Monday, May 30, 2011

What Is a Two-Bit Diner?

A Two Bit Diner is a restaurant with a special priced to the two bit coin.

A bit is one eighth of a silver coin. A two bit coin is a quarter of a silver quarter. The old US silver quarter contains 0.18084 troy ounces of silver. The price of silver varies. When the spot price of silver is $38.70 per troy ounce, the "melt value" of silver quarter is $7.00.

The price of silver is dynamic. To be true to the gimmick, a two bit diner would periodically look up the price of a silver quarter and change the special.

Many restaurants have taken to preparing dishes from local seasonal ingredients. One could combine the changing of the two bit special with the changing of ingredients to create a more compelling special.

Sunday, May 29, 2011

One Pieces of Eight and the Two Bit Coin

In colonial days the common folk did their reckoning in pieces-of-eight. Pieces-of-eight were large silver coins cut into eighth which the folk called "bits."

A bit was a substantial piece of change. One could buy a pint of ale for one bit, a plate of grub for two bits and a bed for the night for four bits.

In the Coinage Act of 1792, the United States weighed the pieces-of-eight in circulation and took their average to create a monetary unit called the US dollar. The US dollar is often symbolized with a barred S as follows: $

The Americans sought to create a decimal based currency with new coins. The larger coins matched up well. A dollar equaled a piece-of-eight. A half dollar was equal to four bits and the quarter equal to two bits. New coins included the silver disme that was worth a tenth of a dollar and a penny worth one hundredth of a dollar.

In this new coinage, four bits equaled 50 cents. Two bits equaled 25 cents. The bit equaled an awkward 12.5 cents. So, the coinage act included a half disme worth five cents and a half penny. In practice, proprietors used to reckoning in bits were known to accept a disme as a short bit, accepting the loss of the odd bit as the price of doing business.

The old common currency was legal tender through 1857 when Congress finally outlawed the use of foreign currency, making the dollar the sole legal tender of the land. Later acts set the dollar as a fiat currency with built in inflation.

In 2011, The Utah Legislature passed a symbolic statement called the Legal Tender Act which doesn't do anything because Federal laws regulate currency.

On passage of the law, I looked up the current price of silver. The price of silver changes daily. I discovered that a silver quarter was worth about $7.00 and the silver half dollar was worth about $14.00.

I was astounded to realize that a basic meal at a diner was still worth two bits.

So Utah's Legal Tender Act of 2011 led me to ask the question: "What is the best two bit diner in Utah?"

A two bit diner is a restaurant with a special that could be bought for the two bit coin (a silver quarter.

Saturday, May 28, 2011

The Two Bit Coin

Long ago, the common folk traded goods and services using a coin known as a bit.

A bit was one eighth of a larger coin known as pieces-of-eight. Get it? Pieces-of-eight were worth 8 bits. The most common pieces-of-eight coin was the Spanish Dollar.

In computer programming, a bit is a single on/off switch. Eight bits combine to make a byte which is the standard measurement of storage capacity.

In colonial days, a bit was a substantial piece of currency. One might buy a pint of ale for a bit, a meal for two bits and a cheap hotel for four bits.

On passage of the Coinage Act of 1792, the mint weighed a number of the worn and shaved Spanish dollars circulating in the colonies and set that weight in silver (412.5 grains) as the United State's dollar. The US dollar was made of a 90% silver 10% copper mix. It became customary to denote the dollar with the symbol $.

The Coinage Act sought to create a decimal system for currency calculations. The act created a monetary system with silver dollars, silver quarters and silver halves along with strange new coins called the disme, a half disme and penny. The copper penny was valued at one percent of a silver dollar. The disme (commonly known as a dime) was set at a tenth of a dollar.

The quarter and half dollar fit into common reckoning well. The quarter was worth two bits. The half was worth four bits. The bit coin itself was problematic. A bit was worth 12.5 cents. Proprietors of the day were known to accept the new disme as a short bit and to accept the loss of the odd bit as cost of doing business.

The Spanish dollar was recognized as legal tender in the US up to 1857. The system of reckoning in bits existed alongside the new dollar system for quite some time.

In the round down program, I suggest that proprietors of today round down cash transactions to the nearest quarter (the two bit coin).

Today's quarter is worth substantially less than the two bit coin of old. A silver quarter sells on ebay for about $7.00. While the deflated quarter in your pocket is only worth a penny candy, the old two bit could still buy a meal.

Friday, May 27, 2011

TV Coin Shows

I've watched several of the coin shows on cable TV.

Apparently when the used cars sales union finds a dealer who is sleazy beyond their lowest standards, they kick 'em out and dealer starts hawking absurdly overpriced coins on cable.

I hope no-one is falling for their overpriced cons.

BTW, if you are buying any item as an investment, you need to find a forum where people buy stuff back. Cable TV is the worst posible forum for any investment grade purchase because it is a one way medium.

A local coin club, coin shop or coin show would be best avenue for investment.

Thursday, May 26, 2011

Coin Production

The US Mint reports that Coin Production is going at a staggering pace in 2011.

In 2009 the Mint produced 2,354 billion zinc pennies and 86.64 million nickels.

The rapid devaluation of the dollar in the last two years means that the older (pre 1982) copper pennies contain 3 cents worth of copper and the nickel contains 7 cents of nickel.

Entrepreneurs are running sorting machines to pull all copper pennies from the market, and collectors are hoarding nickels. They sell bags of pennies as copper bullion indicating contempt for the coin.

From January thru April the US Mint produced 1.454 billion zinc pennies and 223.92 million nickels. Dime production also increased but not at the rate of nickel.

I find no fault for people saving nickels. You can track the future devaluation by the calculating the melt value of the nickel at

The absurdity is that the mint is producing, at a loss, billions of coins which will soon go out of circulation when they change the formulation for all coins in the upcoming years.

Wednesday, May 25, 2011

Pennies Are Toxic

I confess, a primary reason that I started the Round Down US project is reports that the new zinc pennies are toxic.

The United States Mint switched from copper pennies to a copper coated zinc mix in 1983. When the copper coat gets breached the the zinc can leach out and cause Zinc Toxicity. Zinc toxicity can cause illness in children and is fatal to dogs and parrots.

Apparently there also problems with plants and fish when they become exposed to concentrated zinc from a dissolving penny.

I've noticed that zinc new pennies, when damaged, turn sharp and ugly. When they sit in the dirt for years, they start to dissolve.

I often find worn zinc pennies in playgrounds and gutters. As so many people just toss out pennies, it is absurd to be using them.

The mint is reworking the composition of coins. Instead of the people being led by the government, I would rather the people lead the way and round down first.

The Dollar Is The New Penny

The Dollar is the New Penny.

The Federal Reserve was established in 1913. The Federal Reserve is a nexus of central banks that control the US monetary supply by lending out money.

The Federal Reserve has an inflationary monetary policy. Inflation devalues the money in the market. As we approach the centennial of the Federal Reserve, we find that there is roughly a 99% devaluation of the dollar.

The 2013 dollar has about the same purchasing power as the 1913 penny.

As the the nation's currency devalues, small coinage falls ouf of favor. So, in celebration of the Federal Reserve centennial, I thought it would be fun to run a campaign in which merchants stopped accepting small change and round transactions down to the nearest quarter.

Experience taught me that one needs to buy the domain name before starting the project.

So, I bought the domain name RoundDown.US and put together a teaser site. I will make the push for this project in 2012.

I intend to write to state legislatures and ask that they develop tax tables rounded to the quarter.

Friday, May 20, 2011

The Fate of the Penny

The mint produces coins based on demand.

Retailers demand a large number of pennies because sales tax tables force them to calculate all sales to a penny.

As such, the fate of the penny is in the hands of the state and not the hands of the mint.

As the centennial of the Federal Reserve approaches, state lawmakers could make a statement about the devaluation of the dollar by creating a tax table that rounds to the nearest quarter.

Businesses, eager to reduce transaction costs, would adopt the new tax table because they would only need quarters in their change drawers.

Businesses would return unused change to the mint for redistribution. So, even if only a few states developed tax tables rounding to the quarter, we would see an end to the production of dimes, nickels and pennies.

Calculating to the quarter would benefit consumers as consumers would no longer need to deal with piles of pennies building up in jars and falling under the driver seat.

Utah loves to make symbolic political statements. So, I am writing letters to Utah representatives to consider adopting an alternative tax table that rounds transactions to the quarter.

Thursday, May 19, 2011

My Hoard of Silver Dollars

Having joined the ranks of "Hawkers of Gold," I decided that I should take the plunge and buy a precious metal coin. I cannot afford a gold coin; but a silver dollar is still within my reach.

Anyway, two cull grade dollars from I prefer "cull" to the collector quality coins as I prefer coins that were actually used in trade. I have little interested in the coins that have been hoarded by collectors or banks in unciculated quality.

I received a 1925 Peace Dollar and an 1879 Morgan Silver Dollar in the mail yesterday. The average of the two dates is 1902. It is so cool to have coins that have been around for a hundred years.

My pocket scales says the Peace dollar weighs 26.61 grams and the Morgan 26.46. The Morgan Dollar lost a percent of its mass in its life as a coin. The Peace Dollar lost half a percent of its mass.

These aren't the first two silver dollars I've seen, but they are the first I've owned.

Because I own the pieces, I feel free to flip them. I should have bought three ... then I could juggle coins.

As for the purchase: I liked the selection of coins. I found their interface a bit confusing. It took me several minutes to find the section of the site that allows me to buy individual coins. I love the way they divide the silver dollars into the categories of below cull, cull, almost good and good.

My biggest complaint with the APMEX was the shipping costs. The shipping and handling costs for my two coin order was $12.95. More outrageous than the fact that they charged $12.95 to ship the coins, they spent that much shipping the things. The coins arived in an oversized box stuffed with expensive packaging.

To the web site's credit, APMEX's primary market is folks spending thousands of dollars on coins. Small fries like me are a nuisance.

Of course, a person who matters might be aquiring coins in small quantities ... or might run a test order before a real order.

If I were running shop selling coins online, I would have a path for selling packets of one or two coins to appease the rabble ... even if my primary market was people who could afford a whole roll of coins.

The US Mint charges $4.95 to ship a packet with 10 quarters. So it should be possible to reduce the shipping cost on small orders.

Because of the high shipping costs, my investment in two silver dollars will not return a profit until silver tips $55 an ounce. Assuming I have to pay shipping to sell the coins, my investment won't realize a profit return until silver hits $60.00 an ounce.

Excessive shipping fees aside, I am having fun owning two silver coins.

The next challenge is figuring out how to dispose of them. My goal is to become a "hawker of gold" ... not the owner of gold.

Wednesday, May 18, 2011

Hawking Gold

Representative Anthony Weiner has a great deal of contempt for "hawkers of gold."

His feigned comtempt pushed my estimation of coin dealers up a notch.

I've been investigating the possibility of becoming a gold hawker.

The problem I see with coin hawking is that one is trading money for money (like for like). Trading makes more sense when one trades unlike things. For example, trading labor for food. I can see a restaurant adding a sizeable mark up to the food they sell because they are adding value and providing something folks with labor to sell may not have.

I could see trading my skill and time for a purse of silver.

But, trading one form of money for another form of money is purely a speculative play.

For trading to benefit the buyer in a speculative play, the margin on the trade must be very low ... too low to support a large number of sellers.

Imagine a coin dealer charging a modest 5% mark up. Well, the price of the metal must rise more than 5% for the transaction to provide a speculative profit for the buyer.

The internet increases efficiency.

Unfortunately metal coins are heavy and shipping costs expensive. Shipping costs can add another 10% to the transaction.

It will take several years of inflation before the investment covers the mark up of a coin dealer and the cost of the transaction.

Regardless, I think it is good for people to have a few precious metal coins on hand; So, I created a page listing Online Coin Shops. I bought coins through each of the dealers. The shipping costs put a limit on how much I would buy through the dealers.

My favorite place for hawking gold is eBay. I like trading on eBay because I am trading directly with other collectors. Sadly, the listing fees and shipping costs put a damper on my gold hawking activities.

It would be a hoot to make some money on the gold hawking page. I fear the transaction costs associated with buying money online make gold hawking an untenable long term business.

Tuesday, May 17, 2011

A Tale of Two Pennies

It was the best of change. It was the worst of change. To Franklin it was a token of wisdom. It will be discarded in an age of foolishness.

This is the tale of two pennies … a coin of paradox and conflict with a heart of copper and a future of zinc.

The copper cent piece was created in the Coinage Act of 1792. At the time, the penny had about the same purchasing power as today's dollar.

The US Founders disdained the old world practice of putting images of royalty on coins. The first US pennies showed images of Lady Liberty. In 1859, the penny bore a Native American motif.

At the dawn of the progressive era, Teddy Roosevelt sought to revamped American coinage to glorify the nation's leaders. In 1909 the Lincoln penny became the first common US coin to bear the image of the US president.

In 1913, the United States established the Federal Reserve and the US gradually moved from sound money to a fiat money and inflation.

Since 1909, the penny has undergone two major design changes: The first change occurred in 1959. In celebration of the Lincoln Sesquicentennial, the US Mint changed the reverse of the penny from bunches of wheat to an image of the Lincoln Memorial.

In 1982, the purchasing power the US dollar had eroded to the point that it cost more than a penny to produce a penny; so, the mint quietly changed the formulation of the penny from copper to a zinc-copper mix.

(NOTE: In 1965, the mint changed the composition of dimes and quarters from silver to clad copper. This led people to hoard all silver coins, and many collectors began hoarding the wheat pennies. Wheat pennies were a rarity by the late 60s.)

The humble Lincoln penny went through two major transitions. There was a much celebrated cosmetic change of the reverse in 1959. There was downplayed change from copper to zinc in 1982. The next change in the penny's future is likely to be oblivion.

My supposition is that, in the long run, the change in metal composition will have a bigger impact on the price of coins than the cosmetic change of the reverse.

This supposition is a bit hard to test. There are some rare dates among wheat pennies. An unsearched roll of wheat pennies would have a large premium over an unsearched roll of memorial copper pennies. Buyers would be hoping to find a rare coin. Testing the market demand for zinc pennies is hard, as the coins are still in circulation.

A proper test would pit several low grade rolls of 1950 wheat pennies against low grade rolls of 1960 copper pennies, against similar rolls of 1980 zinc pennies. I suspect that the difference between the selling price of the copper and zinc pennies would be greater than the difference between the price of the 1960 Memorial and 1950 Wheat pennies.

I thought of trying this experiment on eBay. My problem is that listing and shipping costs are greater than the price of the coins.

I might try this experiment in a few years … after pennies are pulled from circulation.

(NOTE, the mint made the change from copper to zinc mid way through 1982. You need to weigh coins to determine their make up. This brings up the important point. The first step to collecting coins is to buy a digital pocket scale !)

Monday, May 16, 2011

But, She Did Put the Bank in Peril

Enterprise News reports of a bank teller being fired for accepting rolls of dimes that actually contained pennies ... a common scam.

The scam only cost the bank fifty bucks.

On further reading, we discover the teller was really fired because she refused to sign a paper acknowledging that she put the bank in peril.

Both the teller and newspaper reporter thought the term "in peril" was excessive.

In my experience, the warning letter was not excessive.

This article brings me back to the discussion of coin regulation.

The monetary supply is highly regulated. Financial institutions that do anything to misrepresent the value of coins is in peril.

If a bank regulator found a stack of pennies in a dime roll, the bank would find itself in a regulatory hot seat. It would be in peril.

The bank did not understate its case.

The same thing happens when a paper writes an article on a murder suspect and fails to use the word "alleged." Failing to use the word "alleged" puts the newspaper in peril. The alleged murder suspect could sue the paper.

What is amazing about the American media is that it routinely calls for greater and greater regulation ... but balks at the fact that regulations have effects on the regulated businesses.

I wouldn't fire an employee for making a $50.00 mistake. I would fire an employee if the employee refused to acknowledge that the mistake created regulatory peril.

The Art of Measurement

The heart of coin collecting is the weight of the precious metal in the coin. Coins are minted to precise dimensions and bear the marks of governments to help simplify the exchange of precious metals.

Despite the historical significance of the marks, the real meat of coin collecting is the amount of precious metal in the coin.

Since the mass of the coins is of primary concern, the very first step one should take before buying coins is to get a scale.

The first step in buying a scale is to figure out the precision of the scale.

Coin collectors often measure the specific gravity of a coin. This involves measuring a volume of water that is several times the weight of the coin. A silver dollar weighs 26.73 grams. A troy ounce weighs 31.1034768 grams. Your coin scale should be able to weigh a mass several times this amount. You want a scale that can measure 100 grams or 200 grams.

Precision matters. To weigh coins, you will want a scale that can measure to a hundredth of a gram. When shopping for coins, you will often find pocket scales listing dimension like 200g x .01g or 100g x .01g.

Food scales (those used for cooking) usually have dimensions like 1000g x 0.1 grams. These scales don't have sufficient precision to measure the specific gravity of coins.

You can find pocket scales that measure to the right precision for under $20.

I trolled the Internet for scales. I found the best deals on eBay

Saturday, May 14, 2011

Journalistic Fraud

I was Googling around for information on detecting forged coins and stumbled upon an interesting piece of journalistic fraud.

A piece titled "Coin fraud prompts reform efforts" by a propagandist named Dan Browning appeared in a second rate hack paper called "Star Tribune" from Minnaepolis.

I had hoped the piece would give me some ideas on how to detect fraud and forged coins. Instead of news, the piece was partisan nonsense.

Apparently, a partisan politician named Anthony Weiner (D-NY) dislikes Fox News. He launched an investigation into its advertisers. As a result of the investigation, Representative Weiner wanted to pass a silly new law called "The Precious Coins and Bullion Disclosure Act" that would create additional laws to go after his enemies.

The law did not pass. So Weiner responds:

"There is this sense among my Republican colleagues that this is somehow an attack on Fox [Television] and their hawkers of gold, so I think their inclination is to defend it," Weiner said.

What a joke. Weiner is so arrogant that he included a partisan snipe in his attempt to claim his law wasn't a partisan snipe.

The rest of the article is a sick joke as well.

Dan Browning wants us to believe that the coin industry is "unregulated," and claims to be on "a mission to bring regulation to the coin industry."

The truth of the matter is that coins are one of the most regulated items in history.

I know that coins are regulated by governments because coins have regular sizes, with regular weights and bear the stamps of the government that authorized the minting of the coin.

Coins are part of the monetary supply. The government is very strick about anything to do with money.

The idea that coins aren't regulated is a laugh. Coins, by their nature, are highly regulated.

As the stated thesis of the article is an idiocy of the highest degree, I can see no purpose to this article other than as an attack on political enemies labeled "hawkers of gold."

The article fails to mention that the biggest hawker of gold and coins on this planet is a government agency called the US Mint.

The US Mint not only is the agency that produces American coins, the Mint has strict oversight over "gold hawkers" who wish to resell golden eagles and silver eagles. Only a few coin dealers in each state manage to get approval to hawk the gold sold by the mint.

As for the rest of the article.

Anthony Weiner wants "coin dealers to disclose the melt value of the coins they sell, along with any fees and markups on their products."

Weiner fails to mention that the US Mint aggressively markets "presidental dollars" to children. These coins have a deceptive gold colored coating and a melt value of under 7 cents a coin. I logged onto the to find that the US government just released a proof set of the "Andrew Johnson" coin with a "First Spouse medal" for $14.95. Shipping and handling is an additional $4.95.

The United States Government is deceptively hawking a set of two gold colored coins with a melt value of fifteen cents for twenty dollars! That is a 99% mark up!

The set has a legal tender value of $1.00, but the purchasing power of this coin will diminish with time.

The US Mint (a government agency) is producing one of these overpriced sets for every president! Children are being duped out of some serious dough to buy the full set.

Before Representative Weiner starts going after businesses reselling products from the US Mint, he should look at his own house. The US Mint is guilty of the offenses for which he condemns others.

Anyway, I was extremely disappointed with the attack journalism of The Star Journal. I filed this piece of nothing by Dan Browning in the category of Journalistic Fraud.

Just as a forgery is a useless piece of metal fraudulently masquerading as a coin, Dan Browning is clearly a propagandist masquerading as a reporter.

Extra Legal Economy and Coin Deals Gone South

Apparently, much of the current coin dealing in the US takes part in the "extra-legal" economy. This unfortunately state of affairs means that an interest in coin collecting can draw people into risky situations.

The Journal Star reports on a coin deals gone south in Nebraska.

In the first deal, a coin collector met someone at a coin show. They arranged a coin deal worth $27,000 and agreed to meet in the parking lot of a bar. The deal was a set up for a robbery.

In a second case, a coin dealer agreed to meet people in a city park and was attacked on arrival in the park.

These stories horrified me.

But, I am not sure if I was more freightened by the robbery than by the thought of people meeting strangers face to face to engage in a business transaction at a personal level.

Apparently, a primary reason for owning precious metal coins is to have something to barter if our system of fiat money ever went south, in which case we would have to return to direct transactions with each other.

Relearning the art of face to face transactions is probably a good thing.

For example, one thing we should learn about face to face trading is: Never accept the invitation to trade coins in the parking lot of a bar.

Sunday, May 8, 2011

Ready to Start Blogging

In March, the Utah Legislature passed the "Legal Tendar Act" as a symbolic statement for a hard currency.

I registered the domain to explore ideas around currency.

As I studied the market and the rapid rise in silver and gold prices, I got the distinct impression that people investing in precious metals in April were like sheep being led to slaughter.

Sure enough, the corrupt and captured exchanges where prices are set changed the margin requirements and manufactured a massive pull back in gold and silver prices. This manufactured pullback benefit the hedge funds with massive short positions on precious metals. CoinUpdate talks about the manipulation.

Anyway, the manipulations led to a 35% correction in the price of silver ... and I actually feel comfortable returning to the effort I was making on UtahGold.US.