The United States dollar (
symbol
A symbol is a mark, sign, or word that indicates, signifies, or is understood as representing an idea, object, or relationship. Symbols allow people to go beyond what is known or seen by creating linkages between otherwise very different conc ...
:
$;
code
In communications and information processing, code is a system of rules to convert information—such as a letter, word, sound, image, or gesture—into another form, sometimes shortened or secret, for communication through a communication ...
: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from
other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official
currency
A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins.
A more general def ...
of the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
and
several other countries. The
Coinage Act of 1792 introduced the U.S. dollar at par with the
Spanish silver dollar, divided it into 100
cents, and authorized the minting of coins denominated in dollars and cents. U.S. banknotes are issued in the form of
Federal Reserve Note
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 ...
s, popularly called greenbacks due to their predominantly green color.
The
monetary policy of the United States is conducted by the
Federal Reserve System
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
, which acts as the nation's
central bank
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union,
and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...
.
The U.S. dollar was originally defined under a
bimetallic standard
Bimetallism, also known as the bimetallic standard, is a monetary standard in which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange betwee ...
of (0.7735 troy ounces) fine silver or, from 1837, fine gold, or $20.67 per
troy ounce. The
Gold Standard Act
The Gold Standard Act was an Law_of_the_United_States#Federal_law, Act of the United States Congress, signed by President William McKinley and effective on March 14, 1900, defining the United States dollar by gold weight and requiring the United ...
of 1900 linked the dollar solely to gold. From 1934, its equivalence to gold was revised to $35 per
troy ounce. Since 1971, all links to gold have been repealed.
The U.S. dollar became an important international
reserve currency
A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international tran ...
after the
First World War
World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...
, and displaced the
pound sterling
Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and t ...
as the world's primary reserve currency by the
Bretton Woods Agreement towards the end of the
Second World War
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
. The dollar is the
most widely used currency in
international transactions, and a
free-floating currency
In macroeconomics and economic policy, a floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange rate regime in which a currency's value is allowed to fluctuate in response to foreign exchange marke ...
. It is also the
official currency in several countries and the
''de facto'' currency in many others, with
Federal Reserve Notes
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 ...
(and, in a few cases, U.S. coins) used in circulation.
As of February 10, 2021, currency in circulation amounted to , of which is in Federal Reserve Notes (the remaining is in the form of
coins and older-style
United States Notes).
Overview
In the Constitution
Article I,
Section 8 of the
U.S. Constitution
The Constitution of the United States is the supreme law of the United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven articles, it delineates the natio ...
provides that
Congress
A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of a ...
has the power "
coin money." Laws implementing this power are currently codified in
Title 31 of the
U.S. Code
In the law of the United States, the Code of Laws of the United States of America (variously abbreviated to Code of Laws of the United States, United States Code, U.S. Code, U.S.C., or USC) is the official compilation and codification of the ...
, under Section 5112, which prescribes the forms in which the United States dollars should be issued.
[''Denominations, specifications, and design of coins''. .] These coins are both designated in the section as "
legal tender" in payment of debts.
The
Sacagawea dollar is one example of the
copper alloy dollar, in contrast to the
American Silver Eagle which is pure
silver
Silver is a chemical element with the Symbol (chemistry), symbol Ag (from the Latin ', derived from the Proto-Indo-European wikt:Reconstruction:Proto-Indo-European/h₂erǵ-, ''h₂erǵ'': "shiny" or "white") and atomic number 47. A soft, whi ...
. Section 5112 also provides for the
minting and
issuance
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling ...
of other coins, which have values ranging from
one cent (
U.S. Penny
The cent, the United States one-cent coin (symbol: Cent_(currency)#Symbol, ¢), often called the "penny", is a unit of currency equaling one one-hundredth of a United States dollar. It has been the lowest face-value physical unit of U.S. currenc ...
) to 100 dollars.
These other coins are more fully described in
Coins of the United States dollar.
Article I, Section 9 of 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," which is further specified by Section 331 of Title 31 of the U.S. Code. The sums of money reported in the "Statements" are currently expressed in U.S. dollars, thus the U.S. dollar may be described as the
unit of account of the United States. "Dollar" is one of the first words of Section 9, in which the term refers to the
Spanish milled dollar
The Spanish dollar, also known as the piece of eight ( es, Real de a ocho, , , or ), is a silver coin of approximately diameter worth eight Spanish reales. It was minted in the Spanish Empire following a monetary reform in 1497 with content ...
, or the coin worth eight
Spanish reales.
The Coinage Act
In 1792, the
U.S. Congress passed the
Coinage Act
Coinage Act is a stock short title used for legislation in the United Kingdom and the United States related to coinage.
List United Kingdom
* Coinage Act 1816, defined the value of pound sterling relative to gold
* Coinage Offences Act 1861 (see ...
, of which Section 9 authorized the production of various coins, including:
[ U.S. Congress. 1792. ]
Coinage Act of 1792
'. 2nd Congress, 1st Session. Sec. 9, ch. 16. Retrieved June 6, 2020.Section 20 of the Act designates the United States dollar as the
unit of currency of the United States:
Decimal units
Unlike the Spanish milled dollar, the
Continental Congress
The Continental Congress was a series of legislative bodies, with some executive function, for thirteen of Britain's colonies in North America, and the newly declared United States just before, during, and after the American Revolutionary War. ...
and the Coinage Act prescribed a
decimal system of units to go with the unit dollar, as follows:
the mill, or one-thousandth of a dollar; the cent, or one-hundredth of a dollar; the dime, or one-tenth of a dollar; and the eagle, or ten dollars. The current relevance of these units:
* Only the
cent (¢) is used as everyday division of the dollar.
* The
dime is used solely as the name of the
coin
A coin is a small, flat (usually depending on the country or value), round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order t ...
with the value of 10 cents.
* The
mill (₥) is relatively unknown, but before the mid-20th century was familiarly used in matters of
sales taxes, as well as
gasoline prices
The usage and pricing of gasoline (or ''petrol'') results from factors such as crude oil prices, processing and distribution costs, local demand, the strength of local currencies, local taxation, and the availability of local sources of gas ...
, which are usually in the form of $ΧΧ.ΧΧ9 per
gallon
The gallon is a unit of volume in imperial units and United States customary units. Three different versions are in current use:
*the imperial gallon (imp gal), defined as , which is or was used in the United Kingdom, Ireland, Canada, Austral ...
(e.g., $3.599, commonly written as $).
* The
eagle is also largely unknown to the general public.
This term was used in the ''Coinage Act of 1792'' for the denomination of ten dollars, and subsequently was used in naming gold coins.
The
Spanish peso or dollar was historically divided into eight
reales (colloquially, ''bits'') – hence ''pieces of eight''. Americans also learned counting in non-decimal ''bits'' of cents before 1857 when Mexican ''bits'' were more frequently encountered than American cents; in fact this practice survived in
New York Stock Exchange
The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its listed c ...
quotations until 2001.
In 1854,
Secretary of the Treasury James Guthrie proposed creating $100, $50, and $25 gold coins, to be referred to as a ''
union
Union commonly refers to:
* Trade union, an organization of workers
* Union (set theory), in mathematics, a fundamental operation on sets
Union may also refer to:
Arts and entertainment
Music
* Union (band), an American rock group
** ''Un ...
'', ''
half union'', and ''quarter union'', respectively, thus implying a denomination of 1 Union = $100. However, no such coins were ever struck, and only patterns for the $50 half union exist.
When currently issued in circulating form, denominations less than or equal to a dollar are emitted as
U.S. coins, while denominations greater than or equal to a dollar are emitted as
Federal Reserve Note
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 ...
s, disregarding these special cases:
* Gold coins issued for
circulation until the 1930s, up to the value of $20 (known as the ''
double eagle'')
* Bullion or commemorative
gold
Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile met ...
,
silver
Silver is a chemical element with the Symbol (chemistry), symbol Ag (from the Latin ', derived from the Proto-Indo-European wikt:Reconstruction:Proto-Indo-European/h₂erǵ-, ''h₂erǵ'': "shiny" or "white") and atomic number 47. A soft, whi ...
,
platinum
Platinum is a chemical element with the symbol Pt and atomic number 78. It is a dense, malleable, ductile, highly unreactive, precious, silverish-white transition metal. Its name originates from Spanish , a diminutive of "silver".
Platinu ...
, and
palladium coin
Palladium coins are a form of coinage made out of the rare silver-white transition metal palladium. Palladium is assigned the code XPD by ISO 4217. The first palladium coins were produced in 1966.
History
Sierra Leone issued the first palladium c ...
s valued up to $100 as legal tender (though worth far more as
bullion
Bullion is non-ferrous metal that has been refined to a high standard of elemental purity. The term is ordinarily applied to bulk metal used in the production of coins and especially to precious metals such as gold and silver. It comes from t ...
).
* Civil War paper currency issue in denominations below $1, i.e. fractional currency, sometimes pejoratively referred to as ''
shinplaster
Shinplaster was paper money of low denomination, typically less than one dollar, circulating widely in the economies of the 19th century where there was a shortage of circulating coinage. The shortage of circulating coins was primarily due t ...
s''.
Etymology
In the 16th century, Count
Hieronymus Schlick
Hieronymus Schlick was a Bohemian count who authorised the minting of ''joachimstalers ,''after Joachimstal, the valley in which the silver was mined. Joachimstalers was later shortened to taler, the origin of the word "dollar
Dollar is the ...
of
Bohemia
Bohemia ( ; cs, Čechy ; ; hsb, Čěska; szl, Czechy) is the westernmost and largest historical region of the Czech Republic. Bohemia can also refer to a wider area consisting of the historical Lands of the Bohemian Crown ruled by the Bohem ...
began minting coins known as ''joachimstalers'', named for
Joachimstal, the valley in which the silver was mined. In turn, the valley's name is titled after
Saint Joachim
Joachim (; ''Yəhōyāqīm'', "he whom Yahweh has set up"; ; ) was, according to Christian tradition, the husband of Saint Anne and the father of Mary, the mother of Jesus. The story of Joachim and Anne first appears in the Biblical apocryphal ...
, whereby ''thal'' or ''tal'', a cognate of the English word , is
German
German(s) may refer to:
* Germany (of or related to)
**Germania (historical use)
* Germans, citizens of Germany, people of German ancestry, or native speakers of the German language
** For citizens of Germany, see also German nationality law
**Ger ...
for 'valley.'
["Ask US." '']National Geographic
''National Geographic'' (formerly the ''National Geographic Magazine'', sometimes branded as NAT GEO) is a popular American monthly magazine published by National Geographic Partners. Known for its photojournalism, it is one of the most widely ...
''. June 2002. p. 1. The ''joachimstaler'' was later shortened to the German ''
taler'', a word that eventually found its way into many languages, including:
''tolar'' (
Czech,
Slovak and
Slovenian
Slovene or Slovenian may refer to:
* Something of, from, or related to Slovenia, a country in Central Europe
* Slovene language, a South Slavic language mainly spoken in Slovenia
* Slovenes
The Slovenes, also known as Slovenians ( sl, Sloven ...
); ''daler'' (
Danish
Danish may refer to:
* Something of, from, or related to the country of Denmark
People
* A national or citizen of Denmark, also called a "Dane," see Demographics of Denmark
* Culture of Denmark
* Danish people or Danes, people with a Danish ance ...
and
Swedish
Swedish or ' may refer to:
Anything from or related to Sweden, a country in Northern Europe. Or, specifically:
* Swedish language, a North Germanic language spoken primarily in Sweden and Finland
** Swedish alphabet, the official alphabet used by ...
);
''dalar'' and ''daler'' (
Norwegian); ''daler'' or ''daalder'' (
Dutch);
''
talari'' (
Ethiopian
Ethiopians are the native inhabitants of Ethiopia, as well as the global diaspora of Ethiopia. Ethiopians constitute several component ethnic groups, many of which are closely related to ethnic groups in neighboring Eritrea and other parts of ...
);
''tallér'' (
Hungarian);
''tallero'' (
Italian);
''دولار'' (
Arabic
Arabic (, ' ; , ' or ) is a Semitic languages, Semitic language spoken primarily across the Arab world.Semitic languages: an international handbook / edited by Stefan Weninger; in collaboration with Geoffrey Khan, Michael P. Streck, Janet C ...
); and ''
dollar'' (
English
English usually refers to:
* English language
* English people
English may also refer to:
Peoples, culture, and language
* ''English'', an adjective for something of, from, or related to England
** English national ide ...
).
Though the
Dutch pioneered in modern-day
New York
New York most commonly refers to:
* New York City, the most populous city in the United States, located in the state of New York
* New York (state), a state in the northeastern United States
New York may also refer to:
Film and television
* '' ...
in the 17th century the use and the counting of money in silver dollars in the form of German-Dutch ''
reichsthalers'' and native Dutch ''
leeuwendaalder
A thaler (; also taler, from german: Taler) is one of the large silver coins minted in the states and territories of the Holy Roman Empire and the Habsburg monarchy during the Early Modern period. A ''thaler'' size silver coin has a diameter o ...
s'' ('lion dollars'), it was the ubiquitous
Spanish American
eight-real coin which became exclusively known as the ''dollar'' since the 18th century.
Nicknames
The
colloquialism
Colloquialism (), also called colloquial language, everyday language or general parlance, is the style (sociolinguistics), linguistic style used for casual (informal) communication. It is the most common functional style of speech, the idiom norm ...
''
buck(s)'' (much like the British ''quid'' for the
pound sterling
Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and t ...
) 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
leather
Leather is a strong, flexible and durable material obtained from the tanning, or chemical treatment, of animal skins and hides to prevent decay. The most common leathers come from cattle, sheep, goats, equine animals, buffalo, pigs and hogs, ...
trade, or it may also have originated from a
poker
Poker is a family of comparing card games in which players wager over which hand is best according to that specific game's rules. It is played worldwide, however in some places the rules may vary. While the earliest known form of the game w ...
term.
''Greenback'' is another nickname, originally applied specifically to the 19th-century
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 . Demand Notes were the first issue of paper money by the United States ...
dollars, which were printed black and green on the backside, created by
Abraham Lincoln
Abraham Lincoln ( ; February 12, 1809 – April 15, 1865) was an American lawyer, politician, and statesman who served as the 16th president of the United States from 1861 until his assassination in 1865. Lincoln led the nation thro ...
to finance the
North
North is one of the four compass points or cardinal directions. It is the opposite of south and is perpendicular to east and west. ''North'' is a noun, adjective, or adverb indicating Direction (geometry), direction or geography.
Etymology
T ...
for the
Civil War
A civil war or intrastate war is a war between organized groups within the same state (or country).
The aim of one side may be to take control of the country or a region, to achieve independence for a region, or to change government policies ...
. It is still used to refer to the U.S. dollar (but not to the dollars of other countries). The term ''greenback'' is also used by the financial press in other countries, such as
Australia
Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...
,
New Zealand
New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island count ...
,
South Africa
South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
,
and
India
India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...
.
Other well-known names of the dollar as a whole in denominations include ''greenmail'', ''green'', and ''dead presidents'', the latter of which referring to the deceased presidents pictured on most bills. Dollars in general have also been known as ''bones'' (e.g. "twenty bones" = $20). The newer designs, with portraits displayed in the main body of the obverse (rather than in
cameo insets), upon paper color-coded by denomination, are sometimes referred to as ''bigface'' notes or ''
Monopoly
A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
money''.
''
Piastre
The piastre or piaster () is any of a number of units of currency. The term originates from the Italian for "thin metal plate". The name was applied to Spanish and Hispanic American pieces of eight, or pesos, by Venice, Venetian traders in the ...
'' was the original French word for the U.S. dollar, used for example in the French text of the
Louisiana Purchase
The Louisiana Purchase (french: Vente de la Louisiane, translation=Sale of Louisiana) was the acquisition of the territory of Louisiana by the United States from the French First Republic in 1803. In return for fifteen million dollars, or app ...
. Though the U.S. dollar is called ''dollar'' in Modern French, the term ''piastre'' is still used among the speakers of
Cajun French and
New England French
New England French (french: français de Nouvelle-Angleterre) is a variety of French spoken in the New England region of the United States. It descends from Canadian French because it originally came from French Canadians who immigrated to New Eng ...
, as well as speakers in
Haiti
Haiti (; ht, Ayiti ; French: ), officially the Republic of Haiti (); ) and formerly known as Hayti, is a country located on the island of Hispaniola in the Greater Antilles archipelago of the Caribbean Sea, east of Cuba and Jamaica, and ...
and other
French-speaking Caribbean islands.
Nicknames specific to denomination:
* The
quarter dollar
The term "quarter dollar" refers to a quarter-unit of several currencies that are named "dollar". One dollar ( $1) is normally divided into subsidiary currency of 100 cents, so a quarter dollar is equal to 25 cents. These quarter dollars (aka qu ...
coin is known as ''two bits'', betraying the dollar's origins as the "piece of eight" (bits or ''reales'').
* The
$1 bill is nicknamed ''buck'' or ''single''.
* The infrequently-used
$2 bill is sometimes called ''deuce'', ''Tom'', or ''Jefferson'' (after
Thomas Jefferson
Thomas Jefferson (April 13, 1743 – July 4, 1826) was an American statesman, diplomat, lawyer, architect, philosopher, and Founding Fathers of the United States, Founding Father who served as the third president of the United States from 18 ...
).
* The
$5 bill is sometimes called ''Lincoln'', ''fin'', ''fiver'', or ''five-spot''.
* The
$10 bill is sometimes called ''sawbuck'', ''ten-spot'', or ''Hamilton'' (after
Alexander Hamilton
Alexander Hamilton (January 11, 1755 or 1757July 12, 1804) was an American military officer, statesman, and Founding Father who served as the first United States secretary of the treasury from 1789 to 1795.
Born out of wedlock in Charlest ...
).
* The
$20 bill is sometimes called ''double sawbuck'', ''Jackson'' (after
Andrew Jackson
Andrew Jackson (March 15, 1767 – June 8, 1845) was an American lawyer, planter, general, and statesman who served as the seventh president of the United States from 1829 to 1837. Before being elected to the presidency, he gained fame as ...
), or ''
double eagle''.
* The
$50 bill is sometimes called a ''yardstick'', or a ''grant'', after President
Ulysses S. Grant
Ulysses S. Grant (born Hiram Ulysses Grant ; April 27, 1822July 23, 1885) was an American military officer and politician who served as the 18th president of the United States from 1869 to 1877. As Commanding General, he led the Union Ar ...
.
* The
$100 bill is called ''Benjamin'', ''Benji'', ''Ben'', or ''Franklin'', referring to its portrait of
Benjamin Franklin
Benjamin Franklin ( April 17, 1790) was an American polymath who was active as a writer, scientist, inventor, statesman, diplomat, printer, publisher, and political philosopher. Encyclopædia Britannica, Wood, 2021 Among the leading inte ...
. Other nicknames include ''C-note'' (C being the
Roman numeral
Roman numerals are a numeral system that originated in ancient Rome and remained the usual way of writing numbers throughout Europe well into the Late Middle Ages. Numbers are written with combinations of letters from the Latin alphabet, eac ...
for 100), ''century note'', or ''bill'' (e.g. ''two bills'' = $200).
* Amounts or multiples of $1,000 are sometimes called ''
grand
Grand may refer to:
People with the name
* Grand (surname)
* Grand L. Bush (born 1955), American actor
* Grand Mixer DXT, American turntablist
* Grand Puba (born 1966), American rapper
Places
* Grand, Oklahoma
* Grand, Vosges, village and commu ...
'' in colloquial speech, abbreviated in written form to ''G'', ''K'', or ''k'' (from
''kilo''; e.g. $10k = $10,000). Likewise, a ''large'' or ''stack'' can also refer to a multiple of $1,000 (e.g. "fifty large" = $50,000).
Dollar sign
![Potosi Real](https://upload.wikimedia.org/wikipedia/commons/8/8a/Potosi_Real.jpg)
The symbol , usually written before the numerical amount, is used for the U.S. dollar (as well as for many other currencies). The sign was the result of a late 18th-century evolution of the
scribal abbreviation ''p
s'' for the
peso
The peso is the monetary unit of several countries in the Americas, and the Philippines. Originating in the Spanish Empire, the word translates to "weight". In most countries the peso uses the Dollar sign, same sign, "$", as many currencies na ...
, the common name for the
Spanish dollars that were in wide circulation in the
New World
The term ''New World'' is often used to mean the majority of Earth's Western Hemisphere, specifically the Americas."America." ''The Oxford Companion to the English Language'' (). McArthur, Tom, ed., 1992. New York: Oxford University Press, p. 3 ...
from the 16th to the 19th centuries. The ''p'' and the ''s'' eventually came to be written over each other giving rise to ''$''.
Another popular explanation is that it is derived from the
Pillars of Hercules on the
Spanish Coat of arms of the
Spanish dollar. 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 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
Alice O'Connor (born Alisa Zinovyevna Rosenbaum;, . Most sources transliterate her given name as either ''Alisa'' or ''Alissa''. , 1905 – March 6, 1982), better known by her pen name Ayn Rand (), was a Russian-born American writer and p ...
in ''
Atlas Shrugged
''Atlas Shrugged'' is a 1957 novel by Ayn Rand. It was her longest novel, the fourth and final one published during her lifetime, and the one she considered her '' magnum opus'' in the realm of fiction writing. ''Atlas Shrugged'' includes eleme ...
'', does not consider the fact that the symbol was already in use before the formation of the United States.
History
Origins: the Spanish dollar
The U.S. dollar was introduced at par with the Spanish-American
silver dollar (or ''Spanish peso'', ''Spanish milled dollar'', ''eight-real coin'', ''piece-of-eight''). The latter was produced from the rich silver mine output of
Spanish America; minted in
Mexico City
Mexico City ( es, link=no, Ciudad de México, ; abbr.: CDMX; Nahuatl: ''Altepetl Mexico'') is the capital and largest city of Mexico, and the most populous city in North America. One of the world's alpha cities, it is located in the Valley o ...
,
Potosí
Potosí, known as Villa Imperial de Potosí in the colonial period, is the capital city and a municipality of the Department of Potosí in Bolivia. It is one of the highest cities in the world at a nominal . For centuries, it was the location o ...
(Bolivia),
Lima
Lima ( ; ), originally founded as Ciudad de Los Reyes (City of The Kings) is the capital and the largest city of Peru. It is located in the valleys of the Chillón River, Chillón, Rímac River, Rímac and Lurín Rivers, in the desert zone of t ...
(Peru) and elsewhere; and was in wide circulation throughout the Americas, Asia and Europe from the 16th to 19th centuries. The minting of machine-milled Spanish dollars since 1732 boosted its worldwide reputation as a trade coin and positioned it to be model for the new currency of the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
.
Even after the
United States Mint commenced issuing coins in 1792, locally minted ''dollars'' and ''cents'' were less abundant in circulation than
Spanish American ''pesos'' and ''reales''; hence Spanish, Mexican and American dollars all remained legal tender in the United States until the
Coinage Act of 1857
The Coinage Act of 1857 (Act of Feb. 21, 1857, Chap. 56, 34th Cong., Sess. III, 11 Stat. 163) was an act of the United States Congress which ended the status of foreign coins as legal tender, repealing all acts "authorizing the currency of foreign ...
. In particular, Colonists' familiarity with the Spanish two-''real quarter peso'' was the reason for issuing a quasi-decimal
25-cent quarter dollar coin rather than a 20-cent coin.
For the relationship between the
Spanish dollar and the individual state colonial currencies, see
Connecticut pound
The pound was the currency of Connecticut until 1793. Initially, sterling coin circulated along with foreign currencies. This was supplemented by local paper money from 1709. Although the local currency was denominated in £sd, it was worth less ...
,
Delaware pound
The pound was the currency of Delaware until 1793. Initially, sterling coin circulated along with foreign currencies. This was supplemented by local paper money from 1723. Although the local currency was denominated in £sd, it was worth less tha ...
,
Georgia pound,
Maryland pound
The pound (later dollar) was the currency of Maryland from 1733 until its gradual replacement with the Continental currency and later the United States dollar between the American Revolution and the early 1800s. Initially, sterling coin circulat ...
,
Massachusetts pound,
New Hampshire pound
The pound was the currency of New Hampshire until 1793. Initially, sterling coin circulated, supplemented from 1709 by local paper money. These notes were denominated in £sd but were worth less than sterling, with 1 New Hampshire shilling = 9 pen ...
,
New Jersey pound
The pound was the currency of New Jersey until 1793. Initially, sterling coin and some foreign currencies circulated, supplemented from 1709 by local paper money. Although the notes were denominated in £sd, they were worth less than sterling. A ...
,
New York pound,
North Carolina pound
The pound (symbol: £) was the currency of North Carolina until 1793. Initially, sterling coin circulated, supplemented from 1709 by the introduction of colonial currency denominated in pounds, shillings and pence in 1712. The North Carolina ...
,
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, Pound sterling, sterling and certain foreign coins circulated, suppleme ...
,
Rhode Island pound,
South Carolina pound
The pound was the currency of South Carolina until 1793. Initially, sterling coin circulated, supplemented from 1703 by local paper money.Newman, 2008, p. 405. Although these notes were denominated in £sd, they were worth less than sterling, w ...
, and
Virginia pound
The pound was the currency of Virginia until 1793. Initially, Pound sterling, sterling coin circulated along with foreign currencies, supplemented from 1755 by local paper money.Newman, 2008, p. 437. Although these notes were denominated in £sd ...
.
Coinage Act of 1792
![Alexander Hamilton portrait by John Trumbull 1806](https://upload.wikimedia.org/wikipedia/commons/0/05/Alexander_Hamilton_portrait_by_John_Trumbull_1806.jpg)
On July 6, 1785, the
Continental Congress
The Continental Congress was a series of legislative bodies, with some executive function, for thirteen of Britain's colonies in North America, and the newly declared United States just before, during, and after the American Revolutionary War. ...
resolved that the money unit of the United States, the dollar, would contain 375.64
grains of fine silver; on August 8, 1786, the Continental Congress continued that definition and further resolved that the money of account, corresponding with the division of coins, would proceed in a
decimal ratio, with the sub-units being mills at 0.001 of a dollar, cents at 0.010 of a dollar, and dimes at 0.100 of a dollar.
After the adoption of the
United States Constitution
The Constitution of the United States is the Supremacy Clause, supreme law of the United States, United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven ar ...
, the U.S. dollar was defined by the
Coinage Act of 1792. It specified a "dollar" based on the
Spanish milled dollar
The Spanish dollar, also known as the piece of eight ( es, Real de a ocho, , , or ), is a silver coin of approximately diameter worth eight Spanish reales. It was minted in the Spanish Empire following a monetary reform in 1497 with content ...
to contain
grain
A grain is a small, hard, dry fruit (caryopsis) – with or without an attached hull layer – harvested for human or animal consumption. A grain crop is a grain-producing plant. The two main types of commercial grain crops are cereals and legum ...
s of fine silver, or of "standard silver" of fineness 371.25/416 = 89.24%; as well as an "eagle" to contain grains of fine gold, or of 22
karat or 91.67% fine gold.
Alexander Hamilton
Alexander Hamilton (January 11, 1755 or 1757July 12, 1804) was an American military officer, statesman, and Founding Father who served as the first United States secretary of the treasury from 1789 to 1795.
Born out of wedlock in Charlest ...
arrived at these numbers based on a treasury assay of the average fine silver content of a selection of worn
Spanish dollars, which came out to be 371 grains. Combined with the prevailing gold-silver ratio of 15, the standard for gold was calculated at 371/15 = 24.73 grains fine gold or 26.98 grains 22K gold. Rounding the latter to 27.0 grains finalized the dollar's standard to 24.75 grains of fine gold or 24.75*15 = 371.25 grains = 24.0566 grams = 0.7735 troy ounces of fine silver.
The same coinage act also set the value of an eagle at 10 dollars, and the dollar at eagle. It called for silver coins in denominations of 1, , , , and dollar, as well as gold coins in denominations of 1, and eagle. 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.
Though a
Spanish dollar freshly minted after 1772 theoretically contained 417.7 grains of silver of fineness 130/144 (or 377.1 grains fine silver), reliable assays of the period in fact confirmed a fine silver content of for the average Spanish dollar in circulation.
The new U.S. silver dollar of therefore compared favorably and was received at par with the Spanish dollar for foreign payments, and after 1803 the
United States Mint had to suspend making this coin out of its limited resources since it failed to stay in domestic circulation. It was only after Mexican independence in 1821 when their peso's fine silver content of 377.1 grains was firmly upheld, which the U.S. later had to compete with using a heavier
Trade dollar coin.
Design
The early currency of the United States did not exhibit faces of presidents, as is the custom now; although today, by law, only the portrait of a deceased individual may appear on United States currency. In fact, the newly formed government was against having portraits of leaders on the currency, a practice 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).
Continental currency
![Continental Currency One-Third-Dollar 17-Feb-76 obv](https://upload.wikimedia.org/wikipedia/commons/f/ff/Continental_Currency_One-Third-Dollar_17-Feb-76_obv.jpg)
After the
American Revolution
The American Revolution was an ideological and political revolution that occurred in British America between 1765 and 1791. The Americans in the Thirteen Colonies formed independent states that defeated the British in the American Revolut ...
, the
thirteen colonies
The Thirteen Colonies, also known as the Thirteen British Colonies, the Thirteen American Colonies, or later as the United Colonies, were a group of Kingdom of Great Britain, British Colony, colonies on the Atlantic coast of North America. Fo ...
became
independent
Independent or Independents may refer to:
Arts, entertainment, and media Artist groups
* Independents (artist group), a group of modernist painters based in the New Hope, Pennsylvania, area of the United States during the early 1930s
* Independ ...
. Freed from British monetary regulations, they each issued
£sd
£sd (occasionally written Lsd, spoken as "pounds, shillings and pence" or pronounced ) is the popular name for the pre-decimal currencies once common throughout Europe, especially in the British Isles and hence in several countries of the B ...
paper money to pay for military expenses. The
Continental Congress
The Continental Congress was a series of legislative bodies, with some executive function, for thirteen of Britain's colonies in North America, and the newly declared United States just before, during, and after the American Revolutionary War. ...
also began issuing "Continental Currency" denominated in Spanish dollars. For its value relative to states' currencies, see
Early American currency.
Continental currency
depreciated badly during the war, giving rise to the famous phrase "not worth a continental". A primary problem was that monetary policy was not coordinated between Congress and the states, which continued to issue bills of credit. Additionally, neither Congress nor the governments of the several states had the will or the means to retire the bills from circulation through taxation or the sale of bonds. The currency was ultimately replaced by the silver dollar at the rate of 1 silver dollar to 1000 continental dollars. It gave rise to the phrase "not worth a continental", and was responsible for the clause in
article 1, section 10 of the
United States Constitution
The Constitution of the United States is the Supremacy Clause, supreme law of the United States, United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven ar ...
which reads: "No state shall... make anything but gold and silver coin a tender in payment of debts".
Silver and gold standards, 19th century
From implementation of the 1792
Mint Act
The Coinage Act of 1792 (also known as the Mint Act; officially: ''An act establishing a mint, and regulating the Coins of the United States''), passed by the United States Congress on April 2, 1792, created the United States dollar as the countr ...
to the 1900 implementation of the
gold standard
A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the la ...
the dollar was on a
bimetallic silver-and-gold standard, defined as either 371.25
grains (24.056 g) of fine silver or 24.75 grains of fine gold (gold-silver ratio 15).
Subsequent to the
Coinage Act of 1834
The Coinage Act of 1834 was passed by the United States Congress on June 28, 1834. It raised the silver-to-gold weight ratio from its 1792 level of 15:1 (established by the Coinage Act of 1792) to 16:1 thus setting the mint price for silver at a le ...
the dollar's fine gold equivalent was revised to 23.2 grains; it was slightly adjusted to in 1837 (gold-silver ratio ~16). The same act also resolved the difficulty in minting the "standard silver" of 89.24% fineness by revising the dollar's alloy to 412.5 grains, 90% silver, still containing 371.25 grains fine silver. Gold was also revised to 90% fineness: 25.8 grains gross, 23.22 grains fine gold.
Following the rise in the price of silver during the
California Gold Rush
The California Gold Rush (1848–1855) was a gold rush that began on January 24, 1848, when gold was found by James W. Marshall at Sutter's Mill in Coloma, California. The news of gold brought approximately 300,000 people to California fro ...
and the disappearance of circulating silver coins, the
Coinage Act of 1853
The Coinage Act of 185310 Stat. 160 was a piece of legislation passed by the United States Congress which lowered the silver content of the silver half dime, dime, quarter dollar, and half dollar, and authorized a three dollar gold piece. Althoug ...
reduced the standard for silver coins less than $1 from 412.5 grains to , 90% silver per 100 cents (slightly revised to 25.0 g, 90% silver in 1873). The Act also limited the
free silver
Free silver was a major economic policy issue in the United States in the late 19th-century. Its advocates were in favor of an expansionary monetary policy featuring the unlimited coinage of silver into money on-demand, as opposed to strict adhe ...
right of individuals to convert
bullion
Bullion is non-ferrous metal that has been refined to a high standard of elemental purity. The term is ordinarily applied to bulk metal used in the production of coins and especially to precious metals such as gold and silver. It comes from t ...
into only one coin, the silver dollar of 412.5 grains; smaller coins of lower standard can only be produced by the
United States Mint using its own bullion.
Summary and
links to coins issued in the 19th century:
* In base metal:
1/2 cent,
1 cent,
5 cents.
* In silver:
half dime
The 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 business strike coin minted by the United States Mint under the Coinage Act ...
,
dime,
quarter dollar
The term "quarter dollar" refers to a quarter-unit of several currencies that are named "dollar". One dollar ( $1) is normally divided into subsidiary currency of 100 cents, so a quarter dollar is equal to 25 cents. These quarter dollars (aka qu ...
,
half dollar,
silver dollar.
* In gold:
gold $1,
$2.50 quarter eagle,
$5 half eagle,
$10 eagle,
$20 double eagle
* Less common denominations:
bronze 2 cents,
nickel 3 cents,
silver 3 cents,
silver 20 cents,
gold $3.
Note issues, 19th century
![One US dollar 1917](https://upload.wikimedia.org/wikipedia/commons/5/59/One_US_dollar_1917.jpg)
In order to finance the
War of 1812
The War of 1812 (18 June 1812 – 17 February 1815) was fought by the United States of America and its indigenous allies against the United Kingdom and its allies in British North America, with limited participation by Spain in Florida. It bega ...
, Congress authorized the issuance of
Treasury Note
United States Treasury securities, also called Treasuries or Treasurys, are government debt instruments issued by the United States Department of the Treasury to finance government spending as an alternative to taxation. Since 2012, U.S. gov ...
s, interest-bearing short-term debt that could be used to pay public dues. While they were intended to serve as debt, they did function "to a limited extent" as money. Treasury Notes were again printed to help resolve the reduction in public revenues resulting from the
Panic of 1837
The Panic of 1837 was a financial crisis in the United States that touched off a major depression, which lasted until the mid-1840s. Profits, prices, and wages went down, westward expansion was stalled, unemployment went up, and pessimism abound ...
and the
Panic of 1857
The Panic of 1857 was a financial panic in the United States caused by the declining international economy and over-expansion of the domestic economy. Because of the invention of the telegraph by Samuel F. Morse in 1844, the Panic of 1857 was ...
, as well as to help finance the
Mexican–American War
The Mexican–American War, also known in the United States as the Mexican War and in Mexico as the (''United States intervention in Mexico''), was an armed conflict between the United States and Mexico from 1846 to 1848. It followed the 1 ...
and the
Civil War
A civil war or intrastate war is a war between organized groups within the same state (or country).
The aim of one side may be to take control of the country or a region, to achieve independence for a region, or to change government policies ...
.
Paper money was issued again in 1862 without the backing of precious metals due to the
Civil War
A civil war or intrastate war is a war between organized groups within the same state (or country).
The aim of one side may be to take control of the country or a region, to achieve independence for a region, or to change government policies ...
. In addition to Treasury Notes, Congress in 1861 authorized the Treasury to borrow $50 million in the form of
Demand Notes
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 . Demand Notes were the first issue of paper money by the United States ...
, which did not bear interest but could be redeemed on demand for precious metals. However, by December 1861, the
Union
Union commonly refers to:
* Trade union, an organization of workers
* Union (set theory), in mathematics, a fundamental operation on sets
Union may also refer to:
Arts and entertainment
Music
* Union (band), an American rock group
** ''Un ...
government's supply of specie was outstripped by demand for redemption and they were forced to suspend redemption temporarily. In February 1862 Congress passed the
''Legal Tender Act of 1862'', issuing
United States Notes
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 109 years, they were issued for longer than any other form of U.S. paper money. They were k ...
, which were not redeemable on demand and bore no interest, but were
legal tender, meaning that creditors had to accept them at face value for any payment except for public debts and import tariffs. However, silver and gold coins continued to be issued, resulting in the depreciation of the newly printed notes through
Gresham's Law. In 1869, Supreme Court ruled in
Hepburn v. Griswold
''Hepburn v. Griswold'', 75 U.S. (8 Wall.) 603 (1870), was a United States Supreme Court case in which the Chief Justice of the United States, Salmon P. Chase, speaking for the Court, declared certain parts of the Legal Tender Acts to be uncons ...
that Congress could not require creditors to accept United States Notes, but overturned that ruling the next year in the
Legal Tender Cases
The ''Legal Tender Cases'' were two 1871 Supreme Court of the United States, United States Supreme Court cases that affirmed the constitutionality of banknote, paper money. The two cases were ''Knox v. Lee'' and ''Parker v. Davis''.
The U.S. fede ...
. In 1875, Congress passed the ''
Specie Payment Resumption Act The Specie Payment Resumption Act of January 14, 1875 was a law in the United States that restored the nation to the gold standard through the redemption of previously-unbacked United States Notes and reversed inflationary government policies promo ...
'', requiring the Treasury to allow U.S. Notes to be redeemed for gold after January 1, 1879.
Gold standard, 20th century
![NNC-US-1907-G$20-Saint Gaudens (Roman, high relief)](https://upload.wikimedia.org/wikipedia/commons/8/8d/NNC-US-1907-G%2420-Saint_Gaudens_%28Roman%2C_high_relief%29.jpg)
Though the dollar came under the
gold standard
A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the la ...
''de jure'' only after 1900, the
bimetallic era was ended ''de facto'' when the
Coinage Act of 1873
The Coinage Act of 1873 or Mint Act of 1873, was a general revision of laws relating to the Mint of the United States. By ending the right of holders of silver bullion to have it coined into standard silver dollars, while allowing holders of go ...
suspended the minting of the standard
silver dollar of 412.5 grains (26.73 g = 0.8595 oz t), the only fully legal tender coin that individuals could convert bullion into in unlimited (or
Free silver
Free silver was a major economic policy issue in the United States in the late 19th-century. Its advocates were in favor of an expansionary monetary policy featuring the unlimited coinage of silver into money on-demand, as opposed to strict adhe ...
) quantities, and right at the onset of the
silver rush
A silver rush is the silver-mining equivalent of a gold rush, where the discovery of silver-bearing ore sparks a mass migration of individuals seeking wealth in the new mining region.
Notable silver rushes have taken place in Mexico, Chile, the U ...
from the
Comstock Lode in the 1870s. This was the so-called "Crime of '73".
The ''
Gold Standard Act
The Gold Standard Act was an Law_of_the_United_States#Federal_law, Act of the United States Congress, signed by President William McKinley and effective on March 14, 1900, defining the United States dollar by gold weight and requiring the United ...
'' of 1900 repealed the U.S. dollar's historic link to silver and defined it solely as of fine gold (or $20.67 per
troy ounce of 480 grains). In 1933, gold coins were confiscated by
Executive Order 6102 under
Franklin D. Roosevelt
Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As the ...
, and in 1934 the standard was changed to $35 per troy ounce fine gold, or per dollar.
After 1968 a series of revisions to the gold peg was implemented, culminating in the
Nixon Shock of August 15, 1971, which suddenly ended the convertibility of dollars to gold. The U.S. dollar has since floated freely on the
foreign exchange market
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspec ...
s.
Federal Reserve Notes, 20th century to present
Congress continued to issue paper money after the Civil War, the latest of which is the
Federal Reserve Note
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 ...
that was authorized by the
Federal Reserve Act of 1913
The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States.
The Pani ...
. Since the discontinuation of all other types of notes (Gold Certificates in 1933, Silver Certificates in 1963, and United States Notes in 1971), U.S. dollar notes have since been issued exclusively as
Federal Reserve Note
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 ...
s.
Emergence as reserve currency
![WhiteandKeynes](https://upload.wikimedia.org/wikipedia/commons/0/04/WhiteandKeynes.jpg)
The U.S. dollar first emerged as an important international
reserve currency
A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international tran ...
in the 1920s, displacing the British
pound sterling
Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and t ...
as it emerged from the
First World War
World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...
relatively unscathed and since the United States was a significant recipient of wartime gold inflows. After the United States emerged as an even stronger global
superpower
A superpower is a state with a dominant position characterized by its extensive ability to exert influence or project power on a global scale. This is done through the combined means of economic, military, technological, political and cultural s ...
during the
Second World War
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
, the
Bretton Woods Agreement of 1944 established the U.S. dollar as the world's primary reserve currency and the only post-war currency linked to gold. Despite all links to gold being severed in 1971, the dollar continues to be the world's foremost reserve currency for international trade to this day.
The Bretton Woods Agreement of 1944 also defined the post-World War II monetary order and relations among modern-day
independent states, by setting up a system of rules, institutions, and procedures to regulate the
international monetary system
An international monetary system is a set of internationally agreed rules, conventions and supporting institutions that facilitate international trade, cross border investment and generally the reallocation of capital between states that have d ...
. The agreement founded the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster globa ...
and other institutions of the modern-day
World Bank Group
The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and best-known development bank in the world and an observer at the United Nations Development Grou ...
, establishing the infrastructure for conducting international payments and accessing the global capital markets using the U.S. dollar.
The
monetary policy of the United States is conducted by the
Federal Reserve System
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
, which acts as the nation's
central bank
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union,
and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...
. It was founded in 1913 under the
Federal Reserve Act
The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States.
The Panic ...
in order to furnish an elastic currency for the United States and to supervise its banking system, particularly in the aftermath of the
Panic of 1907
The Panic of 1907, also known as the 1907 Bankers' Panic or Knickerbocker Crisis, was a financial crisis that took place in the United States over a three-week period starting in mid-October, when the New York Stock Exchange fell almost 50% from ...
.
For most of the post-war period, the
U.S. government
The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a fede ...
has financed its own spending by borrowing heavily from the dollar-lubricated global capital markets, in debts denominated in its own currency and at minimal interest rates. This ability to borrow heavily without facing a significant
balance of payments crisis
A currency crisis is a type of financial crisis, and is often associated with a real economic crisis. A currency crisis raises the probability of a banking crisis or a default crisis. During a currency crisis the value of foreign denominated deb ...
has been described as the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
's
exorbitant privilege
The term exorbitant privilege (''privilège exorbitant'' in French) refers to the benefits the United States has due to its own currency (the US dollar) being the international reserve currency. For example, the US would not face a balance of pa ...
.
Coins
The
United States Mint has issued legal tender coins every year from 1792 to the present. From 1934 to the present, the only denominations produced for circulation have been the familiar penny, nickel, dime, quarter, half dollar, and dollar.
Gold and silver coins have been previously minted for general circulation from the 18th to the 20th centuries. The last gold coins were minted in 1933. The last 90% silver coins were minted in 1964, and the last 40% silver half dollar was minted in 1970.
The
United States Mint currently produces circulating coins at the
Philadelphia
Philadelphia, often called Philly, is the largest city in the Commonwealth of Pennsylvania, the sixth-largest city in the U.S., the second-largest city in both the Northeast megalopolis and Mid-Atlantic regions after New York City. Sinc ...
and
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 Min ...
s, and commemorative and proof coins for collectors at the
San Francisco
San Francisco (; Spanish language, Spanish for "Francis of Assisi, Saint Francis"), officially the City and County of San Francisco, is the commercial, financial, and cultural center of Northern California. The city proper is the List of Ca ...
and
West Point Mints. Mint mark conventions for these and for past mint branches are discussed in ''
Coins of the United States dollar#Mint marks''.
The
one-dollar coin has never been in popular circulation from 1794 to present, despite several attempts to increase their usage since the 1970s, the most important reason of which is the continued production and popularity of the
one-dollar bill.
Half dollar coins were commonly used currency since inception in 1794, but has fallen out of use from the mid-1960s when all silver half dollars began to be hoarded.
The
nickel
Nickel is a chemical element with symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel is a hard and ductile transition metal. Pure nickel is chemically reactive but large pieces are slow to ...
is the only coin whose size and composition (5 grams, 75% copper, and 25% nickel) is still in use from 1865 to today, except for wartime 1942-1945
Jefferson nickels which contained silver.
Due to the penny's low value, some
efforts have been made to eliminate the penny as circulating coinage.
For a discussion of other discontinued and canceled denominations, see ''
Obsolete denominations of United States currency#Coinage'' and ''
Canceled denominations of United States currency#Coinage''.
Collector coins
Collector coins are technically legal tender at face value but are usually worth far more due to their numismatic value or for their precious metal content. These include:
*
American Eagle bullion coins American Eagle bullion coins are produced by the United States Mint.
These include:
* American Silver Eagle
* American Gold Eagle
* American Platinum Eagle
The American Platinum Eagle is the official platinum bullion coin of the United States. ...
**
American Silver Eagle $1 (1
troy oz
Troy weight is a system of units of mass that originated in 15th-century England, and is primarily used in the precious metals industry. The troy weight units are the grain, the pennyweight (24 grains), the troy ounce (20 pennyweights), and t ...
) Silver bullion coin 1986–present
**
American Gold Eagle $5 ( troy oz), $10 ( troy oz), $25 ( troy oz), and $50 (1 troy oz) Gold bullion coin 1986–present
**
American Platinum Eagle $10 ( troy oz), $25 ( troy oz), $50 ( troy oz), and $100 (1 troy oz) Platinum bullion coin 1997–present
**
American Palladium Eagle
The American Palladium Eagle is the official palladium bullion coin of the United States. Each coin has a face value of $25 and is composed of 99.95% fine palladium, with 1 troy ounce actual palladium weight.
History
The Palladium Eagle was aut ...
$25 (1 troy oz) Palladium bullion coin 2017–present
*
United States commemorative coins—special issue coins, among these:
**
$50.00 (Half Union) minted for the
Panama-Pacific International Exposition (1915)
**Silver proof sets minted since 1992 with dimes, quarters and half-dollars made of silver rather than the standard copper-nickel
**
Presidential dollar coins
Presidential dollar coins (authorized by ) are a series of United States dollar coins with engravings of relief portraits of U.S. presidents on the obverse and the Statue of Liberty (''Liberty Enlightening the World'') on the reverse.
From 2007 ...
proof sets minted since 2007
Banknotes
The
U.S. Constitution
The Constitution of the United States is the supreme law of the United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven articles, it delineates the natio ...
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
A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve A ...
to issue
Federal Reserve Notes
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 ...
. 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 tender" 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
Federal Reserve Bank Notes are banknotes that are legal tender in the United States issued between 1915 and 1934, together with United States Notes, Silver Certificates, Gold Certificates, National Bank Notes and Federal Reserve Notes. They were ...
. The Federal Reserve Note is the only type that remains in circulation since the 1970s.
Federal Reserve Notes
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 ...
are printed by the
Bureau of Engraving and Printing and are made from
cotton fiber paper (as opposed to
wood fiber
Wood fibres (also spelled wood fibers, see spelling differences) are usually cellulosic elements that are extracted from trees and used to make materials including paper.
The end paper product (paper, paperboard, tissue, cardboard, etc.) dictates ...
used to make common paper). The "
large-sized note
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 ...
s" issued before 1928 measured , while
small-sized note
Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 ...
s introduced that year measure . The dimensions of the modern (small-size) U.S. currency is identical to the size of
Philippine peso
The Philippine peso, also referred to by its Tagalog name ''piso'' (Philippine English: , , plural pesos; tl, piso ; sign: ₱; code: PHP), is the official currency of the Philippines. It is subdivided into 100 ''sentimo'', also called ce ...
banknotes issued under United States administration after 1903, which had proven highly successful. The American large-note bills became known as "horse blankets" or "saddle blankets."
![100 usd 1](https://upload.wikimedia.org/wikipedia/commons/f/f4/100_usd_1.jpg)
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
Organized crime (or organised crime) is a category of transnational, national, or local groupings of highly centralized enterprises run by criminals to engage in illegal activity, most commonly for profit. While organized crime is generally th ...
; it was the latter usage that prompted President
Richard Nixon
Richard Milhous Nixon (January 9, 1913April 22, 1994) was the 37th president of the United States, serving from 1969 to 1974. A member of the Republican Party, he previously served as a representative and senator from California and was ...
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
Large denominations of United States currency greater than were circulated by the United States Treasury until 1969. Since then, U.S. dollar banknotes have only been issued in seven denominations: $1, $2, $5, $10, $20, $50, and $100.
Overvi ...
for details. With the exception of the $100,000 bill (which was only issued as a Series 1934 Gold Certificate and was never publicly circulated; thus it is illegal to own), these notes are now collectors' items and are worth more than their face value to collectors.
Though still predominantly green, the 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 American Council of the Blind (ACB) 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 (although there are many sighted m ...
, 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 current version of the $100 bill. It also plans larger, higher-contrast numerals, more color differences, and distribution of currency readers to assist the visually impaired during the transition period.
Countries that use US dollar
Formal
*
*
*
*
*
*
*
*
*
*
Informal
*
*
*
*
*
*
*
*
*
*
*
Monetary policy
![Marriner S](https://upload.wikimedia.org/wikipedia/commons/8/8d/Marriner_S._Eccles_Federal_Reserve_Board_Building.jpg)
The
Federal Reserve Act
The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States.
The Panic ...
created the
Federal Reserve System
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
in 1913 as the
central bank
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union,
and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...
of the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
. Its primary task is
to conduct the nation's
monetary policy
Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...
to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy. It is also tasked to promote the stability of the financial system and regulate financial institutions, and to act as
lender of last resort.
The
Monetary policy of the United States is conducted by the
Federal Open Market Committee, which is composed of the
Federal Reserve Board of Governors and 5 out of the 12 Federal Reserve Bank presidents, and is implemented by all twelve regional
Federal Reserve Bank
A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve A ...
s.
Monetary policy
Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...
refers to actions made by central banks that determine the size and growth rate of the
money supply
In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include Circulation (curren ...
available in the economy, and which would result in desired objectives like low inflation, low unemployment, and stable financial systems. The economy's aggregate
money supply
In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include Circulation (curren ...
is the total of
* M0 money, or Monetary Base - "dollars" in currency and
bank money
Demand deposits or checkbook money are funds held in demand accounts in commercial banks. These account balances are usually considered money and form the greater part of the narrowly defined money supply of a country. Simply put, these are depo ...
balances credited to the central bank's depositors, which are backed by the central bank's assets,
* plus M1, M2, M3 money - "dollars" in the form of
bank money
Demand deposits or checkbook money are funds held in demand accounts in commercial banks. These account balances are usually considered money and form the greater part of the narrowly defined money supply of a country. Simply put, these are depo ...
balances credited to banks' depositors, which are backed by the bank's assets and investments.
The FOMC influences the level of money available to the economy by the following means:
* Reserve requirements - specifies a required minimum percentage of deposits in a
commercial bank
A commercial bank is a financial institution which accepts deposits from the public and gives loans for the purposes of consumption and investment to make profit.
It can also refer to a bank, or a division of a large bank, which deals with cor ...
that should be held as a reserve (i.e. as deposits with the Federal Reserve), with the rest available to loan or invest. Higher requirements mean less money loaned or invested, helping keep inflation in check. Raising the
federal funds rate earned on those reserves also helps achieve this objective.
* Open market operations - the Federal Reserve buys or sells
US Treasury bonds
United States Treasury securities, also called Treasuries or Treasurys, are government debt instruments issued by the United States Department of the Treasury to finance government spending as an alternative to taxation. Since 2012, U.S. gov ...
and other securities held by banks in exchange for reserves; more reserves increase a bank's capacity to loan or invest elsewhere.
* Discount window lending - banks can borrow from the Federal Reserve.
Monetary policy
Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...
directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates. Through these channels, monetary policy influences spending, investment, production, employment, and inflation in the United States. Effective
monetary policy
Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...
complements
fiscal policy
In economics and political science, fiscal policy is the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variables ...
to support economic growth.
The adjusted monetary base has increased from approximately $400 billion in 1994, to $800 billion in 2005, and to over $3 trillion in 2013.
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
In economics, the monetary base (also base money, money base, high-powered money, reserve money, outside money, central bank money or, in the UK, narrow money) in a country is the total amount of money created by the central bank. This include ...
. Commercial banks then decide how much money to keep in deposit with the Federal Reserve and how much to hold as physical currency. In the latter case, the Federal Reserve places an order for printed money from the U.S. 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).
The Federal Reserve's monetary policy objectives to keep prices stable and unemployment low is often called the ''dual mandate''. This replaces past practices under a
gold standard
A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the la ...
where the main concern is the gold equivalent of the local currency, or under a gold exchange standard where the concern is fixing the exchange rate versus another gold-convertible currency (previously practiced worldwide under the
Bretton Woods Agreement of 1944 via fixed exchange rates to the U.S. dollar).
International use as reserve currency
Ascendancy
The primary currency used for global trade between
Europe
Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Subcontinents, subcontinent of Eurasia ...
,
Asia
Asia (, ) is one of the world's most notable geographical regions, which is either considered a continent in its own right or a subcontinent of Eurasia, which shares the continental landmass of Afro-Eurasia with Africa. Asia covers an area ...
, and
the Americas
The Americas, which are sometimes collectively called America, are a landmass comprising the totality of North America, North and South America. The Americas make up most of the land in Earth's Western Hemisphere and comprise the New World. ...
has historically been the Spanish-American
silver dollar, which created a global
silver standard system from the 16th to 19th centuries, due to abundant silver supplies in
Spanish America.
The U.S. dollar itself was derived from this coin. The
Spanish dollar was later displaced by the British
pound sterling
Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and t ...
in the advent of the international
gold standard
A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the la ...
in the last quarter of the 19th century.
The U.S. dollar began to displace the
pound sterling
Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and t ...
as international
reserve currency
A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international tran ...
from the 1920s since it emerged from the
First World War
World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...
relatively unscathed and since the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
was a significant recipient of wartime gold inflows.
After the U.S. emerged as an even stronger global
superpower
A superpower is a state with a dominant position characterized by its extensive ability to exert influence or project power on a global scale. This is done through the combined means of economic, military, technological, political and cultural s ...
during the
Second World War
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
, the
Bretton Woods Agreement of 1944 established the post-war international monetary system, with the U.S. dollar ascending to become the world's primary
reserve currency
A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international tran ...
for international trade, and the only post-war currency linked to gold at $35 per
troy ounce.
As international reserve currency
The U.S. dollar is joined by the world's other major currencies - the
euro
The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
,
pound sterling
Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and t ...
,
Japanese yen
The is the official currency of Japan. It is the third-most traded currency in the foreign exchange market, after the United States dollar (US$) and the euro. It is also widely used as a third reserve currency after the US dollar and the ...
and Chinese
renminbi
The renminbi (; symbol: ¥; ISO code: CNY; abbreviation: RMB) is the official currency of the People's Republic of China and one of the world's most traded currencies, ranking as the fifth most traded currency in the world as of April 2022. ...
- in the currency basket of the
special drawing rights
Special drawing rights (SDRs, code ) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency ''per se''. They represent a claim ...
of the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster globa ...
. Central banks worldwide have huge reserves of U.S. dollars in their holdings and are significant buyers of
U.S. treasury bills and notes.
Foreign companies, entities, and private individuals hold U.S. dollars in foreign deposit accounts called
eurodollar
Eurodollars are U.S. dollars held in time deposit accounts in banks outside the United States, which thus are not subject to the legal jurisdiction of the U.S. Federal Reserve. Consequently, such deposits are subject to much less regulation than ...
s (not to be confused with the
euro
The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
), which are outside the jurisdiction of the
Federal Reserve System
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
. Private individuals also hold dollars outside the banking system mostly in the form of
US$100 bills, of which 80% of its supply is held overseas.
The
United States Department of the Treasury
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and t ...
exercises considerable oversight over the
SWIFT financial transfers network, and consequently has a huge sway on the global
financial transaction
A financial transaction is an agreement, or communication, between a buyer and seller to exchange goods, services, or assets for payment. Any transaction involves a change in the status of the finances of two or more businesses or individuals. A ...
s systems, with the ability to impose sanctions on foreign entities and individuals.
In the global markets
The U.S. dollar is predominantly the standard currency unit in which goods are quoted and traded, and with which payments are settled in, in the global
commodity markets. The
U.S. Dollar Index
The U.S. Dollar Index (USDX, DXY, DX, or, informally, the "Dixie") is an index number, index (or measure) of the value of the United States dollar relative to a market basket, basket of Foreign currency, foreign currencies, often referred to a ...
is an important indicator of the dollar's strength or weakness versus a basket of six foreign currencies.
The
United States Government is capable of borrowing trillions of dollars from the global capital markets in U.S. dollars issued by the
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
, which is itself under U.S. government purview, at minimal interest rates, and with virtually zero default risk. In contrast, foreign governments and corporations incapable of raising money in their own local currencies are forced to issue debt denominated in U.S. dollars, along with its consequent higher interest rates and risks of default.
The United States's ability to borrow in its own currency without facing a significant balance of payments crisis has been frequently described as its
exorbitant privilege
The term exorbitant privilege (''privilège exorbitant'' in French) refers to the benefits the United States has due to its own currency (the US dollar) being the international reserve currency. For example, the US would not face a balance of pa ...
.
A frequent topic of debate is whether the
strong dollar policy
The strong dollar policy is the United States economic policy based on the assumption that a strong exchange rate of the United States dollar (where a smaller dollar amount is needed to buy the same amount of other currency than would otherwise be ...
of the United States is indeed in America's own best interests, as well as in the best interest of the
international community
The international community is an imprecise phrase used in geopolitics and international relations to refer to a broad group of people and governments of the world.
As a rhetorical term
Aside from its use as a general descriptor, the term is ...
.
Currencies fixed to the U.S. dollar
For a more exhaustive discussion of countries using the U.S. dollar as official or customary currency, or using currencies which are pegged to the U.S. dollar, see ''
International use of the U.S. dollar#Dollarization and fixed exchange rates'' and ''
Currency substitution#US dollar''.
Countries using the U.S. dollar as their official currency include:
* In the Americas:
Panama
Panama ( , ; es, link=no, Panamá ), officially the Republic of Panama ( es, República de Panamá), is a transcontinental country spanning the southern part of North America and the northern part of South America. It is bordered by Cos ...
,
Ecuador
Ecuador ( ; ; Quechua: ''Ikwayur''; Shuar: ''Ecuador'' or ''Ekuatur''), officially the Republic of Ecuador ( es, República del Ecuador, which literally translates as "Republic of the Equator"; Quechua: ''Ikwadur Ripuwlika''; Shuar: ''Eku ...
,
El Salvador
El Salvador (; , meaning " The Saviour"), officially the Republic of El Salvador ( es, República de El Salvador), is a country in Central America. It is bordered on the northeast by Honduras, on the northwest by Guatemala, and on the south b ...
,
British Virgin Islands
)
, anthem = "God Save the King"
, song_type = Territorial song
, song = "Oh, Beautiful Virgin Islands"
, image_map = File:British Virgin Islands on the globe (Americas centered).svg
, map_caption =
, mapsize = 290px
, image_map2 = Brit ...
,
Turks and Caicos Islands
The Turks and Caicos Islands (abbreviated TCI; and ) are a British Overseas Territory consisting of the larger Caicos Islands and smaller Turks Islands, two groups of tropical islands in the Lucayan Archipelago of the Atlantic Ocean and n ...
, and the
Caribbean Netherlands.
* The constituent states of the former
Trust Territory of the Pacific Islands:
Palau
Palau,, officially the Republic of Palau and historically ''Belau'', ''Palaos'' or ''Pelew'', is an island country and microstate in the western Pacific. The nation has approximately 340 islands and connects the western chain of the Caro ...
, the
Federated States of Micronesia
The Federated States of Micronesia (; abbreviated FSM) is an island country in Oceania. It consists of four states from west to east, Yap, Chuuk, Pohnpei and Kosraethat are spread across the western Pacific. Together, the states comprise a ...
, and the
Marshall Islands
The Marshall Islands ( mh, Ṃajeḷ), officially the Republic of the Marshall Islands ( mh, Aolepān Aorōkin Ṃajeḷ),'' () is an independent island country and microstate near the Equator in the Pacific Ocean, slightly west of the Internati ...
.
* Others:
East Timor
East Timor (), also known as Timor-Leste (), officially the Democratic Republic of Timor-Leste, is an island country in Southeast Asia. It comprises the eastern half of the island of Timor, the exclave of Oecusse on the island's north-weste ...
.
Among the countries using the U.S. dollar together with other foreign currencies and their local currency are
Cambodia
Cambodia (; also Kampuchea ; km, កម្ពុជា, UNGEGN: ), officially the Kingdom of Cambodia, is a country located in the southern portion of the Indochinese Peninsula in Southeast Asia, spanning an area of , bordered by Thailand t ...
and
Zimbabwe
Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and Mozam ...
.
Currencies pegged to the U.S. dollar include:
* In the Caribbean: the
Bahamian dollar
The dollar (sign: $; code: BSD) has been the currency of The Bahamas since 1966. It is normally abbreviated with the dollar sign ''$'', or alternatively B$ to distinguish it from other dollar-denominated currencies. It is divided into 100 cents ...
,
Barbadian dollar
The dollar has been the currency of Barbados since 1935. Globally its currency has the ISO 4217 code ''BBD'', however, unofficially in Barbados the International vehicle registration code code BDS is also commonly used, a currency code that is o ...
,
Belize dollar
The Belize dollar is the official currency in Belize (currency code ''BZD''). It is normally abbreviated with the dollar sign ''$'', or alternatively ''BZ$'' to distinguish it from other dollar-denominated currencies.
It is divided into 100 cen ...
,
Bermudan dollar
The Bermudian dollar ( symbol: $; code: BMD; also abbreviated BD$; informally called the Bermuda dollar) is the official currency of the British Overseas Territory of Bermuda. It is subdivided into 100 cents. The Bermudian dollar is n ...
,
Cayman Islands dollar
The Cayman Islands Dollar (currency code ''KYD'') is the currency of the Cayman Islands. It is abbreviated with the dollar sign ''$'', or alternatively ''CI$'' to distinguish it from other dollar-denominated currencies. It is subdivided into 100 ...
,
East Caribbean dollar
The Eastern Caribbean dollar (symbol: EC$; code: XCD) is the currency of all seven full members and one associate member of the Organisation of Eastern Caribbean States (OECS). The successor to the British West Indies dollar, it has existed sinc ...
,
Netherlands Antillean guilder
The Netherlands Antillean guilder ( nl, gulden) is the currency of Curaçao and Sint Maarten, which until 2010 formed the Netherlands Antilles along with Bonaire, Saba, and Sint Eustatius. It is subdivided into 100 ''cents'' (Dutch plural form: ...
and the
Aruban florin.
* The currencies of five oil-producing Arab countries: the
Saudi riyal
The Saudi riyal ( ar, ريال سعودي ') is the currency of Saudi Arabia. It is abbreviated as
or SAR ''(Saudi Arabian Riyal)''. It is subdivided into 100 halalas ( ar, هللة '). The currency is pegged to the US dollar at a constant rate ...
,
United Arab Emirates dirham
The dirham (; ar, درهم إماراتي, abbreviation: د.إ in Arabic, Dh (singular) and Dhs (plural) or DH in Latin; ISO code: AED) is the official currency of the United Arab Emirates. The dirham is subdivided into 100 .
History
The n ...
,
Omani rial,
Qatari riyal and the
Bahraini dinar.
* Others: the
Hong Kong dollar
The Hong Kong dollar (, currency symbol, sign: HK$; ISO 4217, code: HKD) is the official currency of the Hong Kong, Hong Kong Special Administrative Region. It is subdivided into 100 cent (currency), cents or 1000 Mill (currency), mils. The H ...
,
Macanese pataca,
Jordanian dinar
The Jordanian dinar ( ar, دينار أردني; ISO 4217, code: JOD; unofficially abbreviated as JD) has been the currency of Jordan since 1950. The dinar is divided into 10 dirhams, 100 qirsh (also called piastres) or 1000 fils (currency), fulu ...
,
Lebanese pound
The pound or lira ( ar, ليرة لبنانية ''līra Libnāniyya''; French: ''livre libanaise''; abbreviation: LL in Latin, in Arabic, historically also £L, ISO code: LBP) is the currency of Lebanon. It was formerly divided into 100 piast ...
.
Value
![Inflation value of dollar](https://upload.wikimedia.org/wikipedia/commons/3/3e/Inflation_value_of_dollar.webp)
The 6th 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
The Spanish dollar, also known as the piece of eight ( es, Real de a ocho, , , or ), is a silver coin of approximately diameter worth eight Spanish reales. It was minted in the Spanish Empire following a monetary reform in 1497 with content ...
as the same is now current".
The table above shows the equivalent amount of goods that, in a particular year, could be purchased with $1. The table shows that from 1774 through 2012 the U.S. dollar has lost about 97.0% 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
A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time.
Overview
A CPI is a statistica ...
(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
The Bureau of Labor Statistics (BLS) 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 and serves as a principal agency of t ...
, 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
The American Civil War (April 12, 1861 – May 26, 1865; also known by other names) was a civil war in the United States. It was fought between the Union ("the North") and the Confederacy ("the South"), the latter formed by states th ...
, World War I, and World War II. The
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
, 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
In economics, the monetary base (also base money, money base, high-powered money, reserve money, outside money, central bank money or, in the UK, narrow money) in a country is the total amount of money created by the central bank. This include ...
such as gold, national banknotes, 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 were 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
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
established after World War II, the value of gold 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
Richard Milhous Nixon (January 9, 1913April 22, 1994) was the 37th president of the United States, serving from 1969 to 1974. A member of the Republican Party, he previously served as a representative and senator from California and was t ...
, 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
James Earl Carter Jr. (born October 1, 1924) is an American politician who served as the 39th president of the United States from 1977 to 1981. A member of the Democratic Party, he previously served as the 76th governor of Georgia from 19 ...
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
The Great Moderation is a period in the United States of America starting from the mid-1980s until at least 2007 characterized by the reduction in the volatility of business cycle fluctuations in developed nations compared with the decades befor ...
" of economic conditions since the 1970s is credited to monetary policy targeting price stability.
There is an 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
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
and stimulate the economy when needed.
Pegged currencies
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Aruban florin
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Bahamian dollar
The dollar (sign: $; code: BSD) has been the currency of The Bahamas since 1966. It is normally abbreviated with the dollar sign ''$'', or alternatively B$ to distinguish it from other dollar-denominated currencies. It is divided into 100 cents ...
(at par)
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Bahraini dinar (higher value)
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Barbadian dollar
The dollar has been the currency of Barbados since 1935. Globally its currency has the ISO 4217 code ''BBD'', however, unofficially in Barbados the International vehicle registration code code BDS is also commonly used, a currency code that is o ...
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Belarusian ruble
The ruble ( be, рубель ''rubeĺ’''; Currency symbol, Abbreviation: Rbl (plural: Rbls); ISO 4217, ISO code: BYN) is the currency of Belarus. It is also known as the rubel, or in Commonwealth English as the rouble. The ruble is subdivided ...
(alongside Euro and Russian Ruble in currency basket)
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Belize dollar
The Belize dollar is the official currency in Belize (currency code ''BZD''). It is normally abbreviated with the dollar sign ''$'', or alternatively ''BZ$'' to distinguish it from other dollar-denominated currencies.
It is divided into 100 cen ...
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Bermudian dollar (at par)
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Cayman Islands dollar
The Cayman Islands Dollar (currency code ''KYD'') is the currency of the Cayman Islands. It is abbreviated with the dollar sign ''$'', or alternatively ''CI$'' to distinguish it from other dollar-denominated currencies. It is subdivided into 100 ...
(higher value)
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Costa Rican colon
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Cuban peso
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East Caribbean Dollar
The Eastern Caribbean dollar (symbol: EC$; code: XCD) is the currency of all seven full members and one associate member of the Organisation of Eastern Caribbean States (OECS). The successor to the British West Indies dollar, it has existed sinc ...
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East Timor centavo coins
East Timor centavo coins were introduced in East Timor in 2003 for use alongside United States dollar banknotes and coins, which were introduced in 2000 to replace the Indonesian rupiah following the commencement of U.N. administration. One cent ...
(at par)
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Ecuadorian centavo coins
Ecuadorian centavo coins were introduced in 2000 when Ecuador converted its currency from the sucre to the U.S. dollar. The coins are in denominations of 1, 5, 10, 25 and 50 centavos and are identical in size and value to their U.S. cent counte ...
(at par)
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Salvadoran colon
Salvadorans (Spanish: ''Salvadoreños''), also known as Salvadorians (alternate spelling: Salvadoreans), are citizens of El Salvador, a country in Central America. Most Salvadorans live in El Salvador, although there is also a significant Salvad ...
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Eritrean nakfa
The nakfa ( ISO 4217 code: ''ERN''; ''naḳfa'', or or نقفة ''nākfā'') is the currency of Eritrea and was introduced on 15 November 1998 to replace the Ethiopian birr at par. The currency takes its name from the Eritrean town of Nakfa, ...
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Guatemalan quetzal
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Haitian gourde
The gourde () or goud () is the currency of Haiti. Its ISO 4217 code is HTG and it is divided into 100 ''centimes'' (French) or ''santim'' (Creole).
The word "gourde" is a French cognate for the Spanish term "gordo", from the "pesos gordos" ( ...
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Honduran lempira
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Hong Kong dollar
The Hong Kong dollar (, currency symbol, sign: HK$; ISO 4217, code: HKD) is the official currency of the Hong Kong, Hong Kong Special Administrative Region. It is subdivided into 100 cent (currency), cents or 1000 Mill (currency), mils. The H ...
(narrow band)
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Iraqi dinar
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Jordanian dinar
The Jordanian dinar ( ar, دينار أردني; ISO 4217, code: JOD; unofficially abbreviated as JD) has been the currency of Jordan since 1950. The dinar is divided into 10 dirhams, 100 qirsh (also called piastres) or 1000 fils (currency), fulu ...
(higher value)
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Kuwaiti dinar (higher value)
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Lebanese pound
The pound or lira ( ar, ليرة لبنانية ''līra Libnāniyya''; French: ''livre libanaise''; abbreviation: LL in Latin, in Arabic, historically also £L, ISO code: LBP) is the currency of Lebanon. It was formerly divided into 100 piast ...
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Antillean guilder
The Netherlands Antillean guilder ( nl, gulden) is the currency of Curaçao and Sint Maarten, which until 2010 formed the Netherlands Antilles along with Bonaire, Saba (island), Saba, and Sint Eustatius. It is subdivided into 100 ''cents'' (Dutch ...
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Nicaraguan cordoba
Nicaragua (; ), officially the Republic of Nicaragua (), is the largest country in Central America, bordered by Honduras to the north, the Caribbean to the east, Costa Rica to the south, and the Pacific Ocean to the west. Managua is the cou ...
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Nigerian naira
The naira (currency sign, sign: ₦; ISO 4217, code: NGN) is the currency of Nigeria. One naira is divided into 100 ''kobo''.
The Central Bank of Nigeria (CBN) is the sole issuer of legal tender money throughout the Federal Republic of Nigeria ...
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Omani rial (higher value)
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Panamanian balboa
The balboa (sign: B/.; ISO 4217: PAB) is, along with the United States dollar, one of the official currencies of Panama. It is named in honor of the Spanish explorer/conquistador Vasco Núñez de Balboa. The balboa is subdivided into 100 ''centé ...
(at par)
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Qatari riyal
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Saudi riyal
The Saudi riyal ( ar, ريال سعودي ') is the currency of Saudi Arabia. It is abbreviated as
or SAR ''(Saudi Arabian Riyal)''. It is subdivided into 100 halalas ( ar, هللة '). The currency is pegged to the US dollar at a constant rate ...
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Sierra Leonean leone
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Trinidad and Tobago dollar
The Trinidad and Tobago dollar (ISO 4217, currency code TTD) is the currency of Trinidad and Tobago. It is normally abbreviated with the dollar sign $, or alternatively TT$ to distinguish it from other dollar-denominated currencies. It is subdiv ...
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United Arab Emirates dirham
The dirham (; ar, درهم إماراتي, abbreviation: د.إ in Arabic, Dh (singular) and Dhs (plural) or DH in Latin; ISO code: AED) is the official currency of the United Arab Emirates. The dirham is subdivided into 100 .
History
The n ...
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Yemeni rial
The rial ( ar, ريال يمني; sign: ﷼; abbreviation: YRl (singular) and YRls (plural) in Latin, ,ر.ي in Arabic; ISO code: YER) is the official currency of the Republic of Yemen. It is technically divided into 100 fils, although coins ...
(lower value)
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Zimbabwean bond coins and
bond notes (at par)
Exchange rates
Historical exchange rates
Current exchange rates
See also
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Counterfeit United States currency
Counterfeiting of the currency of the United States is widely attempted. According to the United States Department of Treasury, an estimated $70 million in counterfeit bills are in circulation, or approximately 1 note in counterfeits for e ...
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Dedollarisation
Dedollarisation is a process of substituting US dollar as the currency used for (i) trading oil and/ or other commodities (i.e. petrodollar), (ii) buying US dollars for the forex reserves, (iii) bilateral trade agreements, and (iv) dollar-denomina ...
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International use of the U.S. dollar
The United States dollar was established as the world's foremost reserve currency by the Bretton Woods Agreement of 1944. It claimed this status from sterling after the devastation of two world wars and the massive spending of the United Kingdo ...
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List of the largest trading partners of the United States
The 30 largest trade partners of the United States represent 87.9% of U.S. exports, and 87.4% of U.S. imports . These figures do not include services or foreign direct investment.
The largest US partners with their total trade in goods (sum of im ...
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Monetary policy of the United States
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Petrodollar recycling
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Strong dollar policy
The strong dollar policy is the United States economic policy based on the assumption that a strong exchange rate of the United States dollar (where a smaller dollar amount is needed to buy the same amount of other currency than would otherwise be ...
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U.S. Dollar Index
The U.S. Dollar Index (USDX, DXY, DX, or, informally, the "Dixie") is an index number, index (or measure) of the value of the United States dollar relative to a market basket, basket of Foreign currency, foreign currencies, often referred to a ...
Notes
References
Further reading
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External links
U.S. Bureau of Engraving and Printing
American Currency Exhibit at the San Francisco Federal Reserve BankRelative values of the U.S. dollar, from 1774 to presentSummary of BEP Production Statistics
Images of U.S. currency and coins
U.S. Currency Education Program page with images of all current banknotesU.S. Mint: Image Library
{{DEFAULTSORT:United States Dollar
Currencies introduced in 1792
Currencies of British Overseas Territories
Currencies of East Timor
Dollar
Currencies of El Salvador
Currencies of the Kingdom of the Netherlands
Dollar
Currencies of Zimbabwe
Historical currencies of the United States
1792 establishments in the United States