United States dollar
Encyclopedia
The United States dollar (sign
: $
; code
: USD; also abbreviated US$), also referred to as the American dollar, is the official currency
of the United States of America. It is divided into 100 smaller units called cents
or pennies
.
The U.S. dollar is the currency most used in international transactions
and is one of the world's reserve currencies
. Several countries use it as their official currency
, in many others it is the de facto currency, and it is also used as the sole currency in some British Overseas Territories
(British Virgin Islands
and Turks and Caicos).
shall have the power "To coin Money". Laws implementing this power are currently codified in Section 5112 of Title 31 of the United States Code. Section 5112 prescribes the forms in which the United States dollars shall be issued. Those coins are both designated in Section 5112 as "legal tender" in payment of debts. The Sacagawea dollar
is one example of the copper alloy dollar. The pure silver dollar is known as the American Silver Eagle
. Section 5112 also provides for the minting and issuance of other coins, which have values ranging from one cent to fifty dollars. These other coins are more fully described in Coins of the United States dollar.
The Constitution provides that "a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time". That provision of the Constitution is made specific by Section 331 of Title 31 of the United States Code. The sums of money reported in the "Statements" are currently being expressed in U.S. dollars (for example, see the 2009 Financial Report of the United States Government). The U.S. dollar may therefore be described as the unit of account
of the United States.
The word "dollar" is one of the words in the first paragraph of Section 9 of Article 1 of the U.S. Constitution. In that context, "dollars" is a reference to the Spanish milled dollar, a coin that had a monetary value of 8 Spanish units of currency, or reales
. In 1792 the U.S. Congress adopted legislation titled An act establishing a mint, and regulating the Coins of the United States. Section 9 of that act authorized the production of various coins, including "DOLLARS OR UNITS—each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver". Section 20 of the act provided, "That the money of account of the United States shall be expressed in dollars, or units... and that all accounts in the public offices and all proceedings in the courts of the United States shall be kept and had in conformity to this regulation". In other words, this act designated the United States dollar as the unit of currency
of the United States.
The U.S. dollar bill uses the decimal system, consisting of 100 equal cents (symbol ¢). It is also officially divided into 1,000 mills
or ten dimes, while ten dollars is equal to an eagle
. However, only cents are in everyday use as divisions of the dollar; "dime" is used solely as the name of the coin with the value of 10¢, while "eagle" and "mill" are largely unknown to the general public, though mills are sometimes used in matters of tax
levies, and gasoline
prices are usually in the form of $X.XX9 per gallon, e.g., $3.599, sometimes written as $3.59. When currently issued in circulating form, denominations equal to or less than a dollar are emitted as U.S. coins while denominations equal to or greater than a dollar are emitted as Federal Reserve notes
(with the exception of gold, silver and platinum coins valued up to $100 as legal tender, but worth far more as bullion). Both one-dollar coins and notes are produced today, although the note form is significantly more common. In the past, "paper money" was occasionally issued in denominations less than a dollar (fractional currency
) and gold coins were issued for circulation
up to the value of $20 (known as the "double eagle
," discontinued in the 1930s). The term eagle
was used in the Coinage Act of 1792 for the denomination of ten dollars, and subsequently was used in naming gold
coins. In 1854, James Guthrie, then Secretary of the Treasury, proposed creating $100, $50 and $25 gold coins, which were referred to as a "Union," "Half Union," and "Quarter Union," thus implying a denomination of 1 Union = $100.
Today, USD notes are made from cotton
fiber paper, unlike most common paper
, which is made of wood fiber. U.S. coins are produced by the United States Mint
. U.S. dollar banknote
s are printed by the Bureau of Engraving and Printing
, and, since 1914, have been issued by the Federal Reserve. The "large-sized note
s" issued before 1928 measured 7.42 inches (188.5 mm) by 3.125 inches (79.4 mm); small-sized notes, introduced that year, measure 6.14 inches (156 mm) by 2.61 inches (66.3 mm) by 0.0043 inch (0.10922 mm).
began minting coins known as Joachimstalers (from German thal, or nowadays usually Tal, "valley", cognate with "dale" in English), named for Joachimstal, the valley where the silver was mined (St. Joachim's Valley, now Jáchymov; then part of the Holy Roman Empire
, now part of the Czech Republic
). Joachimstaler was later shortened to the German Taler, a word that eventually found its way into Danish and Swedish as daler, Dutch as daalder, Ethiopian as ታላሪ (talari), Italian as tallero, and English as dollar. Alternatively, thaler is said to come from the German coin Guldengroschen
("great guilder", being of silver
but equal in value to a gold
guilder), minted from the silver from Joachimsthal.
"buck" (much like the British word "quid
" for the pound sterling) is often used to refer to dollars of various nations, including the U.S. dollar. This term, dating to the 18th century, may have originated with the colonial fur trade. "Greenback
" is another nickname originally applied specifically to the 19th century Demand Note
dollars created by Abraham Lincoln
to finance the costs of the Civil War for the North
. The original note was printed in black and green on the back side. It is still used to refer to the U.S. dollar (but not to the dollars of other countries). Other well-known names of the dollar as a whole in denominations include "greenmail", "green" and "dead presidents" (the last because late presidents are pictured on some of the bills).
"Grand", sometimes shortened to simply "G", is a common term for the amount of $1,000. The suffix "K" or "k" (from "kilo-") is also commonly used to denote this amount (such as "$10k" to mean $10,000). In colloquial English, when someone refers to a "large" or "stack", it is usually a reference to an amount that is a multiple of $1,000 (such as "fifty large" meaning $50,000). Banknotes' nicknames are the same as their values (such as "five", "twenty" etc.) The $100 bill is nicknamed "Benjamin", "Benji" or "Franklin" (after Benjamin Franklin
, who is pictured on the note), "C-note" (C being the Roman numeral for 100), "Century note" or "bill" (e.g. "two bills" being $200). The $20 bill has been referred to as "double sawbuck", "dub" or "Jackson" (after Andrew Jackson
); the $10 bill - as "sawbuck", "ten-spot" or "Hamilton" (after Alexander Hamilton
); the $5 bill - as "fin", "fiver" or "five-spot". The $2 bill is sometimes called "deuce", "Tom", "Jefferson" or "T.J." (after Thomas Jefferson
); and the $1 bill - "single" or "buck". The dollar has also been referred to as a "bone" and "bones" in plural (e.g. "twenty bones" is equal to $20) or a "bean". The newer designs are sometimes referred to as "Bigface" bills or "Monopoly
money". Some people refer to U.S. money as "cha-chingers", "bucks", "green-backs" and "smackers".
In French-speaking areas of Louisiana
, the dollar is referred to as "piastre" and the French holdover "sous" is used to refer to the cent.
In Panama
, the equivalent of buck is "palo" (literally "stick").
In Ecuador
, the dollar is referred to as "lata".
In Peru
, a nickname for the U.S. dollar is "coco", which is a pet name for Jorge ("George" in Spanish), a reference to the portrait of George Washington
on the $1 note.
Puerto Ricans
, both living in Puerto Rico
and in the United States
, may refer to the dollar as "peso
".
In some places in Mexico
, prices in U.S. dollars are referred to as "en americano" ("in American"), with the word "peso" used in Mexico primarily to refer to the Mexican peso
.
Cubans call the U.S. dollar "fula". Loosely translated from Cuban jargon mean bad or not good. American money was not bad to have or use by Cubans in the island, but its possession was penalized before the mid-1990s, hence the nickname.
The symbol $, usually written before the numerical amount, is used for the U.S. dollar (as well as for many other currencies). The sign was the result of a late 18th-century evolution of the scribal abbreviation
"ps" for the peso
. The p and the s eventually came to be written over each other giving rise to $.
Another popular explanation is that it comes from the Pillars of Hercules
on the Spanish Coat of arms
on the Spanish dollars that were minted in the New World
mints in Mexico City
, Potosí
, Bolivia
, and in Lima
, Peru
. These Pillars of Hercules
on the silver Spanish dollar
coins take the form of two vertical bars (||) and a swinging cloth band in the shape of an "S".
Yet another fictional explanation suggests that the dollar sign was formed from the capital letters U and S written or printed one on top of the other. This theory, popularized by novelist Ayn Rand
in Atlas Shrugged
, does not consider the fact that the symbol was already in use before the formation of the United States.
(founded 1792) were similar in size and composition to the Spanish dollar
. The Spanish, U.S. silver dollars, and Mexican silver pesos circulated side by side in the United States, and the Spanish dollar and Mexican peso remained legal tender until 1857
. The coinage of various English colonies also circulated. The lion dollar was popular in the Dutch New Netherland Colony (New York), but the lion dollar also circulated throughout the English colonies during the 17th century and early 18th century. Examples circulating in the colonies were usually worn so that the design was not fully distinguishable, thus they were sometimes referred to as "dog dollars".
The U.S. dollar was created by the Constitution and defined by the Coinage Act of 1792. It specified a "dollar" to be based in the Mexican peso at 1 dollar per peso and between 371 and 416 gr of silver (depending on purity) and an "eagle" to be between 247 and 270 gr of gold (again depending on purity). The choice of the value 371 grains arose from Alexander Hamilton
's decision to base the new American unit on the average weight of a selection of worn Spanish dollars (and later Mexican peso). Hamilton got the treasury to weigh a sample of Spanish dollars and the average weight came out to be 371 grains. A new Spanish dollar was usually about 377 grains in weight, and so the new U.S. dollar was at a slight discount in relation to the Spanish dollar. The gold equivalent of the Spanish dollar in sterling
was ₤1 = $4.80, whereas the gold equivalent of the U.S. dollar was ₤1 = 4.86⅔. This exchange rate with sterling remained right up until Britain abandoned the gold standard
in 1931. Hamilton and Franklin are the only two people depicted on the US dollar, who were not presidents.
The Coinage Act of 1792 set the value of an eagle at 10 dollars, and the dollar at 1/10 eagle. It called for 90% silver alloy coins in denominations of 1, 1/2, 1/4, 1/10, and 1/20 dollars; it called for 90% gold alloy coins in denominations of 1, 1/2, 1/4, and 1/10 eagles.
The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the value of things to remain fairly constant over time, except for the influx and outflux of gold and silver in the nation's economy.
The early currency of the USA did not exhibit faces of presidents, as is the custom now. In fact, George Washington was against having his face on the currency, a practice he compared to the policies of European monarchs. The currency as we know it today did not get the faces they currently have until after the early 20th century; before that "heads" side of coinage used profile faces and striding, seated, and standing figures from Greek and Roman mythology and composite native Americans. The last coins to be converted to profiles of historic Americans were the dime (1946) and the Dollar (1971).
For articles on the currencies of the colonies and states, see Connecticut pound
, Delaware pound
, Georgia pound
, Maryland pound
, Massachusetts pound
, New Hampshire pound
, New Jersey pound
, New York pound
, North Carolina pound
, Pennsylvania pound
, Rhode Island pound
, South Carolina pound
and Virginia pound
.
The continental currency suffered from printing press inflation and was replaced by the silver dollar at the rate of 1 silver dollar = 1000 continental dollars.
's suggestion to Congress of a fixed 15:1 ratio of silver to gold, respectively. The gold coins that were minted however, were not given any denomination whatsoever and traded for a market value relative to the Congressional standard of the silver dollar. 1834 saw a shift in the gold standard
to 23.2 gr, followed by a slight adjustment to 23.22 gr in 1837 (16:1 ratio).
In 1862, paper money was issued without the backing of precious metals, due to the Civil War
. Silver and gold coins continued to be issued and in 1878 the link between paper money and coins was reinstated. This disconnection from gold and silver backing also occurred during the War of 1812
. The use of paper money not backed by precious metals had also occurred under the Articles of Confederation from 1777 to 1788. With no solid backing and being easily counterfeited, the continentals quickly lost their value, giving rise to the phrase "not worth a continental". This was a primary reason for the "No state shall... make any thing but gold and silver coin a tender in payment of debts" clause in article 1, section 10 of the United States Constitution.
The Gold Standard Act
of 1900 abandoned the bimetallic standard and defined the dollar as 23.22 gr of gold, equivalent to setting the price of 1 troy ounce
of gold at $20.67. Silver coins continued to be issued for circulation until 1964, when all silver was removed from dimes and quarters, and the half dollar was reduced to 40% silver. Silver half dollars were last issued for circulation in 1970.
Gold coins were confiscated by Executive Order 6102
issued in 1933 by Franklin Roosevelt. The gold standard was changed to 13.71 gr, equivalent to setting the price of 1 troy ounce of gold at $35. This standard persisted until 1968. Between 1968 and 1975, a variety of pegs to gold were put in place. The price was at $42.22 per ounce before August 15, 1971 saw the U.S. dollar freely float on currency markets
.
According to the Bureau of Engraving and Printing, the largest note it ever printed was the $100,000 Gold Certificate, Series 1934. These notes were printed from December 18, 1934 through January 9, 1935, and were issued by the Treasurer of the United States to Federal Reserve Banks only against an equal amount of gold bullion held by the Treasury. These notes were used for transactions between Federal Reserve Banks and were not circulated among the general public.
Collector coins for which everyday transactions are non-existent.
Technically, all these coins are still legal tender at face value, though some are far more valuable today for their numismatic
value, and for gold and silver coins, their precious metal
value. From 1965 to 1970 the Kennedy half dollar
was the only circulating coin with any silver content though the Mint still makes what it calls Silver Proof sets for collectors.
In addition, an experimental $4.00 (Stella)
coin was also minted, but never placed into circulation and is properly considered to be a pattern rather than an actual coin denomination.
The $50 coin mentioned was only produced in 1915 for the Panama-Pacific International Exposition (1915)
celebrating the opening of the Panama Canal
. Only 1,128 were made, 645 of which were octagonal; this remains the only U.S. coin that was not round as well as the largest and heaviest U.S. coin ever.
From 1934 to present the only denominations produced for circulation have been the familiar penny, nickel, dime, quarter, half dollar and dollar. The nickel is the only coin still in use today that is essentially unchanged (except in its design) from its original version. Every year since 1866, the nickel has been 75% copper and 25% nickel, except for 4 years during World War II
when nickel was needed for the war.
, it contained 416 grains of "standard silver" (89.25% silver
and 10.75% copper
), as specified by Section 13 of the Coinage Act of 1792. It was designated by Section 9 of that Act as having "the value of a Spanish milled dollar".
Dollar coins have not been very popular in the United States. Silver dollars
were minted intermittently from 1794 through 1935; a copper-nickel dollar of the same large size, featuring President Dwight D. Eisenhower
, was minted from 1971 through 1978. Gold dollars were also minted in the 19th century. The Susan B. Anthony
dollar
coin was introduced in 1979; these proved to be unpopular because they were often mistaken for quarters, due to their nearly equal size, their milled edge, and their similar color. Minting of these dollars for circulation was suspended in 1980 (collectors' pieces were struck in 1981), but, as with all past U.S. coins, they remain legal tender
. As the number of Anthony dollars held by the Federal Reserve and dispensed primarily to make change in postal and transit vending machines had been virtually exhausted, additional Anthony dollars were struck in 1999. In 2000, a new $1 coin, featuring Sacagawea
, (the Sacagawea dollar
) was introduced, which corrected some of the mistakes of the Anthony dollar by having a smooth edge and a gold color, without requiring changes to vending machines that accept the Anthony dollar. However, this new coin has failed to achieve the popularity of the still-existing $1 bill and is rarely used in daily transactions. The failure to simultaneously withdraw the dollar bill and weak publicity efforts have been cited by coin proponents as primary reasons for the failure of the dollar coin to gain popular support. There are indications that the dollar coin's failure was also due to the reluctance of armored transport companies to make the necessary adjustments to handle the new coins, and the government's reluctance to mandate it. The result of the armored carriers' unwillingness to handle the new coins was that they virtually never reached merchants in quantities sufficient to be given out as change on a routine basis, or for retail clerks to become used to handling them.
In February 2007, the U.S. Mint, under the Presidential $1 Coin Act of 2005
, introduced a new $1 U.S. Presidential dollar coin. Based on the success of the "50 State Quarters
" series, the new coin features a sequence of presidents in order of their inaugurations, starting with George Washington
, on the obverse side. The reverse side features the Statue of Liberty
. To allow for larger, more detailed portraits, the traditional inscriptions of "E Pluribus Unum
," "In God We Trust," the year of minting or issuance, and the mint mark will be inscribed on the edge of the coin instead of the face. This feature, similar to the edge inscriptions seen on the British £1 coin, is not usually associated with U.S. coin designs. The inscription "Liberty" has been eliminated, with the Statue of Liberty serving as a sufficient replacement. In addition, due to the nature of U.S. coins, this will be the first time there will be circulating U.S. coins of different denominations with the same President featured on the obverse (heads) side. (Lincoln
/penny
, Jefferson
/nickel
, Franklin D. Roosevelt
/dime
, Washington
/quarter
and Kennedy
/half dollar
/dollar
Another unusual fact about the new $1 coin is Grover Cleveland
will have two coins with his portrait issued due to the fact he was the only U.S. President to be elected to two non-consecutive terms.
Early releases of the Washington coin included error coins shipped primarily from the Philadelphia mint to Florida and Tennessee banks. Highly sought after by collectors, and trading for as much as $850 each within a week of discovery, the error coins were identified by the absence of the edge impressions "E PLURIBUS UNUM IN GOD WE TRUST 2007 P". The mint of origin is generally accepted to be mostly Philadelphia, although identifying the source mint is impossible without opening a mint pack also containing marked units. Edge lettering is minted in both orientations with respect to "heads", some amateur collectors were initially duped into buying "upside down lettering error" coins.
Some cynics also erroneously point out that the Federal Reserve makes more profit from dollar bills than dollar coins because they wear out in a few years, whereas coins are more permanent. The fallacy of this argument arises because new notes printed to replace worn out notes which have been withdrawn from circulation bring in no net revenue to the government to offset the costs of printing new notes and destroying the old ones. As most vending machines are incapable of making change in banknotes, they commonly accept only $1 bills, though a few will give change in dollar coins.
as part of the design, usually found on the front
of the coin near the date although in the past it was more commonly found on the reverse
. The Philadelphia Mint
issues coins bearing a letter P (or no mark at all), while the Denver Mint
uses a letter D. The San Francisco Mint
uses an S, though no coins have been released from that mint for general circulation since 1980. It does, however, continue to strike proof
coins for collectors. The West Point Mint
uses a W, though this is rarely seen as the West Point mint generally only makes high denomination coins (with face values over $1.00) which are not meant for everyday use. A CC mark, for the Carson City Mint
, was used from 1870 to 1893, but the mint at that location was only a temporary establishment. The New Orleans Mint
used a mint mark O. It operated from 1838 until Louisiana seceded from the Union in 1861, and again from 1879 to 1909. The letter D was also used for coinage of the Dahlonega Mint
from 1837 to 1861, and C was used for the Charlotte Mint
during the same timespan. The latter two mints struck gold coins only.
" for the payment of debts. Congress has also authorized the issuance of more than 10 other types of banknotes, including the United States Note
and the Federal Reserve Bank Note
. The Federal Reserve Note is the only type that remains in circulation since the 1970s.
Currently printed denominations are $1
, $2
, $5
, $10
, $20
, $50
, and $100
. Notes above the $100 denomination stopped being printed in 1946 and were officially withdrawn from circulation in 1969. These notes were used primarily in inter-bank transactions or by organized crime
; it was the latter usage that prompted President
Richard Nixon
to issue an executive order in 1969 halting their use. With the advent of electronic banking, they became less necessary. Notes in denominations of $500, $1,000, $5,000, $10,000, and $100,000 were all produced at one time; see large denomination bills in U.S. currency for details. These notes are now collector's items and are worth more than their face value to collectors.
Though still predominantly green, post-2004 series incorporate other colors to better distinguish different denominations. As a result of a 2008 decision in an accessibility lawsuit filed by the American Council of the Blind
, the Bureau of Engraving and Printing
is planning to implement a raised tactile feature in the next redesign of each note, except the $1 and the version of the $100 bill already in process. It also plans larger, higher-contrast numerals, more color differences, and distribution of currency readers to assist the visually impaired during the transition period.
. Eight times a year, the 12-person Federal Open Market Committee
meet to determine US monetary policy
. Every business day, the Federal Reserve System engages in Open market operations to carry out that monetary policy. If the Federal Reserve desires to increase the money supply, it will buy securities (such as US Treasury Bonds) anonymously from banks in exchange for dollars. Conversely, it will sell securities to the banks in exchange for dollars, to take dollars out of circulation.
When the Federal Reserve makes a purchase, it credits the seller's reserve account (with the Federal Reserve). This money is not transferred from any existing funds – it is at this point that the Federal Reserve has created new high-powered money. Commercial banks can freely withdraw in cash any excess reserves from their reserve account at the Federal Reserve. To fulfill those requests, the Federal Reserve places an order for printed money from the US Treasury Department. The Treasury Department in turn sends these requests to the Bureau of Engraving and Printing (to print new dollar bills) and the Bureau of the Mint (to stamp the coins).
Usually, the short term goal of open market operations is to achieve a specific short term interest rate target. In other instances, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency or else relative to gold. For example, in the case of the USA the Federal Reserve targets the federal funds rate
, the rate at which member banks lend to one another overnight. The other primary means of conducting monetary policy include: (i) Discount window
lending (as lender of last resort
); (ii) Fractional deposit lending (changes in the reserve requirement); (iii) Moral suasion (cajoling certain market players to achieve specified outcomes); (iv) "Open mouth operations" (talking monetary policy with the market).
The 5th paragraph of Section 8 of Article 1 of the U.S. Constitution provides that the U.S. Congress shall have the power to "coin money" and to "regulate the value" of domestic and foreign coins. Congress exercised those powers when it enacted the Coinage Act of 1792. That Act provided for the minting of the first U.S. dollar
and it declared that the U.S. dollar shall have "the value of a Spanish milled dollar as the same is now current".
The table to the right shows the equivalent amount of goods that, in a particular year, could be purchased with $1. The table shows that from 1774 through 2009 the U.S. dollar has lost about 96.4% of its buying power.
The decline in the value of the U.S. dollar corresponds to price inflation, which is a rise in the general level of prices of goods and services in an economy over a period of time. A consumer price index
(CPI) is a measure estimating the average price of consumer goods and services purchased by households. The United States Consumer Price Index, published by the Bureau of Labor Statistics
, is a measure estimating the average price of consumer goods and services in the United States. It reflects inflation as experienced by consumers in their day-to-day living expenses. A graph showing the U.S. CPI relative to 1982-1984 and the annual year-over-year change in CPI is shown at right.
The value of the U.S. dollar declined significantly during wartime, especially during the American Civil War
, World War I
, and World War II
. The Federal Reserve, which was established in 1913, was designed to furnish an "elastic" currency subject to "substantial changes of quantity over short periods," which differed significantly from previous forms of high-powered money such as gold, national bank notes, and silver coins. Over the very long run, the prior gold standard kept prices stable - for instance, the price level and the value of the U.S. dollar in 1914 was not very different from the price level in the 1880s. The Federal Reserve initially succeeded in maintaining the value of the U.S. dollar and price stability, reversing the inflation caused by the First World War and stabilizing the value of the dollar during the 1920s, before presiding over a 30% deflation in U.S. prices in the 1930s.
Under the Bretton Woods system
established after World War II
, the value of the U.S. dollar was fixed to $35 per ounce, and the value of the U.S. dollar was thus anchored to the value of gold. Rising government spending in the 1960s, however, led to doubts about the ability of the United States to maintain this convertibility, gold stocks dwindled as banks and international investors began to convert dollars to gold, and as a result the value of the dollar began to decline. Facing an emerging currency crisis
and the imminent danger that the United States would no longer be able to redeem dollars for gold, gold convertibility was finally terminated in 1971 by President Nixon
, resulting in the "Nixon shock
."
The value of the U.S. dollar was therefore no longer anchored to gold, and it fell upon the Federal Reserve to maintain the value of the U.S. currency. The Federal Reserve, however, continued to increase the money supply, resulting in stagflation
and a rapidly declining value of the U.S. dollar in the 1970s. This was largely due to the prevailing economic view at the time that inflation and real economic growth were linked (the Phillips curve
), and so inflation was regarded as relatively benign. Between 1965 and 1981, the U.S. dollar lost two thirds of its value.
In 1979, President Carter
appointed Paul Volcker
Chairman of the Federal Reserve
. The Federal Reserve tightened the money supply and inflation was substantially lower in the 1980s, and hence the value of the U.S. dollar stabilized.
Over the thirty-year period from 1981 to 2009, the U.S. dollar lost over half its value. This is because the Federal Reserve has targeted not zero inflation, but a low, stable rate of inflation - between 1987 and 1997, the rate of inflation was approximately 3.5%, and between 1997 and 2007 it was approximately 2%. The so-called "Great Moderation" of economic conditions since the 1970s is credited to monetary policy targeting price stability.
There is ongoing debate about whether central banks should target zero inflation (which would mean a constant value for the U.S. dollar over time) or low, stable inflation (which would mean a continuously but slowly declining value of the dollar over time, as is the case now). Although some economists are in favor of a zero inflation policy and therefore a constant value for the U.S. dollar, others contend that such a policy limits the ability of the central bank to control interest rates and stimulate the economy when needed.
Contrary to some urban legends, there is not now, nor has there ever been, any skins of animals contained in US monies. The term frog skin, in reference to the bill, is in regards to the coloration of the bill's back.
Currency sign
A currency sign is a graphic symbol used as a shorthand for a currency's name, especially in reference to amounts of money. They typically employ the first letter or character of the currency, sometimes with minor changes such as ligatures or overlaid vertical or horizontal bars...
: $
Dollar sign
The dollar or peso sign is a symbol primarily used to indicate the various peso and dollar units of currency around the world.- Origin :...
; code
ISO 4217
ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...
: USD; also abbreviated US$), also referred to as the American dollar, is the official currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
of the United States of America. It is divided into 100 smaller units called cents
Cent (currency)
In many national currencies, the cent is a monetary unit that equals 1⁄100 of the basic monetary unit. Etymologically, the word cent derives from the Latin word "centum" meaning hundred. Cent also refers to a coin which is worth one cent....
or pennies
Cent (currency)
In many national currencies, the cent is a monetary unit that equals 1⁄100 of the basic monetary unit. Etymologically, the word cent derives from the Latin word "centum" meaning hundred. Cent also refers to a coin which is worth one cent....
.
The U.S. dollar is the currency most used in international transactions
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
and is one of the world's reserve currencies
Reserve currency
A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves...
. Several countries use it as their official currency
Dollarization
Dollarization occurs when the inhabitants of a country use foreign currency in parallel to or instead of the domestic currency. The term is not only applied to usage of the United States dollar, but generally to the use of any foreign currency as the national currency.The biggest economies to have...
, in many others it is the de facto currency, and it is also used as the sole currency in some British Overseas Territories
British overseas territories
The British Overseas Territories are fourteen territories of the United Kingdom which, although they do not form part of the United Kingdom itself, fall under its jurisdiction. They are remnants of the British Empire that have not acquired independence or have voted to remain British territories...
(British Virgin Islands
British Virgin Islands
The Virgin Islands, often called the British Virgin Islands , is a British overseas territory and overseas territory of the European Union, located in the Caribbean to the east of Puerto Rico. The islands make up part of the Virgin Islands archipelago, the remaining islands constituting the U.S...
and Turks and Caicos).
Overview
The Constitution of the United States of America provides that the United States CongressUnited States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
shall have the power "To coin Money". Laws implementing this power are currently codified in Section 5112 of Title 31 of the United States Code. Section 5112 prescribes the forms in which the United States dollars shall be issued. Those coins are both designated in Section 5112 as "legal tender" in payment of debts. The Sacagawea dollar
Sacagawea dollar
The Sacagawea dollar is a United States dollar coin that has been minted every year since 2000. These coins have a copper core clad by manganese brass, giving them a distinctive golden color. The coin features an obverse by Glenna Goodacre. The reverse design has varied, from 2000 to 2008...
is one example of the copper alloy dollar. The pure silver dollar is known as the American Silver Eagle
American Silver Eagle
The American Silver Eagle is the official silver bullion coin of the United States. It was first released by the United States Mint on November 24, 1986. It is struck only in the one-troy ounce size, which has a nominal face value of one dollar and is guaranteed to contain one troy ounce of 99.9%...
. Section 5112 also provides for the minting and issuance of other coins, which have values ranging from one cent to fifty dollars. These other coins are more fully described in Coins of the United States dollar.
The Constitution provides that "a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time". That provision of the Constitution is made specific by Section 331 of Title 31 of the United States Code. The sums of money reported in the "Statements" are currently being expressed in U.S. dollars (for example, see the 2009 Financial Report of the United States Government). The U.S. dollar may therefore be described as the unit of account
Unit of account
A unit of account is a standard monetary unit of measurement of value/cost of goods, services, or assets. It is one of three well-known functions of money. It lends meaning to profits, losses, liability, or assets....
of the United States.
The word "dollar" is one of the words in the first paragraph of Section 9 of Article 1 of the U.S. Constitution. In that context, "dollars" is a reference to the Spanish milled dollar, a coin that had a monetary value of 8 Spanish units of currency, or reales
Spanish real
The real was a unit of currency in Spain for several centuries after the mid-14th century, but changed in value relative to other units introduced...
. In 1792 the U.S. Congress adopted legislation titled An act establishing a mint, and regulating the Coins of the United States. Section 9 of that act authorized the production of various coins, including "DOLLARS OR UNITS—each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver". Section 20 of the act provided, "That the money of account of the United States shall be expressed in dollars, or units... and that all accounts in the public offices and all proceedings in the courts of the United States shall be kept and had in conformity to this regulation". In other words, this act designated the United States dollar as the unit of currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
of the United States.
The U.S. dollar bill uses the decimal system, consisting of 100 equal cents (symbol ¢). It is also officially divided into 1,000 mills
Mill (currency)
The mill or mille is a now-abstract unit of currency used sometimes in accounting. In the United States, it is a notional unit equivalent to of a United States dollar...
or ten dimes, while ten dollars is equal to an eagle
Eagle (United States coin)
The eagle is a base-unit of denomination issued only for gold coinage by the United States Mint. It has been obsolete as a circulating denomination since 1933. The eagle was the largest of the four main decimal base-units of denomination used for circulating coinage in the United States prior to...
. However, only cents are in everyday use as divisions of the dollar; "dime" is used solely as the name of the coin with the value of 10¢, while "eagle" and "mill" are largely unknown to the general public, though mills are sometimes used in matters of tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
levies, and gasoline
Gasoline
Gasoline , or petrol , is a toxic, translucent, petroleum-derived liquid that is primarily used as a fuel in internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Some gasolines also contain...
prices are usually in the form of $X.XX9 per gallon, e.g., $3.599, sometimes written as $3.59. When currently issued in circulating form, denominations equal to or less than a dollar are emitted as U.S. coins while denominations equal to or greater than a dollar are emitted as Federal Reserve notes
Federal Reserve Note
A Federal Reserve Note is a type of banknote used in the United States of America. Federal Reserve Notes are printed by the United States Bureau of Engraving and Printing on paper made by Crane & Co. of Dalton, Massachusetts. They are the only type of U.S...
(with the exception of gold, silver and platinum coins valued up to $100 as legal tender, but worth far more as bullion). Both one-dollar coins and notes are produced today, although the note form is significantly more common. In the past, "paper money" was occasionally issued in denominations less than a dollar (fractional currency
Treasury (Coin) Note
Fractional currency notes were issued by the United States Federal Government during and after the U.S. Civil War due to the hoarding and shortage of coins in gold, silver and copper in denominations of 3, 5, 10, 15, 25 and 50 cents. These notes were in use until 1876 and were redeemable by the...
) and gold coins were issued for circulation
Circulation (currency)
The social system in which we live has usually developed to the stage for money to be used as the medium for the exchange of goods and services. Hence the money is an important aspect of the general social or macroeconomics system...
up to the value of $20 (known as the "double eagle
Double Eagle
A Double Eagle is a gold coin of the United States with a denomination of $20. . The coins are made from a 90% gold and 10% copper alloy....
," discontinued in the 1930s). The term eagle
Eagle (United States coin)
The eagle is a base-unit of denomination issued only for gold coinage by the United States Mint. It has been obsolete as a circulating denomination since 1933. The eagle was the largest of the four main decimal base-units of denomination used for circulating coinage in the United States prior to...
was used in the Coinage Act of 1792 for the denomination of ten dollars, and subsequently was used in naming gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
coins. In 1854, James Guthrie, then Secretary of the Treasury, proposed creating $100, $50 and $25 gold coins, which were referred to as a "Union," "Half Union," and "Quarter Union," thus implying a denomination of 1 Union = $100.
Today, USD notes are made from cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
fiber paper, unlike most common paper
Paper
Paper is a thin material mainly used for writing upon, printing upon, drawing or for packaging. It is produced by pressing together moist fibers, typically cellulose pulp derived from wood, rags or grasses, and drying them into flexible sheets....
, which is made of wood fiber. U.S. coins are produced by the United States Mint
United States Mint
The United States Mint primarily produces circulating coinage for the United States to conduct its trade and commerce. The Mint was created by Congress with the Coinage Act of 1792, and placed within the Department of State...
. U.S. dollar banknote
Banknote
A banknote is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender. In addition to coins, banknotes make up the cash or bearer forms of all modern fiat money...
s are printed by the Bureau of Engraving and Printing
Bureau of Engraving and Printing
The Bureau of Engraving and Printing is a government agency within the United States Department of the Treasury that designs and produces a variety of security products for the United States government, most notable of which is paper currency for the Federal Reserve. The Federal Reserve itself is...
, and, since 1914, have been issued by the Federal Reserve. The "large-sized note
Large-sized note
A large-sized note is a bill of any denomination of U.S. currency printed between 1863 and 1929. This is in contrast with small-sized notes, which were printed starting in 1928. Large-sized notes exist in denominations of $1 through $10,000. The most common large-sized notes are the Federal Reserve...
s" issued before 1928 measured 7.42 inches (188.5 mm) by 3.125 inches (79.4 mm); small-sized notes, introduced that year, measure 6.14 inches (156 mm) by 2.61 inches (66.3 mm) by 0.0043 inch (0.10922 mm).
Etymology
In the 16th century, Count Hieronymus Schlick of BohemiaBohemia
Bohemia is a historical region in central Europe, occupying the western two-thirds of the traditional Czech Lands. It is located in the contemporary Czech Republic with its capital in Prague...
began minting coins known as Joachimstalers (from German thal, or nowadays usually Tal, "valley", cognate with "dale" in English), named for Joachimstal, the valley where the silver was mined (St. Joachim's Valley, now Jáchymov; then part of the Holy Roman Empire
Holy Roman Empire
The Holy Roman Empire was a realm that existed from 962 to 1806 in Central Europe.It was ruled by the Holy Roman Emperor. Its character changed during the Middle Ages and the Early Modern period, when the power of the emperor gradually weakened in favour of the princes...
, now part of the Czech Republic
Czech Republic
The Czech Republic is a landlocked country in Central Europe. The country is bordered by Poland to the northeast, Slovakia to the east, Austria to the south, and Germany to the west and northwest....
). Joachimstaler was later shortened to the German Taler, a word that eventually found its way into Danish and Swedish as daler, Dutch as daalder, Ethiopian as ታላሪ (talari), Italian as tallero, and English as dollar. Alternatively, thaler is said to come from the German coin Guldengroschen
Guldengroschen
The Guldengroschen was a large silver coin originally minted in Tirol in 1486.The Guldengroschen's name comes from the fact that it has an equivalent denomination value in silver relative to that of the goldgulden...
("great guilder", being of silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
but equal in value to a gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
guilder), minted from the silver from Joachimsthal.
Nicknames
The colloquialismColloquialism
A colloquialism is a word or phrase that is common in everyday, unconstrained conversation rather than in formal speech, academic writing, or paralinguistics. Dictionaries often display colloquial words and phrases with the abbreviation colloq. as an identifier...
"buck" (much like the British word "quid
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
" for the pound sterling) is often used to refer to dollars of various nations, including the U.S. dollar. This term, dating to the 18th century, may have originated with the colonial fur trade. "Greenback
Greenback
Greenback may refer to:In currency:* Greenback , a fiat currency issued during the American Civil War**United States Note**Demand Note, issued in 1861–62* A modern United States Federal Reserve Note...
" is another nickname originally applied specifically to the 19th century Demand Note
Demand Note
A Demand Note is a type of United States paper money that was issued between August 1861 and April 1862 during the American Civil War in denominations of 5, 10, and 20 US$...
dollars created by Abraham Lincoln
Abraham Lincoln
Abraham Lincoln was the 16th President of the United States, serving from March 1861 until his assassination in April 1865. He successfully led his country through a great constitutional, military and moral crisis – the American Civil War – preserving the Union, while ending slavery, and...
to finance the costs of the Civil War for the North
Northern United States
Northern United States, also sometimes the North, may refer to:* A particular grouping of states or regions of the United States of America. The United States Census Bureau divides some of the northernmost United States into the Midwest Region and the Northeast Region...
. The original note was printed in black and green on the back side. It is still used to refer to the U.S. dollar (but not to the dollars of other countries). Other well-known names of the dollar as a whole in denominations include "greenmail", "green" and "dead presidents" (the last because late presidents are pictured on some of the bills).
"Grand", sometimes shortened to simply "G", is a common term for the amount of $1,000. The suffix "K" or "k" (from "kilo-") is also commonly used to denote this amount (such as "$10k" to mean $10,000). In colloquial English, when someone refers to a "large" or "stack", it is usually a reference to an amount that is a multiple of $1,000 (such as "fifty large" meaning $50,000). Banknotes' nicknames are the same as their values (such as "five", "twenty" etc.) The $100 bill is nicknamed "Benjamin", "Benji" or "Franklin" (after Benjamin Franklin
Benjamin Franklin
Dr. Benjamin Franklin was one of the Founding Fathers of the United States. A noted polymath, Franklin was a leading author, printer, political theorist, politician, postmaster, scientist, musician, inventor, satirist, civic activist, statesman, and diplomat...
, who is pictured on the note), "C-note" (C being the Roman numeral for 100), "Century note" or "bill" (e.g. "two bills" being $200). The $20 bill has been referred to as "double sawbuck", "dub" or "Jackson" (after Andrew Jackson
Andrew Jackson
Andrew Jackson was the seventh President of the United States . Based in frontier Tennessee, Jackson was a politician and army general who defeated the Creek Indians at the Battle of Horseshoe Bend , and the British at the Battle of New Orleans...
); the $10 bill - as "sawbuck", "ten-spot" or "Hamilton" (after Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
); the $5 bill - as "fin", "fiver" or "five-spot". The $2 bill is sometimes called "deuce", "Tom", "Jefferson" or "T.J." (after Thomas Jefferson
Thomas Jefferson
Thomas Jefferson was the principal author of the United States Declaration of Independence and the Statute of Virginia for Religious Freedom , the third President of the United States and founder of the University of Virginia...
); and the $1 bill - "single" or "buck". The dollar has also been referred to as a "bone" and "bones" in plural (e.g. "twenty bones" is equal to $20) or a "bean". The newer designs are sometimes referred to as "Bigface" bills or "Monopoly
Monopoly (game)
Marvin Gardens, the leading yellow property on the board shown, is actually a misspelling of the original location name, Marven Gardens. The misspelling was said to be introduced by Charles Todd and passed on when his home-made Monopoly board was copied by Charles Darrow and thence to Parker...
money". Some people refer to U.S. money as "cha-chingers", "bucks", "green-backs" and "smackers".
In French-speaking areas of Louisiana
Louisiana
Louisiana is a state located in the southern region of the United States of America. Its capital is Baton Rouge and largest city is New Orleans. Louisiana is the only state in the U.S. with political subdivisions termed parishes, which are local governments equivalent to counties...
, the dollar is referred to as "piastre" and the French holdover "sous" is used to refer to the cent.
In Panama
Panama
Panama , officially the Republic of Panama , is the southernmost country of Central America. Situated on the isthmus connecting North and South America, it is bordered by Costa Rica to the northwest, Colombia to the southeast, the Caribbean Sea to the north and the Pacific Ocean to the south. The...
, the equivalent of buck is "palo" (literally "stick").
In Ecuador
Ecuador
Ecuador , officially the Republic of Ecuador is a representative democratic republic in South America, bordered by Colombia on the north, Peru on the east and south, and by the Pacific Ocean to the west. It is one of only two countries in South America, along with Chile, that do not have a border...
, the dollar is referred to as "lata".
In Peru
Peru
Peru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....
, a nickname for the U.S. dollar is "coco", which is a pet name for Jorge ("George" in Spanish), a reference to the portrait of George Washington
George Washington
George Washington was the dominant military and political leader of the new United States of America from 1775 to 1799. He led the American victory over Great Britain in the American Revolutionary War as commander-in-chief of the Continental Army from 1775 to 1783, and presided over the writing of...
on the $1 note.
Puerto Ricans
Puerto Rico
Puerto Rico , officially the Commonwealth of Puerto Rico , is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin Islands.Puerto Rico comprises an...
, both living in Puerto Rico
Puerto Rico
Puerto Rico , officially the Commonwealth of Puerto Rico , is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin Islands.Puerto Rico comprises an...
and in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, may refer to the dollar as "peso
Peso
The word peso was the name of a coin that originated in Spain and became of immense importance internationally...
".
In some places in Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
, prices in U.S. dollars are referred to as "en americano" ("in American"), with the word "peso" used in Mexico primarily to refer to the Mexican peso
Mexican peso
The peso is the currency of Mexico. Modern peso and dollar currencies have a common origin in the 15th–19th century Spanish dollar, most continuing to use its sign, "$". The Mexican peso is the 12th most traded currency in the world, the third most traded in the Americas, and by far the most...
.
Cubans call the U.S. dollar "fula". Loosely translated from Cuban jargon mean bad or not good. American money was not bad to have or use by Cubans in the island, but its possession was penalized before the mid-1990s, hence the nickname.
Dollar sign
Scribal abbreviation
Scribal abbreviations are the abbreviations used by ancient and mediæval scribes writing in Latin and, later, in Greek and Old Norse...
"ps" for the peso
Peso
The word peso was the name of a coin that originated in Spain and became of immense importance internationally...
. The p and the s eventually came to be written over each other giving rise to $.
Another popular explanation is that it comes from the Pillars of Hercules
Pillars of Hercules
The Pillars of Hercules was the phrase that was applied in Antiquity to the promontories that flank the entrance to the Strait of Gibraltar. The northern Pillar is the Rock of Gibraltar in the British overseas territory of Gibraltar...
on the Spanish Coat of arms
Coat of arms of Spain
The current coat of arms of Spain, although it has its roots centuries ago, was approved by law in 1981, when the present established replaced the interim version which, in turn, replaced the official arms of Francoist Spain...
on the Spanish dollars that were minted in the New World
New World
The New World is one of the names used for the Western Hemisphere, specifically America and sometimes Oceania . The term originated in the late 15th century, when America had been recently discovered by European explorers, expanding the geographical horizon of the people of the European middle...
mints in Mexico City
Mexico City
Mexico City is the Federal District , capital of Mexico and seat of the federal powers of the Mexican Union. It is a federal entity within Mexico which is not part of any one of the 31 Mexican states but belongs to the federation as a whole...
, Potosí
Potosí
Potosí is a city and the capital of the department of Potosí in Bolivia. It is one of the highest cities in the world by elevation at a nominal . and it was the location of the Spanish colonial mint, now the National Mint of Bolivia...
, Bolivia
Bolivia
Bolivia officially known as Plurinational State of Bolivia , is a landlocked country in central South America. It is the poorest country in South America...
, and in Lima
Lima
Lima is the capital and the largest city of Peru. It is located in the valleys of the Chillón, Rímac and Lurín rivers, in the central part of the country, on a desert coast overlooking the Pacific Ocean. Together with the seaport of Callao, it forms a contiguous urban area known as the Lima...
, Peru
Peru
Peru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....
. These Pillars of Hercules
Pillars of Hercules
The Pillars of Hercules was the phrase that was applied in Antiquity to the promontories that flank the entrance to the Strait of Gibraltar. The northern Pillar is the Rock of Gibraltar in the British overseas territory of Gibraltar...
on the silver Spanish dollar
Spanish dollar
The Spanish dollar is a silver coin, of approximately 38 mm diameter, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Its purpose was to correspond to the German thaler...
coins take the form of two vertical bars (||) and a swinging cloth band in the shape of an "S".
Yet another fictional explanation suggests that the dollar sign was formed from the capital letters U and S written or printed one on top of the other. This theory, popularized by novelist Ayn Rand
Ayn Rand
Ayn Rand was a Russian-American novelist, philosopher, playwright, and screenwriter. She is known for her two best-selling novels The Fountainhead and Atlas Shrugged and for developing a philosophical system she called Objectivism....
in Atlas Shrugged
Atlas Shrugged
Atlas Shrugged is a novel by Ayn Rand, first published in 1957 in the United States. Rand's fourth and last novel, it was also her longest, and the one she considered to be her magnum opus in the realm of fiction writing...
, does not consider the fact that the symbol was already in use before the formation of the United States.
History
The first dollar coins issued by the United States MintUnited States Mint
The United States Mint primarily produces circulating coinage for the United States to conduct its trade and commerce. The Mint was created by Congress with the Coinage Act of 1792, and placed within the Department of State...
(founded 1792) were similar in size and composition to the Spanish dollar
Spanish dollar
The Spanish dollar is a silver coin, of approximately 38 mm diameter, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Its purpose was to correspond to the German thaler...
. The Spanish, U.S. silver dollars, and Mexican silver pesos circulated side by side in the United States, and the Spanish dollar and Mexican peso remained legal tender until 1857
Coinage Act of 1857
The Coinage Act of 1857 was an act of the United States Congress which forbade the use of foreign coins as legal tender, repealing all acts "authorizing the currency of foreign gold or silver coins". Specific coins would be exchanged at the Treasury and recoined...
. The coinage of various English colonies also circulated. The lion dollar was popular in the Dutch New Netherland Colony (New York), but the lion dollar also circulated throughout the English colonies during the 17th century and early 18th century. Examples circulating in the colonies were usually worn so that the design was not fully distinguishable, thus they were sometimes referred to as "dog dollars".
The U.S. dollar was created by the Constitution and defined by the Coinage Act of 1792. It specified a "dollar" to be based in the Mexican peso at 1 dollar per peso and between 371 and 416 gr of silver (depending on purity) and an "eagle" to be between 247 and 270 gr of gold (again depending on purity). The choice of the value 371 grains arose from Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
's decision to base the new American unit on the average weight of a selection of worn Spanish dollars (and later Mexican peso). Hamilton got the treasury to weigh a sample of Spanish dollars and the average weight came out to be 371 grains. A new Spanish dollar was usually about 377 grains in weight, and so the new U.S. dollar was at a slight discount in relation to the Spanish dollar. The gold equivalent of the Spanish dollar in sterling
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
was ₤1 = $4.80, whereas the gold equivalent of the U.S. dollar was ₤1 = 4.86⅔. This exchange rate with sterling remained right up until Britain abandoned the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
in 1931. Hamilton and Franklin are the only two people depicted on the US dollar, who were not presidents.
The Coinage Act of 1792 set the value of an eagle at 10 dollars, and the dollar at 1/10 eagle. It called for 90% silver alloy coins in denominations of 1, 1/2, 1/4, 1/10, and 1/20 dollars; it called for 90% gold alloy coins in denominations of 1, 1/2, 1/4, and 1/10 eagles.
The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the value of things to remain fairly constant over time, except for the influx and outflux of gold and silver in the nation's economy.
The early currency of the USA did not exhibit faces of presidents, as is the custom now. In fact, George Washington was against having his face on the currency, a practice he compared to the policies of European monarchs. The currency as we know it today did not get the faces they currently have until after the early 20th century; before that "heads" side of coinage used profile faces and striding, seated, and standing figures from Greek and Roman mythology and composite native Americans. The last coins to be converted to profiles of historic Americans were the dime (1946) and the Dollar (1971).
For articles on the currencies of the colonies and states, see Connecticut pound
Connecticut pound
The pound was the currency of Connecticut until 1793. Initially, the British pound circulated along with foreign currencies. This was supplemented by local paper money from 1709. Although the local currency was denominated in pounds, shillings and pence, it was worth less than sterling, with 1...
, Delaware pound
Delaware pound
The pound was the currency of Delaware until 1793. Initially, the British pound and foreign coins circulated. This was supplemented from 1723 by local paper money...
, Georgia pound
Georgia pound
The pound was the currency of Georgia until 1793. Initially, the British pound circulated. This was supplemented from 1735 with local paper money denominated in sterling, with 1 pound = 20 shillings = 240 pence....
, Maryland pound
Maryland pound
The pound was the currency of Maryland until 1793. Initially, the British pound circulated along with foreign coins. From 1733, this was supplemented by paper money, known as "Proclamation Money". Although this was denominated in pounds, shillings and pence, they were worth less than sterling, with...
, Massachusetts pound
Massachusetts pound
The pound was the currency of the Commonwealth of Massachusetts and its colonial predecessors until 1793. Like the British pound sterling of that era, the Massachusetts pound was subdivided into 20 shillings, each of 12 pence, but the Massachusetts and British pounds were not equivalent in value...
, New Hampshire pound
New Hampshire pound
The pound was the currency of New Hampshire until 1793. Initially, the British pound circulated, supplemented from 1709 by local paper money. These notes were denominated in pounds, shillings and pence but were worth less than sterling, with 1 New Hampshire shilling = 9 pence sterling...
, New Jersey pound
New Jersey pound
The pound was the currency of New Jersey until 1793. Initially, the British pound and some foreign currencies circulated, supplemented from 1709 by local paper money. However, although the notes were denominated in pounds, shillings and pence, they were worth less than sterling, with 1 New Jersey...
, New York pound
New York pound
The pound was the currency of New York until 1793. Initially, the British pound and some foreign currencies circulated, supplemented by local paper money from 1709...
, North Carolina pound
North Carolina pound
The pound was the currency of North Carolina until 1793. Initially, the British pound circulated, supplemented from 1709 by local paper money. Although these notes were denominated in pounds, shillings and pence, they were worth less than sterling, with 1 North Carolina shilling = 9 pence sterling....
, Pennsylvania pound
Pennsylvania pound
The pound was the currency of Pennsylvania until 1793. It was created as a response to the global economic downturn caused by the collapse of the South Sea Company. Initially, the British pound and certain foreign coins circulated, supplemented from 1723 by local paper money, called Colonial Scrip...
, Rhode Island pound
Rhode Island pound
The pound was the currency of Rhode Island until 1793. Initially, the British pound and foreign coins circulated, supplemented by local paper money from 1710. Although these notes were denominated in pounds, shillings and pence, they were worth less than sterling, with 1 Rhode Island shilling = 9...
, South Carolina pound
South Carolina pound
The pound was the currency of South Carolina until 1793. Initially, the British pound circulated, supplemented from 1703 by local paper money. Although these notes were denominated in pounds, shillings and pence, they were worth less than sterling, with 1 South Carolina shilling = 8 pence sterling....
and Virginia pound
Virginia pound
The pound was the currency of Virginia until 1793. Initially, the British pound sterling circulated along with foreign currencies, supplemented from 1755 by local paper money...
.
Continental currency
In 1775, the United States and the individual states began issuing "Continental Currency" denominated in Spanish dollars and (for the issues of the states) the £sd currencies of the states. The dollar was valued relative to the states' currencies at the following rates:| State | Value of Dollar in State Currency |
|---|---|
| Georgia Georgia (U.S. state) Georgia is a state located in the southeastern United States. It was established in 1732, the last of the original Thirteen Colonies. The state is named after King George II of Great Britain. Georgia was the fourth state to ratify the United States Constitution, on January 2, 1788... |
5 Shillings |
| Connecticut Connecticut Connecticut is a state in the New England region of the northeastern United States. It is bordered by Rhode Island to the east, Massachusetts to the north, and the state of New York to the west and the south .Connecticut is named for the Connecticut River, the major U.S. river that approximately... , Massachusetts Massachusetts The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010... , New Hampshire New Hampshire New Hampshire is a state in the New England region of the northeastern United States of America. The state was named after the southern English county of Hampshire. It is bordered by Massachusetts to the south, Vermont to the west, Maine and the Atlantic Ocean to the east, and the Canadian... , Rhode Island Rhode Island The state of Rhode Island and Providence Plantations, more commonly referred to as Rhode Island , is a state in the New England region of the United States. It is the smallest U.S. state by area... , Virginia Virginia The Commonwealth of Virginia , is a U.S. state on the Atlantic Coast of the Southern United States. Virginia is nicknamed the "Old Dominion" and sometimes the "Mother of Presidents" after the eight U.S. presidents born there... |
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| Delaware Delaware Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania... , Maryland Maryland Maryland is a U.S. state located in the Mid Atlantic region of the United States, bordering Virginia, West Virginia, and the District of Columbia to its south and west; Pennsylvania to its north; and Delaware to its east... , New Jersey New Jersey New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware... , Pennsylvania Pennsylvania The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to... |
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| New York New York New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east... , North Carolina North Carolina North Carolina is a state located in the southeastern United States. The state borders South Carolina and Georgia to the south, Tennessee to the west and Virginia to the north. North Carolina contains 100 counties. Its capital is Raleigh, and its largest city is Charlotte... |
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| South Carolina South Carolina South Carolina is a state in the Deep South of the United States that borders Georgia to the south, North Carolina to the north, and the Atlantic Ocean to the east. Originally part of the Province of Carolina, the Province of South Carolina was one of the 13 colonies that declared independence... |
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The continental currency suffered from printing press inflation and was replaced by the silver dollar at the rate of 1 silver dollar = 1000 continental dollars.
Silver and gold standards
From 1792, when the Mint Act was passed, the dollar was defined as 371.25 grains (24.056 g) of silver. Many historians erroneously assume gold was standardized at a fixed rate in parity with silver; however, there is no evidence of Congress making this law. This has to do with Alexander HamiltonAlexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
's suggestion to Congress of a fixed 15:1 ratio of silver to gold, respectively. The gold coins that were minted however, were not given any denomination whatsoever and traded for a market value relative to the Congressional standard of the silver dollar. 1834 saw a shift in the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
to 23.2 gr, followed by a slight adjustment to 23.22 gr in 1837 (16:1 ratio).
In 1862, paper money was issued without the backing of precious metals, due to the Civil War
American Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...
. Silver and gold coins continued to be issued and in 1878 the link between paper money and coins was reinstated. This disconnection from gold and silver backing also occurred during the War of 1812
War of 1812
The War of 1812 was a military conflict fought between the forces of the United States of America and those of the British Empire. The Americans declared war in 1812 for several reasons, including trade restrictions because of Britain's ongoing war with France, impressment of American merchant...
. The use of paper money not backed by precious metals had also occurred under the Articles of Confederation from 1777 to 1788. With no solid backing and being easily counterfeited, the continentals quickly lost their value, giving rise to the phrase "not worth a continental". This was a primary reason for the "No state shall... make any thing but gold and silver coin a tender in payment of debts" clause in article 1, section 10 of the United States Constitution.
The Gold Standard Act
Gold Standard Act
The Gold Standard Act of the United States was passed in 1900 and established gold as the only standard for redeeming paper money, stopping bimetallism...
of 1900 abandoned the bimetallic standard and defined the dollar as 23.22 gr of gold, equivalent to setting the price of 1 troy ounce
Troy ounce
The troy ounce is a unit of imperial measure. In the present day it is most commonly used to gauge the weight of precious metals. One troy ounce is nowadays defined as exactly 0.0311034768 kg = 31.1034768 g. There are approximately 32.1507466 troy oz in 1 kg...
of gold at $20.67. Silver coins continued to be issued for circulation until 1964, when all silver was removed from dimes and quarters, and the half dollar was reduced to 40% silver. Silver half dollars were last issued for circulation in 1970.
Gold coins were confiscated by Executive Order 6102
Executive Order 6102
Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States"...
issued in 1933 by Franklin Roosevelt. The gold standard was changed to 13.71 gr, equivalent to setting the price of 1 troy ounce of gold at $35. This standard persisted until 1968. Between 1968 and 1975, a variety of pegs to gold were put in place. The price was at $42.22 per ounce before August 15, 1971 saw the U.S. dollar freely float on currency markets
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
.
According to the Bureau of Engraving and Printing, the largest note it ever printed was the $100,000 Gold Certificate, Series 1934. These notes were printed from December 18, 1934 through January 9, 1935, and were issued by the Treasurer of the United States to Federal Reserve Banks only against an equal amount of gold bullion held by the Treasury. These notes were used for transactions between Federal Reserve Banks and were not circulated among the general public.
Coins
Official United States coins have been produced every year from 1792 to the present.- Half-centHalf cent (United States coin)First authorized on April 2, 1792 , the half cent coin was produced in the United States from 1793-1857. The half-cent piece was made of 100% copper. It was slightly smaller than a modern U.S. quarter. Diameters are: 22 mm , 23.5 mm and 23 mm ., Coinage was discontinued by the Act...
1792 - 1857 - Cent (Penny) 1793–present
- 2-centTwo-cent piece (United States coin)The two-cent coin was produced in the United States from 1864–1873 with decreasing mintages throughout that time. In terms of consumer price indexes, the 1864 coin would be comparable to $ in today's money....
1864–1873 - 3-centThree-cent piece (United States coin)The United States three cent piece was a unit of currency equaling 3/100th of a United States dollar. The mint produced two different three-cent coins: the three-cent silver and the three-cent nickel. Its purchasing power in 1851 would be equivalent to $ today.-History:The three cent coin has an...
1851-1889 - Half DimeHalf dimeThe half dime, or half disme, was a silver coin, valued at five cents, formerly minted in the United States.Some numismatists consider the denomination to be the first coin minted by the United States Mint under the Coinage Act of 1792, with production beginning on or about July 1792...
, or half disme 1792-1873 (Not to be confused with the Five-cent Nickel below) - Five-cent NickelNickel (United States coin)The nickel is a five-cent coin, representing a unit of currency equaling five hundredths of one United States dollar. A later-produced Canadian nickel five-cent coin was also called by the same name....
1866–present - DimeDime (United States coin)The dime is a coin 10 cents, one tenth of a United States dollar, labeled formally as "one dime". The denomination was first authorized by the Coinage Act of 1792. The dime is the smallest in diameter and is the thinnest of all U.S...
1792–present - 20-centTwenty-cent piece (United States coin)The United States twenty cent coin was a unit of currency equalling 1/5 of a United States dollar....
1875-1878 - QuarterQuarter (United States coin)A quarter dollar, commonly shortened to quarter, is a coin worth ¼ of a United States dollar, or 25 cents. The quarter has been produced since 1796. The choice of 25¢ as a denomination, as opposed to 20¢ which is more common in other parts of the world, originated with the practice of dividing...
1796–present - Half dollarHalf dollar (United States coin)Half dollar coins have been produced nearly every year since the inception of the United States Mint in 1794. Sometimes referred to as the fifty-cent piece, the only U.S. coin that has been minted more consistently is the cent.-Circulation:...
1794–present - Dollar coin 1794–present
- Quarter EagleQuarter EagleThe quarter eagle was a coin issued by the United States with a denomination of two hundred and fifty cents, or two dollars and fifty cents. It was given its name in the Coinage Act of 1792, as a derivation from the US ten-dollar eagle coin...
($2.50 gold coin) 1792-1929 - Three-dollar pieceThree-dollar pieceThe three-dollar piece was a United States coin produced from 1854 to 1889. Its value was intended to tie in with the postal system. At the time, a first class postage stamp was worth 3¢, and such stamps were often sold in sheets of one hundred stamps. Therefore, the three-dollar piece was...
1854-1889 (gold coin) - Four-dollar pieceStella (United States coin)The United States four dollar coin, also officially called a Stella, is a unit of currency equivalent to four United States dollars.-History:...
1879-1880 (gold coin) - Half EagleHalf EagleThe Half Eagle is a United States coin that was produced for circulation from 1795 to 1929 and in commemorative and bullion coins since the 1980s. Composed almost entirely of gold, it has a face value of five dollars...
($5 gold coin) 1795-1929 - EagleEagle (United States coin)The eagle is a base-unit of denomination issued only for gold coinage by the United States Mint. It has been obsolete as a circulating denomination since 1933. The eagle was the largest of the four main decimal base-units of denomination used for circulating coinage in the United States prior to...
($10 gold coin) 1795-1933 - Double EagleDouble EagleA Double Eagle is a gold coin of the United States with a denomination of $20. . The coins are made from a 90% gold and 10% copper alloy....
($20 gold coin) 1850-1933
Collector coins for which everyday transactions are non-existent.
- American EaglesAmerican Eagle bullion coinsAmerican Eagle bullion coins are produced by the United States Mint.* American Silver Eagle* American Gold Eagle* American Platinum Eagle...
originally were not available from the Mint for individuals but had to be purchased from authorized dealers. In 2006 The Mint began direct sales to individuals of uncirculated bullion coins with a special finish, and bearing a "W" mintmark.
- * American Silver EagleAmerican Silver EagleThe American Silver Eagle is the official silver bullion coin of the United States. It was first released by the United States Mint on November 24, 1986. It is struck only in the one-troy ounce size, which has a nominal face value of one dollar and is guaranteed to contain one troy ounce of 99.9%...
$1 (1 troy ounceTroy ounceThe troy ounce is a unit of imperial measure. In the present day it is most commonly used to gauge the weight of precious metals. One troy ounce is nowadays defined as exactly 0.0311034768 kg = 31.1034768 g. There are approximately 32.1507466 troy oz in 1 kg...
) silver bullion coin 1986-Present - * American Gold EagleAmerican Gold EagleThe American Gold Eagle is an official gold bullion coin of the United States. Authorized under the Gold Bullion Coin Act of 1985, it was first released by the United States Mint in 1986.- Details :...
$5 (1/10 troy oz), $10 (1/4 troy oz), $25 (1/2 troy oz), and $50 (1 troy oz) Gold bullion coin 1986-Present - * American Platinum EagleAmerican Platinum EagleThe American Platinum Eagle is the official platinum bullion coin of the United States. The coins were first released by the United States Mint in 1997. It is offered in 1/10, 1/4, 1/2, and 1 troy oz varieties and consists of .9995 fine platinum...
($10, $25, $50, and $100 platinum coin) 1997–present
- United States commemorative coinUnited States commemorative coinCommemorative coinage of the United States consists of coins that have been minted to commemorate a particular person, place, event, or institution. They are legal tender but are not intended for general circulation....
s - special issue coins
- * $50.00 (Half Union) 1915
- * Presidential Proofs (see below) 2007-present
Technically, all these coins are still legal tender at face value, though some are far more valuable today for their numismatic
Numismatics
Numismatics is the study or collection of currency, including coins, tokens, paper money, and related objects. While numismatists are often characterized as students or collectors of coins, the discipline also includes the broader study of money and other payment media used to resolve debts and the...
value, and for gold and silver coins, their precious metal
Precious metal
A precious metal is a rare, naturally occurring metallic chemical element of high economic value.Chemically, the precious metals are less reactive than most elements, have high lustre, are softer or more ductile, and have higher melting points than other metals...
value. From 1965 to 1970 the Kennedy half dollar
Kennedy half dollar
Within hours of the assassination of John F. Kennedy on November 22, 1963, Mint Director Eva Adams called Chief Engraver Gilroy Roberts, informing him that serious consideration was being given to depicting Kennedy on one of the larger silver coins: either the silver dollar, half dollar, or...
was the only circulating coin with any silver content though the Mint still makes what it calls Silver Proof sets for collectors.
In addition, an experimental $4.00 (Stella)
Stella (United States coin)
The United States four dollar coin, also officially called a Stella, is a unit of currency equivalent to four United States dollars.-History:...
coin was also minted, but never placed into circulation and is properly considered to be a pattern rather than an actual coin denomination.
The $50 coin mentioned was only produced in 1915 for the Panama-Pacific International Exposition (1915)
Panama-Pacific International Exposition (1915)
The Panama-Pacific International Exposition was a world's fair held in San Francisco, California between February 20 and December 4 in 1915. Its ostensible purpose was to celebrate the completion of the Panama Canal, but it was widely seen in the city as an opportunity to showcase its recovery...
celebrating the opening of the Panama Canal
Panama Canal
The Panama Canal is a ship canal in Panama that joins the Atlantic Ocean and the Pacific Ocean and is a key conduit for international maritime trade. Built from 1904 to 1914, the canal has seen annual traffic rise from about 1,000 ships early on to 14,702 vessels measuring a total of 309.6...
. Only 1,128 were made, 645 of which were octagonal; this remains the only U.S. coin that was not round as well as the largest and heaviest U.S. coin ever.
From 1934 to present the only denominations produced for circulation have been the familiar penny, nickel, dime, quarter, half dollar and dollar. The nickel is the only coin still in use today that is essentially unchanged (except in its design) from its original version. Every year since 1866, the nickel has been 75% copper and 25% nickel, except for 4 years during World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
when nickel was needed for the war.
Collector coins
The United States Mint produces Proof Sets specifically for collectors and speculators. Silver Proofs tend to be the standard designs but with the dime, quarter, half dollar, and in some cases the dollar having silver content. Another type of proof set is the Presidential Dollar Proof Set where four special $1 coins are minted each featuring a president.- 2007 had George Washington, John Adams, Thomas Jefferson, and James Madison
- 2008 had James Monroe, John Quincy Adams, Andrew Jackson, and Martin Van Buren
- 2009 had William Henry Harrison, John Tyler, James K. Polk, and Zachary Taylor
- 2010 had Millard Fillmore, Franklin Pierce, James Buchanan, and Abraham Lincoln
- 2011 is to have Andrew Johnson, Ulysses S. Grant, Rutherford B. Hayes, and James A. Garfield
Dollar coins
The first United States dollar was minted in 1794. Known as the Flowing Hair DollarFlowing Hair Dollar
The Flowing Hair dollar was the first dollar coin issued by the United States federal government. The coin was minted in 1794 and 1795; its size and weight were based on the Spanish dollar, which was popular in trade throughout the Americas....
, it contained 416 grains of "standard silver" (89.25% silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
and 10.75% copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
), as specified by Section 13 of the Coinage Act of 1792. It was designated by Section 9 of that Act as having "the value of a Spanish milled dollar".
Dollar coins have not been very popular in the United States. Silver dollars
United States dollar coin
Dollar coins have been minted in the United States in gold, silver, and base metal versions. The term silver dollar is often used for any large white metal coin issued by the United States with a face value of one dollar, although purists insist that a dollar is not silver unless it contains some...
were minted intermittently from 1794 through 1935; a copper-nickel dollar of the same large size, featuring President Dwight D. Eisenhower
Dwight D. Eisenhower
Dwight David "Ike" Eisenhower was the 34th President of the United States, from 1953 until 1961. He was a five-star general in the United States Army...
, was minted from 1971 through 1978. Gold dollars were also minted in the 19th century. The Susan B. Anthony
Susan B. Anthony
Susan Brownell Anthony was a prominent American civil rights leader who played a pivotal role in the 19th century women's rights movement to introduce women's suffrage into the United States. She was co-founder of the first Women's Temperance Movement with Elizabeth Cady Stanton as President...
dollar
Susan B. Anthony dollar
The Susan B. Anthony dollar is a United States coin minted from 1979 to 1981, and again in 1999. It depicts women's suffrage campaigner Susan B. Anthony on a dollar coin. It was the first circulating U.S. coin with the portrait of an actual woman rather than an allegorical female figure such as...
coin was introduced in 1979; these proved to be unpopular because they were often mistaken for quarters, due to their nearly equal size, their milled edge, and their similar color. Minting of these dollars for circulation was suspended in 1980 (collectors' pieces were struck in 1981), but, as with all past U.S. coins, they remain legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
. As the number of Anthony dollars held by the Federal Reserve and dispensed primarily to make change in postal and transit vending machines had been virtually exhausted, additional Anthony dollars were struck in 1999. In 2000, a new $1 coin, featuring Sacagawea
Sacagawea
Sacagawea ; was a Lemhi Shoshone woman, who accompanied the Lewis and Clark Expedition, acting as an interpreter and guide, in their exploration of the Western United States...
, (the Sacagawea dollar
Sacagawea dollar
The Sacagawea dollar is a United States dollar coin that has been minted every year since 2000. These coins have a copper core clad by manganese brass, giving them a distinctive golden color. The coin features an obverse by Glenna Goodacre. The reverse design has varied, from 2000 to 2008...
) was introduced, which corrected some of the mistakes of the Anthony dollar by having a smooth edge and a gold color, without requiring changes to vending machines that accept the Anthony dollar. However, this new coin has failed to achieve the popularity of the still-existing $1 bill and is rarely used in daily transactions. The failure to simultaneously withdraw the dollar bill and weak publicity efforts have been cited by coin proponents as primary reasons for the failure of the dollar coin to gain popular support. There are indications that the dollar coin's failure was also due to the reluctance of armored transport companies to make the necessary adjustments to handle the new coins, and the government's reluctance to mandate it. The result of the armored carriers' unwillingness to handle the new coins was that they virtually never reached merchants in quantities sufficient to be given out as change on a routine basis, or for retail clerks to become used to handling them.
In February 2007, the U.S. Mint, under the Presidential $1 Coin Act of 2005
Presidential $1 Coin Act of 2005
The Presidential $1 Coin Program is part of an Act of Congress, , which directs the United States Mint to produce $1 coins with engravings of relief portraits of U.S. Presidents on the obverse.-Legislative history:...
, introduced a new $1 U.S. Presidential dollar coin. Based on the success of the "50 State Quarters
50 State Quarters
The 50 State Quarters program is the release of a series of circulating commemorative coins by the United States Mint. Between 1999 and 2008, it featured each of the 50 U.S. states on unique designs for the reverse of the quarter....
" series, the new coin features a sequence of presidents in order of their inaugurations, starting with George Washington
George Washington
George Washington was the dominant military and political leader of the new United States of America from 1775 to 1799. He led the American victory over Great Britain in the American Revolutionary War as commander-in-chief of the Continental Army from 1775 to 1783, and presided over the writing of...
, on the obverse side. The reverse side features the Statue of Liberty
Statue of Liberty
The Statue of Liberty is a colossal neoclassical sculpture on Liberty Island in New York Harbor, designed by Frédéric Bartholdi and dedicated on October 28, 1886...
. To allow for larger, more detailed portraits, the traditional inscriptions of "E Pluribus Unum
E pluribus unum
E pluribus unum , Latin for "Out of many, one", is a phrase on the Seal of the United States, along with Annuit cœptis and Novus ordo seclorum, and adopted by an Act of Congress in 1782...
," "In God We Trust," the year of minting or issuance, and the mint mark will be inscribed on the edge of the coin instead of the face. This feature, similar to the edge inscriptions seen on the British £1 coin, is not usually associated with U.S. coin designs. The inscription "Liberty" has been eliminated, with the Statue of Liberty serving as a sufficient replacement. In addition, due to the nature of U.S. coins, this will be the first time there will be circulating U.S. coins of different denominations with the same President featured on the obverse (heads) side. (Lincoln
Abraham Lincoln
Abraham Lincoln was the 16th President of the United States, serving from March 1861 until his assassination in April 1865. He successfully led his country through a great constitutional, military and moral crisis – the American Civil War – preserving the Union, while ending slavery, and...
/penny
Cent (United States coin)
The United States one-cent coin, commonly known as a penny, is a unit of currency equaling one one-hundredth of a United States dollar. The cent's symbol is ¢. Its obverse has featured the profile of President Abraham Lincoln since 1909, the centennial of his birth. From 1959 to 2008, the reverse...
, Jefferson
Thomas Jefferson
Thomas Jefferson was the principal author of the United States Declaration of Independence and the Statute of Virginia for Religious Freedom , the third President of the United States and founder of the University of Virginia...
/nickel
Nickel (United States coin)
The nickel is a five-cent coin, representing a unit of currency equaling five hundredths of one United States dollar. A later-produced Canadian nickel five-cent coin was also called by the same name....
, Franklin D. Roosevelt
Franklin D. Roosevelt
Franklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...
/dime
Dime (United States coin)
The dime is a coin 10 cents, one tenth of a United States dollar, labeled formally as "one dime". The denomination was first authorized by the Coinage Act of 1792. The dime is the smallest in diameter and is the thinnest of all U.S...
, Washington
George Washington
George Washington was the dominant military and political leader of the new United States of America from 1775 to 1799. He led the American victory over Great Britain in the American Revolutionary War as commander-in-chief of the Continental Army from 1775 to 1783, and presided over the writing of...
/quarter
Quarter (United States coin)
A quarter dollar, commonly shortened to quarter, is a coin worth ¼ of a United States dollar, or 25 cents. The quarter has been produced since 1796. The choice of 25¢ as a denomination, as opposed to 20¢ which is more common in other parts of the world, originated with the practice of dividing...
and Kennedy
John F. Kennedy
John Fitzgerald "Jack" Kennedy , often referred to by his initials JFK, was the 35th President of the United States, serving from 1961 until his assassination in 1963....
/half dollar
Half dollar (United States coin)
Half dollar coins have been produced nearly every year since the inception of the United States Mint in 1794. Sometimes referred to as the fifty-cent piece, the only U.S. coin that has been minted more consistently is the cent.-Circulation:...
/dollar
Dwight D. Eisenhower
Dwight David "Ike" Eisenhower was the 34th President of the United States, from 1953 until 1961. He was a five-star general in the United States Army...
Another unusual fact about the new $1 coin is Grover Cleveland
Grover Cleveland
Stephen Grover Cleveland was the 22nd and 24th president of the United States. Cleveland is the only president to serve two non-consecutive terms and therefore is the only individual to be counted twice in the numbering of the presidents...
will have two coins with his portrait issued due to the fact he was the only U.S. President to be elected to two non-consecutive terms.
Early releases of the Washington coin included error coins shipped primarily from the Philadelphia mint to Florida and Tennessee banks. Highly sought after by collectors, and trading for as much as $850 each within a week of discovery, the error coins were identified by the absence of the edge impressions "E PLURIBUS UNUM IN GOD WE TRUST 2007 P". The mint of origin is generally accepted to be mostly Philadelphia, although identifying the source mint is impossible without opening a mint pack also containing marked units. Edge lettering is minted in both orientations with respect to "heads", some amateur collectors were initially duped into buying "upside down lettering error" coins.
Some cynics also erroneously point out that the Federal Reserve makes more profit from dollar bills than dollar coins because they wear out in a few years, whereas coins are more permanent. The fallacy of this argument arises because new notes printed to replace worn out notes which have been withdrawn from circulation bring in no net revenue to the government to offset the costs of printing new notes and destroying the old ones. As most vending machines are incapable of making change in banknotes, they commonly accept only $1 bills, though a few will give change in dollar coins.
Mint marks
Most U.S. coins bear a mint markMint mark
A mint mark is an inscription on a coin indicating the mint where the coin was produced.-History:Mint marks were first developed to locate a problem. If a coin was underweight, or overweight, the mint mark would immediately tell where the coin was minted, and the problem could be located and fixed...
as part of the design, usually found on the front
Obverse and reverse
Obverse and its opposite, reverse, refer to the two flat faces of coins and some other two-sided objects, including paper money, flags , seals, medals, drawings, old master prints and other works of art, and printed fabrics. In this usage, obverse means the front face of the object and reverse...
of the coin near the date although in the past it was more commonly found on the reverse
Obverse and reverse
Obverse and its opposite, reverse, refer to the two flat faces of coins and some other two-sided objects, including paper money, flags , seals, medals, drawings, old master prints and other works of art, and printed fabrics. In this usage, obverse means the front face of the object and reverse...
. The Philadelphia Mint
Philadelphia Mint
The Philadelphia Mint was created from the need to establish a national identity and the needs of commerce in the United States. This led the Founding Fathers of the United States to make an establishment of a continental national mint a main priority after the ratification of the Constitution of...
issues coins bearing a letter P (or no mark at all), while the Denver Mint
Denver Mint
The Denver Mint is a branch of the United States Mint that struck its first coins on February 1, 1906. The mint is still operating and producing coins for circulation, as well as mint sets and commemorative coins. Coins produced at the Denver Mint bear a D mint mark...
uses a letter D. The San Francisco Mint
San Francisco Mint
The San Francisco Mint is a branch of the United States Mint, and was opened in 1854 to serve the gold mines of the California Gold Rush. It quickly outgrew its first building and moved into a new one in 1874. This building, the Old United States Mint, also known affectionately as The Granite Lady,...
uses an S, though no coins have been released from that mint for general circulation since 1980. It does, however, continue to strike proof
Proof coinage
Proof coinage means special early samples of a coin issue, historically made for checking the dies and for archival purposes, but nowadays often struck in greater numbers specially for coin collectors . Many countries now issue them....
coins for collectors. The West Point Mint
West Point Mint
The West Point Mint Facility was erected in 1937 near the U.S. Military Academy in West Point, New York. Originally it was called the West Point Bullion Depository. At one point it had the highest concentration of silver of any U.S. mint facility, and for 35 years produced circulating pennies...
uses a W, though this is rarely seen as the West Point mint generally only makes high denomination coins (with face values over $1.00) which are not meant for everyday use. A CC mark, for the Carson City Mint
Carson City Mint
The Carson City Mint was a branch of the United States Mint in Carson City, Nevada. Built at the peak of the silver boom, 50 issues of silver coins and 57 issues of gold coins minted here between 1870 and 1893 bore the "CC" mint mark...
, was used from 1870 to 1893, but the mint at that location was only a temporary establishment. The New Orleans Mint
New Orleans Mint
The New Orleans Mint operated in New Orleans, Louisiana, as a branch mint of the United States Mint from 1838 to 1861 and from 1879 to 1909. During its years of operation, it produced over 427 million gold and silver coins of nearly every American denomination, with a total face value of over...
used a mint mark O. It operated from 1838 until Louisiana seceded from the Union in 1861, and again from 1879 to 1909. The letter D was also used for coinage of the Dahlonega Mint
Dahlonega Mint
The Dahlonega Mint was a branch of the United States Mint. It was located at 34°31.8′N 83°59.2′W at Dahlonega, Lumpkin County, Georgia. Coins produced at the Dahlonega Mint bear the "D" mint mark. That mint mark is used today by the Denver Mint, which opened many years after the Dahlonega Mint...
from 1837 to 1861, and C was used for the Charlotte Mint
Charlotte Mint
The Charlotte Mint was a branch of the United States Mint that came into existence on March 3, 1835 during the Carolina Gold Rush. The first gold mine in the United States was established in North Carolina at the Reed Gold Mine...
during the same timespan. The latter two mints struck gold coins only.
Banknotes
The U.S. Constitution provides that Congress shall have the power to "borrow money on the credit of the United States". Congress has exercised that power by authorizing Federal Reserve Banks to issue Federal Reserve Notes. Those notes are "obligations of the United States" and "shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank." Federal Reserve Notes are designated by law as "legal tenderLegal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
" for the payment of debts. Congress has also authorized the issuance of more than 10 other types of banknotes, including the United States Note
United States Note
A United States Note, also known as a Legal Tender Note, is a type of paper money that was issued from 1862 to 1971 in the U.S. Having been current for over 100 years, they were issued for longer than any other form of U.S. paper money. They were known popularly as "greenbacks" in their heyday, a...
and the Federal Reserve Bank Note
Federal Reserve Bank Note
Federal Reserve Bank Notes are legal tender in the United States, together with United States Notes, Silver Certificates, Gold Certificates, National Bank Notes and Federal Reserve Notes. They had the same value as other kinds of notes of similar face value...
. The Federal Reserve Note is the only type that remains in circulation since the 1970s.
Currently printed denominations are $1
United States one-dollar bill
The United States one-dollar bill is the most common denomination of US currency. The first president, George Washington, painted by Gilbert Stuart, is currently featured on the obverse, while the Great Seal of the United States is featured on the reverse. The one-dollar bill has the oldest...
, $2
United States two-dollar bill
The United States two-dollar bill is a current denomination of US currency. President Thomas Jefferson is featured on the obverse of the note...
, $5
United States five-dollar bill
The United States five-dollar bill or fiver is a denomination of United States currency. The $5 bill currently features U.S. President Abraham Lincoln's portrait on the front and the Lincoln Memorial on the back. All $5 bills issued today are Federal Reserve Notes...
, $10
United States ten-dollar bill
The United States ten-dollar bill is a denomination of United States currency. The first U.S. Secretary of the Treasury, Alexander Hamilton, is currently featured on the obverse of the bill, while the U.S. Treasury is featured on the reverse. The United States ten-dollar bill ($10) is a...
, $20
United States twenty-dollar bill
The United States twenty-dollar bill is a denomination of United States currency. U.S. President Andrew Jackson is currently featured on the front side of the bill, which is why the twenty-dollar bill is often called a "Jackson," while the White House is featured on the reverse side.The...
, $50
United States fifty-dollar bill
The United States fifty-dollar bill is a denomination of United States currency. Ulysses S. Grant is currently featured on the obverse, while the U.S. Capitol is featured on the reverse. All current-issue $50 bills are Federal Reserve Notes....
, and $100
United States one hundred-dollar bill
The United States one hundred-dollar bill is a denomination of United States currency. U.S. statesman, inventor and diplomat Benjamin Franklin is currently featured on the obverse of the bill. On the reverse of the banknote is an image of Independence Hall. The time on the clock according to the...
. Notes above the $100 denomination stopped being printed in 1946 and were officially withdrawn from circulation in 1969. These notes were used primarily in inter-bank transactions or by organized crime
Organized crime
Organized crime or criminal organizations are transnational, national, or local groupings of highly centralized enterprises run by criminals for the purpose of engaging in illegal activity, most commonly for monetary profit. Some criminal organizations, such as terrorist organizations, are...
; it was the latter usage that prompted President
President
A president is a leader of an organization, company, trade union, university, or country.Etymologically, a president is one who presides, who sits in leadership...
Richard Nixon
Richard Nixon
Richard Milhous Nixon was the 37th President of the United States, serving from 1969 to 1974. The only president to resign the office, Nixon had previously served as a US representative and senator from California and as the 36th Vice President of the United States from 1953 to 1961 under...
to issue an executive order in 1969 halting their use. With the advent of electronic banking, they became less necessary. Notes in denominations of $500, $1,000, $5,000, $10,000, and $100,000 were all produced at one time; see large denomination bills in U.S. currency for details. These notes are now collector's items and are worth more than their face value to collectors.
Though still predominantly green, post-2004 series incorporate other colors to better distinguish different denominations. As a result of a 2008 decision in an accessibility lawsuit filed by the American Council of the Blind
American Council of the Blind
The American Council of the Blind is a nationwide organization in the United States. It is an organization mainly made up of blind and visually impaired people who want to achieve independence and equality .-History:The American Council of the Blind was formed out of the dissolution of the...
, the Bureau of Engraving and Printing
Bureau of Engraving and Printing
The Bureau of Engraving and Printing is a government agency within the United States Department of the Treasury that designs and produces a variety of security products for the United States government, most notable of which is paper currency for the Federal Reserve. The Federal Reserve itself is...
is planning to implement a raised tactile feature in the next redesign of each note, except the $1 and the version of the $100 bill already in process. It also plans larger, higher-contrast numerals, more color differences, and distribution of currency readers to assist the visually impaired during the transition period.
Means of issue
Currently, the US government maintains over 800 billion US dollars in cash money (primarily Federal Reserve Notes) in circulation. The amount of cash in circulation is increased (or decreased) by the actions of the Federal Reserve SystemFederal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...
. Eight times a year, the 12-person Federal Open Market Committee
Federal Open Market Committee
The Federal Open Market Committee , a committee within the Federal Reserve System, is charged under United States law with overseeing the nation's open market operations . It is the Federal Reserve committee that makes key decisions about interest rates and the growth of the United States money...
meet to determine US monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
. Every business day, the Federal Reserve System engages in Open market operations to carry out that monetary policy. If the Federal Reserve desires to increase the money supply, it will buy securities (such as US Treasury Bonds) anonymously from banks in exchange for dollars. Conversely, it will sell securities to the banks in exchange for dollars, to take dollars out of circulation.
When the Federal Reserve makes a purchase, it credits the seller's reserve account (with the Federal Reserve). This money is not transferred from any existing funds – it is at this point that the Federal Reserve has created new high-powered money. Commercial banks can freely withdraw in cash any excess reserves from their reserve account at the Federal Reserve. To fulfill those requests, the Federal Reserve places an order for printed money from the US Treasury Department. The Treasury Department in turn sends these requests to the Bureau of Engraving and Printing (to print new dollar bills) and the Bureau of the Mint (to stamp the coins).
Usually, the short term goal of open market operations is to achieve a specific short term interest rate target. In other instances, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency or else relative to gold. For example, in the case of the USA the Federal Reserve targets the federal funds rate
Federal funds rate
In the United States, the federal funds rate is the interest rate at which depository institutions actively trade balances held at the Federal Reserve, called federal funds, with each other, usually overnight, on an uncollateralized basis. Institutions with surplus balances in their accounts lend...
, the rate at which member banks lend to one another overnight. The other primary means of conducting monetary policy include: (i) Discount window
Discount window
The discount window is an instrument of monetary policy that allows eligible institutions to borrow money from the central bank, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions...
lending (as lender of last resort
Lender of last resort
A lender of last resort is an institution willing to extend credit when no one else will. The term refers especially to a reserve financial institution, most often the central bank of a country, intended to avoid bankruptcy of banks or other institutions deemed systemically important or 'too big to...
); (ii) Fractional deposit lending (changes in the reserve requirement); (iii) Moral suasion (cajoling certain market players to achieve specified outcomes); (iv) "Open mouth operations" (talking monetary policy with the market).
Value
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Flowing Hair Dollar
The Flowing Hair dollar was the first dollar coin issued by the United States federal government. The coin was minted in 1794 and 1795; its size and weight were based on the Spanish dollar, which was popular in trade throughout the Americas....
and it declared that the U.S. dollar shall have "the value of a Spanish milled dollar as the same is now current".
The table to the right shows the equivalent amount of goods that, in a particular year, could be purchased with $1. The table shows that from 1774 through 2009 the U.S. dollar has lost about 96.4% of its buying power.
The decline in the value of the U.S. dollar corresponds to price inflation, which is a rise in the general level of prices of goods and services in an economy over a period of time. A consumer price index
Consumer price index
A consumer price index measures changes in the price level of consumer goods and services purchased by households. The CPI, in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of...
(CPI) is a measure estimating the average price of consumer goods and services purchased by households. The United States Consumer Price Index, published by the Bureau of Labor Statistics
Bureau of Labor Statistics
The Bureau of Labor Statistics is a unit of the United States Department of Labor. It is the principal fact-finding agency for the U.S. government in the broad field of labor economics and statistics. The BLS is a governmental statistical agency that collects, processes, analyzes, and...
, is a measure estimating the average price of consumer goods and services in the United States. It reflects inflation as experienced by consumers in their day-to-day living expenses. A graph showing the U.S. CPI relative to 1982-1984 and the annual year-over-year change in CPI is shown at right.
The value of the U.S. dollar declined significantly during wartime, especially during the American Civil War
American Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...
, World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
, and World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
. The Federal Reserve, which was established in 1913, was designed to furnish an "elastic" currency subject to "substantial changes of quantity over short periods," which differed significantly from previous forms of high-powered money such as gold, national bank notes, and silver coins. Over the very long run, the prior gold standard kept prices stable - for instance, the price level and the value of the U.S. dollar in 1914 was not very different from the price level in the 1880s. The Federal Reserve initially succeeded in maintaining the value of the U.S. dollar and price stability, reversing the inflation caused by the First World War and stabilizing the value of the dollar during the 1920s, before presiding over a 30% deflation in U.S. prices in the 1930s.
Under the Bretton Woods system
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century...
established after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, the value of the U.S. dollar was fixed to $35 per ounce, and the value of the U.S. dollar was thus anchored to the value of gold. Rising government spending in the 1960s, however, led to doubts about the ability of the United States to maintain this convertibility, gold stocks dwindled as banks and international investors began to convert dollars to gold, and as a result the value of the dollar began to decline. Facing an emerging currency crisis
Currency crisis
A currency crisis, which is also called a balance-of-payments crisis, is a sudden devaluation of a currency caused by chronic balance-of-payments deficits which usually ends in a speculative attack in the foreign exchange market. It occurs when the value of a currency changes quickly, undermining...
and the imminent danger that the United States would no longer be able to redeem dollars for gold, gold convertibility was finally terminated in 1971 by President Nixon
Richard Nixon
Richard Milhous Nixon was the 37th President of the United States, serving from 1969 to 1974. The only president to resign the office, Nixon had previously served as a US representative and senator from California and as the 36th Vice President of the United States from 1953 to 1961 under...
, resulting in the "Nixon shock
Nixon Shock
The Nixon Shock was a series of economic measures taken by U.S. President Richard Nixon in 1971 including unilaterally cancelling the direct convertibility of the United States dollar to gold that essentially ended the existing Bretton Woods system of international financial exchange.-Background:By...
."
The value of the U.S. dollar was therefore no longer anchored to gold, and it fell upon the Federal Reserve to maintain the value of the U.S. currency. The Federal Reserve, however, continued to increase the money supply, resulting in stagflation
Stagflation
In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...
and a rapidly declining value of the U.S. dollar in the 1970s. This was largely due to the prevailing economic view at the time that inflation and real economic growth were linked (the Phillips curve
Phillips curve
In economics, the Phillips curve is a historical inverse relationship between the rate of unemployment and the rate of inflation in an economy. Stated simply, the lower the unemployment in an economy, the higher the rate of inflation...
), and so inflation was regarded as relatively benign. Between 1965 and 1981, the U.S. dollar lost two thirds of its value.
In 1979, President Carter
Jimmy Carter
James Earl "Jimmy" Carter, Jr. is an American politician who served as the 39th President of the United States and was the recipient of the 2002 Nobel Peace Prize, the only U.S. President to have received the Prize after leaving office...
appointed Paul Volcker
Paul Volcker
Paul Adolph Volcker, Jr. is an American economist. He was the Chairman of the Federal Reserve under United States Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987. He is widely credited with ending the high levels of inflation seen in the United States in the 1970s and...
Chairman of the Federal Reserve
Chairman of the Federal Reserve
The Chairman of the Board of Governors of the Federal Reserve System is the head of the central banking system of the United States. Known colloquially as "Chairman of the Fed," or in market circles "Fed Chairman" or "Fed Chief"...
. The Federal Reserve tightened the money supply and inflation was substantially lower in the 1980s, and hence the value of the U.S. dollar stabilized.
Over the thirty-year period from 1981 to 2009, the U.S. dollar lost over half its value. This is because the Federal Reserve has targeted not zero inflation, but a low, stable rate of inflation - between 1987 and 1997, the rate of inflation was approximately 3.5%, and between 1997 and 2007 it was approximately 2%. The so-called "Great Moderation" of economic conditions since the 1970s is credited to monetary policy targeting price stability.
There is ongoing debate about whether central banks should target zero inflation (which would mean a constant value for the U.S. dollar over time) or low, stable inflation (which would mean a continuously but slowly declining value of the dollar over time, as is the case now). Although some economists are in favor of a zero inflation policy and therefore a constant value for the U.S. dollar, others contend that such a policy limits the ability of the central bank to control interest rates and stimulate the economy when needed.
Contrary to some urban legends, there is not now, nor has there ever been, any skins of animals contained in US monies. The term frog skin, in reference to the bill, is in regards to the coloration of the bill's back.
Historical exchange rates
| 1970* | 1980* | 1985* !! 1990* !! 1993 !! 1999 !! 2000 !! 2001 !! 2002 !! 2003 !! 2004 !! 2005 !! 2006 !! 2007 !! 2008 !! 2009 !! 2010 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Euro Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... |
- | - | - | 0.8343 | 0.8551 | 0.9387 | 1.0832 | 1.1171 | 1.0578 | 0.8833 | 0.8040 | 0.8033 | 0.7960 | 0.7293 | 0.6791 | 0.7176 | 0.6739 |
| Japanese yen Japanese yen The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling... |
357.6 | 240.45 | 250.35 | 146.25 | 111.08 | 113.73 | 107.80 | 121.57 | 125.22 | 115.94 | 108.15 | 110.11 | 116.31 | 117.76 | 103.39 | 93.68 | 87.78 |
| Pound sterling Pound sterling The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence... |
0.4164 | 0.4484 | 0.8613 | 0.6207 | 0.6660 | 0.6184 | 0.6598 | 0.6946 | 0.6656 | 0.6117 | 0.5456 | 0.5493 | 0.5425 | 0.4995 | 0.5392 | 0.6385 | 0.4548 |
| Canadian dollar Canadian dollar The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies... |
1.081 | 1.168 | 1.321 | 1.1605 | 1.2902 | 1.4858 | 1.4855 | 1.5487 | 1.5704 | 1.4008 | 1.3017 | 1.2115 | 1.1340 | 1.0734 | 1.0660 | 1.1412 | 1.0298 |
| Mexican peso Mexican peso The peso is the currency of Mexico. Modern peso and dollar currencies have a common origin in the 15th–19th century Spanish dollar, most continuing to use its sign, "$". The Mexican peso is the 12th most traded currency in the world, the third most traded in the Americas, and by far the most... |
- | 2.801 | 2.671 | 2.501 | 3.1237 | 9.553 | 9.459 | 9.337 | 9.663 | 10.793 | 11.290 | 10.894 | 10.906 | 10.928 | 11.143 | 13.498 | 12.623 |
| Renminbi yuan | - | 1.7050 | 2.9366 | 4.7832 | 5.7620 | 8.2783 | 8.2784 | 8.2770 | 8.2771 | 8.2772 | 8.2768 | 8.1936 | 7.9723 | 7.6058 | 6.9477 | 6.8307 | 6.7696 |
| Singapore dollar Singapore dollar The Singapore dollar or Dollar is the official currency of Singapore. It is normally abbreviated with the dollar sign $, or alternatively S$ to distinguish it from other dollar-denominated currencies... |
- | - | 2.179 | 1.903 | 1.6158 | 1.6951 | 1.7361 | 1.7930 | 1.7908 | 1.7429 | 1.6902 | 1.6639 | 1.5882 | 1.5065 | 1.4140 | 1.4543 | 1.24586 |
| South African Rand South African rand The rand is the currency of South Africa. It takes its name from the Witwatersrand , the ridge upon which Johannesburg is built and where most of South Africa's gold deposits were found. The rand has the symbol "R" and is subdivided into 100 cents, symbol "c"... |
- | - | |||||||||||||||
| 2.5600 | 3.2729 | 6.1191 | 6.9468 | 8.6093 | 10.5176 | 7.5550 | 6.4402 | 6.3606 | - | 7.0477 | 8.2480 | 8.4117 | 11.73161 | ||||
| Source: Last 4 years 2005-2002 2003-2100 1996-1999 1993-1996 1990 1970-1992 1970-1985 Canada, China, Mexico 1. Mexican peso values prior to 1993 revaluation. |
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See also
- Counterfeit United States currencyCounterfeit United States currencyCounterfeiting of the currency of the United States is widely attempted. According to the United States Department of Treasury, an estimated 70 million counterfeit dollars are believed to be in circulation, or approximately $1 in counterfeits for every $12,500 in genuine currency.-Historical...
- International use of the American dollarInternational use of the American dollarBesides being the main currency of the United States, the American dollar is used as the standard unit of currency in international markets for commodities such as gold and petroleum . Some non-U.S. companies dealing in globalized markets, such as Airbus, list their prices in dollars.The U.S...
- Strong dollar policyStrong dollar policyThe strong dollar policy is the United States economic policy based on the assumption that a strong exchange rate of the United States dollar is in the interests of the United States and the whole world. It is said to be also driven by a desire to encourage foreign bondholders to buy more Treasury...
External links
- U.S. Bureau of Engraving and Printing
- U.S. Currency and Coin Outstanding and in Circulation
- U.S. Treasury page with images of all current banknotes
- American Currency Exhibit at the San Francisco Federal Reserve Bank
- Relative values of the US dollar, from 1790 to 2006
- Summary of BEP Production Statistics
- U.S. Currency tracking experiment
- 50 Factors that Affect the Value of the US Dollar – Currency Trading.net