silver were undated until 1580 when some were and others were not marked with the year of coinage. The first pieces of eight were struck in Spain, as early as 1497, although it was not until after 1572 that the Casa de Moneda in Mexico City struck them. Before that time, only denominations smaller than eight-reales were struck in Mexico.These were fine quality silver, assayed at .931 or .916. This is finer and almost as fine as the standard for sterling silver, which is .925, or 92.5% pure. Later, milled coins, contained .9027 silver which is normally rounded off as .903 in print. Many of the coins of New Spain were handsome, especially the specimens referred to as “royal strikes” which were made with round planchets and the later milled coins. The silver content of 20th Century Mexican coins dropped as low as .100 and was eventually eliminated from coins. Silver USA dollars and lesser value coins also disappeared from circulation.In 1732, the Mexico City mint started producing milled coins. They are called “milled” because the planchets were cut from rolled (or milled) silver. The planchets were round and flat as opposed to the cob planchets. These were stamped with hand cranked screw presses like the one illustrated on the KM# M49a troy ounce silver coins. One hundred and fifty years later, in January of  1882, the Casa de Moneda began stamping coins with a steam press purchased from Morgan, Orr & Co. of Philadelphia. In the early 1900’s Mexico installed its first hydraulic press, also bought in the USA.The silver piece of eight evolved into the silver peso of Mexico and the silver dollar of the USA, which, for all practical purposes was identical in content and value through the early 1900’s. “Peso” means weight in Spanish. The dollar gets its name from the German “thaler” or “taler”.Mexican, or to be more exact, coins from New Spain (the official name at the time), were made primarily because it was the most convenient means of exporting and transporting the huge quantities of silver being mined. Gold coins called “escudos” (shields) or doubloons were also produced. The silver pieces of eight began their travels from the New World to Spain and then on to Asia and Africa. A great convenience of coins is that they are readily exchanged for goods and services.The English colonies of America were prohibited by royal law from coining, minting, or even so much as using coins. The colonists were supposed to ship any and all coins to Mother England in payment for manufactured goods. This, of course, precluded any foolhardy colonist from starting a mint. Besides, there is little silver or gold to be had in New England and eastern Canada to this day. So, the English Colonies decided to use paper money which served them well until they attempted to finance the USA Revolutionary War with it. By 1780, this form of currency became useless and worthless and the money called Continental Currency collapsed.Immediately, part of the vacuum was filled by the milled Spanish-American silver issues based on the real system in denominations of 1/8R through eight-reales. The most widely circulated of these was the piece of eight, which, when supplies of smaller denomination coins dwindled were chopped or cut into smaller pieces to make change. Thus, one eighth of eight-reales became one bit, one quarter two-bits–the equivalent of our present day quarter-dollar. One-half is four-bits and three quarters are six-bits. Many believe these expressions to be slang, yet, history suggests they are perfectly good nomenclature.When making plans for a monetary system, the United States considered using one similar to the real system. This was because it was the most common system used in the USA at the time, and was familiar to most citizens. A system based on the piece of eight was agreed to and renamed “dollar” in the 1780’s. To this day, in the USA we see the use of dollar or crown instead of “real” or “peso” even for modern Mexican coins.It was not until 1792 that the system became law in the USA, which coincided with the establishment of a new coinage system in the world. The introduction of the decimal system divided the piece of eight into one hundred parts or cents and became the standard for coinage throughout the world. The US Mint Act of 1792 provided for the first United States Mint, which was set-up in Philadelphia.By comparison, Mexico, which rebelled against Spain in 1810, did not adopt decimal coinage until 1857 and started striking decimals in 1863, after the downfall of the second Mexican empire, of Maximilian I. In 1869 Mexico discontinued the piece of eight and replaced it with the peso, which was identical in silver content and weight, but two millimeters smaller. This proved to be unfortunate, because the eight-reales coin was used more than 200 years as THE trade coin, and was the most important coin in use in Mexico, the Philippines, Central America, China, India, Indo-China, Africa and the Near East.Its value was seldom questioned, although it competed with other so called “trade dollars”, such as the Maria Teresa thaler. The Maria Teresa thaler was first struck in 1790 and is still being coined and to this day is used in many countries. The eight-reales coin became the most widely used silver piece in the world until late in the 1800’s. Asian merchants counter stamped the pieces of eight to certify them as authentic. These stamps are called “chop marks” and can be seen on some coins being sold to collectors today.At its height of acceptance, until 1869, the eight reales coin of Mexico was the “non plus ultra” of silver coins. Nevertheless, the new Mexican peso was exported, with the same intrinsic value as the piece of eight it replaced. The differences were in design and markings. The peso is two millimeters smaller in diameter. It was not very well accepted. In China, for example, when it was accepted, it was at a discount of up to four percent. The eight-reales coin is 39mm in diameter and contains 20g of pure silver. The ill-fated peso that tried to replace it is 37mm in diameter and also contains 20g of pure silver.Since Mexico greatly depended on its exports of silver coins and the peso was not well accepted, it reissued the eight-reales coin. In the meantime, the peso was discontinued until 1898, and when it reappeared it was with a design very similar to the piece of eight. The last eight-reales coins were minted in 1897. Today, only the Maria Teresa thaler is being struck, albeit with an old date.The saying “A dollar does not go very far these days” is no longer a saying. It is a fact! One dollar and one peso coins no longer contain much if any silver. . .* * *Many thanks to Mr. McClellan for this excellent article. This article only may be reproduced without additional permission. Please give proper attribution.