United States dollar

"USD" redirects here. For other uses, see USD (disambiguation).

ISO 4217 code USD (num. 840)
Central bank Federal Reserve System
 Website www.federalreserve.gov
Official user(s)

 United States
 East Timor[1][Note 1]
 Ecuador[2][Note 2]
 El Salvador[3]
 Marshall Islands
 Federated States of Micronesia
 Palau
 Panama[Note 3]
 Zimbabwe[Note 4]

Unofficial user(s)
Inflation 0.17 % (October 2015)
 Source inflationdata.com
 Method CPI
Pegged by
Subunit
 1⁄10 Dime
 1⁄100 Cent
 1⁄1000 Mill (used in accounting and by almost all fueling stations)
Symbol $
Nickname
Coins
 Freq. used 1¢, 5¢, 10¢, 25¢
 Rarely used 50¢, $1
Banknotes
 Freq. used $1, $5, $10, $20, $50,
$100
 Rarely used $2
Printer Bureau of Engraving and Printing
 Website www.moneyfactory.gov
Mint United States Mint
 Website www.usmint.gov

The United States dollar (sign: $; code: USD; also abbreviated US$ and referred to as the dollar, U.S. dollar, or American dollar) is the official currency of the United States and its overseas territories. It is a Federal Reserve Note and consists of 100 smaller cent units.

The U.S. dollar is fiat money. It is the currency most used in international transactions and is the world's most dominant reserve currency.[8] Several countries use it as their official currency, and in many others it is the de facto currency.[9] Besides the United States, it is also used as the sole currency in two British Overseas Territories in the Caribbean: the British Virgin Islands and the Turks and Caicos islands. A few countries use only the U.S. Dollar for paper money, while the country mints its own coins, or also accepts U.S. coins that can be used as payment in U.S. dollars, such as the Susan B. Anthony dollar.

Overview

The Constitution of the United States of America provides that the United States Congress has the power "To coin money".[10] Laws implementing this power are currently codified at 31 U.S.C. § 5112. Section 5112 prescribes the forms, in which the United States dollars should be issued.[11] These coins are both designated in Section 5112 as "legal tender" in payment of debts.[11] The Sacagawea dollar is one example of the copper alloy dollar. The pure silver dollar is known as the American Silver Eagle. Section 5112 also provides for the minting and issuance of other coins, which have values ranging from one cent to 50 dollars.[11] These other coins are more fully described in Coins of the United States dollar.

The Constitution provides that "a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time".[12] That provision of the Constitution is made specific by Section 331 of Title 31 of the United States Code.[13] The sums of money reported in the "Statements" are currently being expressed in U.S. dollars (for example, see the 2009 Financial Report of the United States Government).[14] The U.S. dollar may therefore be described as the unit of account of the United States.

The word "dollar" is one of the words in the first paragraph of Section 9 of Article 1 of the U.S. Constitution. In that context, "dollars" is a reference to the Spanish milled dollar, a coin that had a monetary value of 8 Spanish units of currency, or reales. In 1792 the U.S. Congress adopted legislation titled An act establishing a mint, and regulating the Coins of the United States. Section 9 of that act authorized the production of various coins, including "DOLLARS OR UNITS—each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver". Section 20 of the act provided, "That the money of account of the United States shall be expressed in dollars, or units... and that all accounts in the public offices and all proceedings in the courts of the United States shall be kept and had in conformity to this regulation". In other words, this act designated the United States dollar as the unit of currency of the United States.

Unlike the Spanish milled dollar the U.S. dollar is based upon a decimal system of values. In addition to the dollar the coinage act officially established monetary units of mill or one-thousandth of a dollar (symbol ₥), cent or one-hundredth of a dollar (symbol ¢), dime or one-tenth of a dollar, and eagle or ten dollars, with prescribed weights and composition of gold, silver, or copper for each. It was proposed in the mid-1800s that one hundred dollars be known as a union, but no union coins were ever struck and only patterns for the $50 half union exist. However, only cents are in everyday use as divisions of the dollar; "dime" is used solely as the name of the coin with the value of 10¢, while "eagle" and "mill" are largely unknown to the general public, though mills are sometimes used in matters of tax levies, and gasoline prices are usually in the form of $X.XX9 per gallon, e.g., $3.599, sometimes written as $3.599⁄10. When currently issued in circulating form, denominations equal to or less than a dollar are emitted as U.S. coins while denominations equal to or greater than a dollar are emitted as Federal Reserve notes (with the exception of gold, silver and platinum coins valued up to $100 as legal tender, but worth far more as bullion). Both one-dollar coins and notes are produced today, although the note form is significantly more common. In the past, "paper money" was occasionally issued in denominations less than a dollar (fractional currency) and gold coins were issued for circulation up to the value of $20 (known as the "double eagle", discontinued in the 1930s). The term eagle was used in the Coinage Act of 1792 for the denomination of ten dollars, and subsequently was used in naming gold coins. Paper currency less than one dollar in denomination, known as "fractional currency", was also sometimes pejoratively referred to as "shinplasters". In 1854, James Guthrie, then Secretary of the Treasury, proposed creating $100, $50 and $25 gold coins, which were referred to as a "Union", "Half Union", and "Quarter Union",[15] thus implying a denomination of 1 Union = $100.

Series of 1917 $1 United States bill

Today, USD notes are made from cotton fiber paper, unlike most common paper, which is made of wood fiber. U.S. coins are produced by the United States Mint. U.S. dollar banknotes are printed by the Bureau of Engraving and Printing and, since 1914, have been issued by the Federal Reserve. The "large-sized notes" issued before 1928 measured 7.42 inches (188 mm) by 3.125 inches (79.4 mm); small-sized notes, introduced that year, measure 6.14 inches (156 mm) by 2.61 inches (66 mm) by 0.0043 inches (0.11 mm). When the current, smaller sized U.S. currency was introduced it was referred to as Philippine-sized currency because the Philippines had previously adopted the same size for its legal currency.

Etymology

Further information: Dollar

In the 16th century, Count Hieronymus Schlick of Bohemia began minting coins known as Joachimstalers (from German thal, or nowadays usually Tal, "valley", cognate with "dale" in English), named for Joachimstal, the valley where the silver was mined (St. Joachim's Valley, now Jáchymov; then part of the Kingdom of Bohemia, now part of the Czech Republic).[16] Joachimstaler was later shortened to the German Taler, a word that eventually found its way into Danish and Swedish as daler, Norwegian as dalar and daler, Dutch as daler or daalder, Ethiopian as ታላሪ (talari), Hungarian as tallér, Italian as tallero, and English as dollar.[16] Alternatively, thaler is said to come from the German coin Guldengroschen ("great guilder", being of silver but equal in value to a gold guilder), minted from the silver from Joachimsthal.

The coins minted at Joachimsthal soon lent their name to other coins of similar size and weight from other places. One such example, was a Dutch coin depicting a lion, hence its Dutch name leeuwendaler (in English: lion daler).

The leeuwendaler was authorized to contain 427.16 grains of .75 fine silver and passed locally for between 36 and 42 stuivers. It was lighter than the large-denomination coins then in circulation, thus it was more advantageous for a Dutch merchant to pay a foreign debt in leeuwendalers and it became the coin of choice for foreign trade.

The leeuwendaler was popular in the Dutch East Indies and in the Dutch New Netherland Colony (New York), and circulated throughout the Thirteen Colonies during the 17th and early 18th centuries. It was also popular throughout Eastern Europe, where it led to the current Romanian and Moldovan currency being called leu (literally "lion").

Among the English-speaking community, the coin came to be popularly known as lion dollar – and is the origin of the name dollar.[17] The modern American-English pronunciation of dollar is still remarkably close to the 17th-century Dutch pronunciation of daler.[18]

By analogy with this lion dollar, Spanish pesos – with the same weight and shape as the lion dollar – came to be known as Spanish dollars.[18] By the mid-18th century, the lion dollar had been replaced by the Spanish dollar, the famous "piece of eight", which was distributed widely in the Spanish colonies in the New World and in the Philippines.[19] Eventually, dollar became the name of the first official American currency.

Nicknames

The colloquialism "buck"(s) (much like the British word "quid"(s, pl) for the pound sterling) is often used to refer to dollars of various nations, including the U.S. dollar. This term, dating to the 18th century, may have originated with the colonial leather trade. It may also have originated from a poker term.[20] "Greenback" is another nickname originally applied specifically to the 19th century Demand Note dollars created by Abraham Lincoln to finance the costs of the Civil War for the North.[21] The original note was printed in black and green on the back side. It is still used to refer to the U.S. dollar (but not to the dollars of other countries). Other well-known names of the dollar as a whole in denominations include "greenmail", "green" and "dead presidents" (the last because deceased presidents are pictured on most bills).

A "grand", sometimes shortened to simply "G", is a common term for the amount of $1,000. The suffix "K" or "k" (from "kilo-") is also commonly used to denote this amount (such as "$10k" to mean $10,000). However, the $1,000 note is no longer in general use. A "large" or "stack", it is usually a reference to a multiple of $1,000 (such as "fifty large" meaning $50,000). The $100 note is nicknamed "Benjamin", "Benji", "Ben", or "Franklin" (after Benjamin Franklin), "C-note" (C being the Roman numeral for 100), "Century note" or "bill" (e.g. "two bills" being $200). The $50 note is occasionally called a "yardstick" or a "grant" (after President Ulysses S. Grant, pictured on the obverse). The $20 note is referred to as a "double sawbuck", "Jackson" (after Andrew Jackson), or "double eagle". The $10 note is referred to as a "sawbuck", "ten-spot" or "Hamilton" (after Alexander Hamilton). The $5 note as "Lincoln", "fin", "fiver" or "five-spot". The infrequently-used $2 note is sometimes called "deuce", "Tom", or "Jefferson" (after Thomas Jefferson). The $1 note as a "single" or "buck". The dollar has also been, referred to as a "bone" and "bones" in plural (e.g. "twenty bones" is equal to $20). 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 money".

In French-speaking areas of Louisiana, the dollar is referred to as "piastre" or "piasse" (pronounced "pee-as") and the French holdover "sou" (pronounced "soo") is used to refer to the cent.

In El Salvador, the dollar replaced the Salvadoran colón under the presidency of Francisco Flores Pérez.

In Panama, the equivalent of buck is "palo" (literally "stick"). Also, the Panamanian balboa is directly tied to the U.S. dollar, and U.S. dollars are frequently used in place of the minted Panamanian currency.

In Ecuador, the dollar is referred to as "plata" (literally "silver").

In Peru, a nickname for the U.S. dollar is "coco", which is a pet name for Jorge ("George" in Spanish), a reference to the portrait of George Washington on the $1 note.

Puerto Ricans, both living in Puerto Rico and in the United States, may refer to the dollar as "peso".

In some places in Mexico, prices in U.S. dollars are referred to as "en americano" ("in American") or en oro ("in gold"), with the word "peso" used in Mexico primarily to refer to the Mexican peso.

Cubans call the U.S. dollar "fula", loosely translated from Cuban jargon meaning bad. Possession of American money was penalized before the mid-1990s, hence the nickname.

Dollar sign

Main article: Dollar sign
Spanish silver real or peso of 1768

The symbol $, usually written before the numerical amount, is used for the U.S. dollar (as well as for many other currencies). The sign was the result of a late 18th-century evolution of the scribal abbreviation "ps" for the peso, the common name for the Spanish dollars that were in wide circulation in the New World from the 16th to the 19th centuries. These Spanish pesos or dollars were minted in Spanish America, namely in Mexico City, Potosí, Bolivia; and Lima, Peru. The p and the s eventually came to be written over each other giving rise to $.[22][23][24][25]

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 in Atlas Shrugged,[26] does not consider the fact that the symbol was already in use before the formation of the United States.[27]

History

Obverse of rare 1934 $500 Federal Reserve Note, featuring a portrait of President William McKinley.
Reverse of a $500 Federal Reserve Note.

The dollar was first based on the value and look of the Spanish dollar, used widely in Spanish America from the 16th to the 19th centuries. The first dollar coins issued by the United States Mint (founded 1792) were similar in size and composition to the Spanish dollar, minted in Mexico and Peru. The Spanish, U.S. silver dollars, and later, Mexican silver pesos circulated side by side in the United States, and the Spanish dollar and Mexican peso remained legal tender until the Coinage Act of 1857. The coinage of various English colonies also circulated. The lion dollar was popular in the Dutch New Netherland Colony (New York), but the lion dollar also circulated throughout the English colonies during the 17th century and early 18th century. Examples circulating in the colonies were usually worn so that the design was not fully distinguishable, thus they were sometimes referred to as "dog dollars".[28]

The U.S. dollar was created by the Constitution and defined by the Coinage Act of 1792. It specified a "dollar" to be based in the Spanish milled dollar and of 371 grains and 4 sixteenths part of a grain of pure or 416 grains (27.0 g) of standard silver and an "eagle" to be 247 and 4 eighths of a grain or 270 grains (17 g) of gold (again depending on purity).[29] The choice of the value 371 grains arose from Alexander Hamilton's decision to base the new American unit on the average weight of a selection of worn Spanish dollars. Hamilton got the treasury to weigh a sample of Spanish dollars and the average weight came out to be 371 grains. A new Spanish dollar was usually about 377 grains in weight, and so the new U.S. dollar was at a slight discount in relation to the Spanish dollar.

The Coinage Act of 1792 set the value of an eagle at 10 dollars, and the dollar at 1⁄10 eagle. It called for 90% silver alloy coins in denominations of 1, 1⁄2, 1⁄4, 1⁄10, and 1⁄20 dollars; it called for 90% gold alloy coins in denominations of 1, 1⁄2, 1⁄4, and 1⁄10 eagles.

The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the value of things to remain fairly constant over time, except for the influx and outflux of gold and silver in the nation's economy.

The early currency of the United States did not exhibit faces of presidents, as is the custom now;[30] although today, by law, only the portrait of a deceased individual may appear on United States currency.[31] In fact, the newly formed government was against having portraits of leaders on the currency, a practice compared to the policies of European monarchs.[32] The currency as we know it today did not get the faces they currently have until after the early 20th century; before that "heads" side of coinage used profile faces and striding, seated, and standing figures from Greek and Roman mythology and composite Native Americans. The last coins to be converted to profiles of historic Americans were the dime (1946) and the Dollar (1971).

For articles on the currencies of the colonies and states, see Connecticut pound, Delaware pound, Georgia pound, Maryland pound, Massachusetts pound, New Hampshire pound, New Jersey pound, New York pound, North Carolina pound, Pennsylvania pound, Rhode Island pound, South Carolina pound and Virginia pound.

Continental currency

Continental One Third Dollar Bill (obverse)

In 1775, the United States and the individual states began issuing "Continental Currency" denominated in Spanish dollars and (for the issues of the states) the £sd currencies of the states. The dollar was valued relative to the states' currencies at the following rates:

State Value of dollar
in state currency
Georgia 5 shillings
Connecticut, Massachusetts, New Hampshire, Rhode Island, Virginia 6 shillings
Delaware, Maryland, New Jersey, Pennsylvania 7 1⁄2 shillings
New York, North Carolina 8 shillings
South Carolina 32 1⁄2 shillings

The continental currency suffered from printing press inflation and was replaced by the silver dollar at the rate of 1 silver dollar = 1000 continental dollars.

Silver and gold standards

From 1792, when the Mint Act was passed, the dollar was defined as 371.25 grains (24.056 g) of silver. Many historians erroneously assume gold was standardized at a fixed rate in parity with silver; however, there is no evidence of Congress making this law. This has to do with Alexander Hamilton's suggestion to Congress of a fixed 15:1 ratio of silver to gold, respectively. The gold coins that were minted however, were not given any denomination whatsoever and traded for a market value relative to the Congressional standard of the silver dollar. 1834 saw a shift in the gold standard to 23.2 grains (1.50 g), followed by a slight adjustment to 23.22 grains (1.505 g) in 1837 (16:1 ratio).

In 1862, paper money was issued without the backing of precious metals, due to the Civil War. Silver and gold coins continued to be issued and in 1878 the link between paper money and coins was reinstated. This disconnection from gold and silver backing also occurred during the War of 1812. The use of paper money not backed by precious metals had also occurred under the Articles of Confederation from 1777 to 1788. With no solid backing and being easily counterfeited, the continentals quickly lost their value, giving rise to the phrase "not worth a continental". This was a primary reason for the "No state shall... make any thing but gold and silver coin a tender in payment of debts" clause in article 1, section 10 of the United States Constitution.

The Gold Standard Act of 1900 abandoned the bimetallic standard and defined the dollar as 23.22 grains (1.505 g) of gold, equivalent to setting the price of 1 troy ounce of gold at $20.67. Silver coins continued to be issued for circulation until 1964, when all silver was removed from dimes and quarters, and the half dollar was reduced to 40% silver. Silver half dollars were last issued for circulation in 1970. Gold coins were confiscated by Executive Order 6102 issued in 1933 by Franklin Roosevelt. The gold standard was changed to 13.71 grains (0.888 g), equivalent to setting the price of 1 troy ounce of gold at $35. This standard persisted until 1968.

Between 1968 and 1975, a variety of pegs to gold were put in place, eventually culminating in a sudden end, on August 15, 1971, to the convertibility of dollars to gold later dubbed the Nixon Shock. The last peg was $42.22 per ounce before the U.S. dollar was let to freely float on currency markets.

According to the Bureau of Engraving and Printing, the largest note it ever printed was the $100,000 Gold Certificate, Series 1934. These notes were printed from December 18, 1934, through January 9, 1935, and were issued by the Treasurer of the United States to Federal Reserve Banks only against an equal amount of gold bullion held by the Treasury. These notes were used for transactions between Federal Reserve Banks and were not circulated among the general public.

Coins

Official United States coins have been produced every year from 1792 to the present.

Denomination Obverse Reverse Portrait Reverse motif Weight Diameter Material Edge Years of minting
Penny
1¢
Abraham Lincoln Union Shield 2.50 g 19.05 mm 97.5% Zn
2.5% Cu		 plain 1793–present
Nickel
5¢
Thomas Jefferson Monticello 5.00 g 21.21 mm 75% Cu
25% Ni		 plain 1866–present
Dime
10¢
Franklin D. Roosevelt olive branch, torch, oak branch 2.27 g 17.91 mm 91.67% Cu
8.33% Ni		 118 reeds 1792–present
Quarter
25¢
George Washington various; five designs per year 5.67 g 24.26 mm 91.67% Cu
8.33 % Ni		 119 reeds 1796–present
Half dollar
50¢
John F. Kennedy Presidential Seal 11.34 g 30.61 mm 91.67 % Cu
8.33 % Ni		 150 reeds 1794–present
Dollar
$1
Profile of Sacagawea with her child, Jean Baptiste
Charbonneau		 A construction worker guiding a
beam above the New York City skyline.		 8.10 g 26.50 mm 88.5% Cu
6 % Zn
3.5% Mn
2 % Ni		 Lettered 1794–present

Discontinued coin denominations include:

Collector coins for which everyday transactions are non-existent.[33]

Technically, all these coins are still legal tender at face value, though some are far more valuable today for their numismatic value, and for gold and silver coins, their precious metal value. From 1965 to 1970 the Kennedy half dollar was the only circulating coin with any silver content, which was removed in 1971 and replaced with cupronickel. However, since 1992, the U.S. Mint has produced special Silver Proof Sets in addition to the regular yearly proof sets with silver dimes, quarters, and half dollars in place of the standard copper-nickel versions. In addition, an experimental $4.00 (Stella) coin was also minted in 1879, but never placed into circulation, and is properly considered to be a pattern rather than an actual coin denomination.

The $50 coin mentioned was only produced in 1915 for the Panama-Pacific International Exposition (1915) celebrating the opening of the Panama Canal. Only 1,128 were made, 645 of which were octagonal; this remains the only U.S. coin that was not round as well as the largest and heaviest U.S. coin ever produced.

From 1934 to present, the only denominations produced for circulation have been the familiar penny, nickel, dime, quarter, half dollar and dollar. The nickel is the only coin still in use today that is essentially unchanged (except in its design) from its original version. Every year since 1866, the nickel has been 75% copper and 25% nickel, except for 4 years during World War II when nickel was needed for the war.

Due to the penny's low value, some efforts have been made to eliminate the penny as circulating coinage.[34][35]

Collector coins

The United States Mint produces Proof Sets specifically for collectors and speculators. Silver Proofs tend to be the standard designs but with the dime, quarter, and half dollar containing 90% silver. Starting in 1983 and ending in 1997, the Mint also produced proof sets containing the year's commemorative coins alongside the regular coins. Another type of proof set is the Presidential Dollar Proof Set where four special $1 coins are minted each year featuring a president. Because of budget constraints and increasing stockpiles of these relatively unpopular coins, the production of new Presidential dollar coins for circulation was suspended on December 13, 2011, by U.S. Treasury Secretary Timothy F. Geithner. Future minting of such coins will be made solely for collectors.[36]

Dollar coins

Flowing Hair Dollar

The first United States dollar was minted in 1794. Known as the Flowing Hair Dollar, it contained 416 grains of "standard silver" (89.25% silver and 10.75% copper), as specified by Section 13[37] of the Coinage Act of 1792. It was designated by Section 9 of that Act as having "the value of a Spanish milled dollar".

Dollar coins have not been very popular in the United States.[38] Silver dollars were minted intermittently from 1794 through 1935; a copper-nickel dollar of the same large size, featuring President Dwight D. Eisenhower, was minted from 1971 through 1978. Gold dollars were also minted in the 19th century. The Susan B. Anthony dollar coin was introduced in 1979; these proved to be unpopular because they were often mistaken for quarters, due to their nearly equal size, their milled edge, and their similar color. Minting of these dollars for circulation was suspended in 1980 (collectors' pieces were struck in 1981), but, as with all past U.S. coins, they remain legal tender. As the number of Anthony dollars held by the Federal Reserve and dispensed primarily to make change in postal and transit vending machines had been virtually exhausted, additional Anthony dollars were struck in 1999. In 2000, a new $1 coin, featuring Sacagawea, (the Sacagawea dollar) was introduced, which corrected some of the problems of the Anthony dollar by having a smooth edge and a gold color, without requiring changes to vending machines that accept the Anthony dollar. However, this new coin has failed to achieve the popularity of the still-existing $1 bill and is rarely used in daily transactions. The failure to simultaneously withdraw the dollar bill and weak publicity efforts have been cited by coin proponents as primary reasons for the failure of the dollar coin to gain popular support.[39]

In February 2007, the U.S. Mint, under the Presidential $1 Coin Act of 2005,[40] introduced a new $1 U.S. Presidential dollar coin. Based on the success of the "50 State Quarters" series, the new coin features a sequence of presidents in order of their inaugurations, starting with George Washington, on the obverse side. The reverse side features the Statue of Liberty. To allow for larger, more detailed portraits, the traditional inscriptions of "E Pluribus Unum", "In God We Trust", the year of minting or issuance, and the mint mark will be inscribed on the edge of the coin instead of the face. This feature, similar to the edge inscriptions seen on the British £1 coin, is not usually associated with U.S. coin designs. The inscription "Liberty" has been eliminated, with the Statue of Liberty serving as a sufficient replacement. In addition, due to the nature of U.S. coins, this will be the first time there will be circulating U.S. coins of different denominations with the same president featured on the obverse (heads) side (Lincoln/penny, Jefferson/nickel, Franklin D. Roosevelt/dime, Washington/quarter, Kennedy/half dollar, and Eisenhower/dollar). Another unusual fact about the new $1 coin is Grover Cleveland will have two coins with his portrait issued due to the fact he was the only U.S. President to be elected to two non-consecutive terms.[41]

Early releases of the Washington coin included error coins shipped primarily from the Philadelphia mint to Florida and Tennessee banks. Highly sought after by collectors, and trading for as much as $850 each within a week of discovery, the error coins were identified by the absence of the edge impressions "E PLURIBUS UNUM IN GOD WE TRUST 2007 P". The mint of origin is generally accepted to be mostly Philadelphia, although identifying the source mint is impossible without opening a mint pack also containing marked units. Edge lettering is minted in both orientations with respect to "heads", some amateur collectors were initially duped into buying "upside down lettering error" coins.[42] Some cynics also erroneously point out that the Federal Reserve makes more profit from dollar bills than dollar coins because they wear out in a few years, whereas coins are more permanent. The fallacy of this argument arises because new notes printed to replace worn out notes, which have been withdrawn from circulation, bring in no net revenue to the government to offset the costs of printing new notes and destroying the old ones. As most vending machines are incapable of making change in banknotes, they commonly accept only $1 bills, though a few will give change in dollar coins.

Mint marks

Mint Mint mark Metal Minted Year Established Current Status
Denver D All metals 1906 Still in operation
Philadelphia None or P, see note 1 All metals 1792 Still in operation
San Francisco S All metals 1854 Still in operation (proof coins only)
West Point W see note 5 Gold, Silver and Platinum 1973 Still in operation
Carson City CC Gold and Silver 1870 Closed in 1893, see note 3
New Orleans O Gold and Silver 1838 Closed in 1861, reopened in 1879, closed in 1909, see note 2
Charlotte C Gold only 1838 Closed in 1861
Dahlonega D see note 4 Gold only 1838 Closed in 1861

Note 1: The letter "P" is used for the Philadelphia mint mark on all coins (except pennies) released from 1980 onward. Before this it had been used on silver Jefferson nickels from 1942 to 1945.

Note 2: During the Civil War, this mint operated under the control of the State of Louisiana (February 1861) and the Confederate States of America (March 1861) until it ran out of bullion later in that year; some Half Dollars have been identified as being the issue of the State of Louisiana and the Confederacy.

Note 3: Press Number 1 is still in use by the Nevada State Museum; it produces tokens for the Reno Coin Club.

Note 4: Although the mint mark "D" is used for two separate mints, it is easy to distinguish between the two; any antebellum coinage (up to 1861) is Dahlonega, and any 20th century or later coinage is Denver.

Note 5: Between 1973 and 1986 there was no mint mark; these coins are indistinguishable from coins produced at the Philadelphia Mint (note 1 notwithstanding): after 1988 the letter "W" was used for coinage (except for the 2009 Ultra High Relief Double Eagle).

Banknotes

Denomination Obverse Reverse Portrait First Series Latest Series
One Dollar George Washington Series 1963 Series 2013
Two Dollars Thomas Jefferson Series 1976 Series 2013
Five Dollars Abraham Lincoln Series 2006 Series 2013
Ten Dollars Alexander Hamilton Series 2004A Series 2013
Twenty Dollars Andrew Jackson Series 2004 Series 2013
Fifty Dollars Ulysses S. Grant Series 2004 Series 2013
One Hundred Dollars Benjamin Franklin Series 2009 Series 2013

The U.S. Constitution provides that Congress shall have the power to "borrow money on the credit of the United States".[43] Congress has exercised that power by authorizing Federal Reserve Banks to issue Federal Reserve Notes. Those notes are "obligations of the United States" and "shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank".[44] Federal Reserve Notes are designated by law as "legal tender" for the payment of debts.[45] Congress has also authorized the issuance of more than 10 other types of banknotes, including the United States Note[46] and the Federal Reserve Bank Note. The Federal Reserve Note is the only type that remains in circulation since the 1970s.

Currently printed denominations are $1, $2, $5, $10, $20, $50, and $100. Notes above the $100 denomination stopped being printed in 1946 and were officially withdrawn from circulation in 1969. These notes were used primarily in inter-bank transactions or by organized crime; it was the latter usage that prompted President Richard Nixon to issue an executive order in 1969 halting their use. With the advent of electronic banking, they became less necessary. Notes in denominations of $500, $1,000, $5,000, $10,000 and $100,000 were all produced at one time; see large denomination bills in U.S. currency for details. These notes are now collectors' items and are worth more than their face value to collectors.

Though still predominantly green, post-2004 series incorporate other colors to better distinguish different denominations. As a result of a 2008 decision in an accessibility lawsuit filed by the American Council of the Blind, the Bureau of Engraving and Printing is planning to implement a raised tactile feature in the next redesign of each note, except the $1 and the version of the $100 bill already in process. It also plans larger, higher-contrast numerals, more color differences, and distribution of currency readers to assist the visually impaired during the transition period.[47]

Means of issue

The monetary base consists of coins and Federal Reserve Notes in circulation outside the Federal Reserve Banks and the U.S. Treasury, plus deposits held by depository institutions at Federal Reserve Banks. The adjusted monetary base has increased from approximately 400 billion dollars in 1994, to 800 billion in 2005, and over 3000 billion in 2013.[48] The amount of cash in circulation is increased (or decreased) by the actions of the Federal Reserve System. Eight times a year, the 12-person Federal Open Market Committee meet to determine U.S. monetary policy.[49] Every business day, the Federal Reserve System engages in Open market operations to carry out that monetary policy.[50] If the Federal Reserve desires to increase the money supply, it will buy securities (such as U.S. Treasury Bonds) anonymously from banks in exchange for dollars. Conversely, it will sell securities to the banks in exchange for dollars, to take dollars out of circulation.[51]

When the Federal Reserve makes a purchase, it credits the seller's reserve account (with the Federal Reserve). This money is not transferred from any existing funds—it is at this point that the Federal Reserve has created new high-powered money. Commercial banks can freely withdraw in cash any excess reserves from their reserve account at the Federal Reserve. To fulfill those requests, the Federal Reserve places an order for printed money from the U.S. Treasury Department.[52] The Treasury Department in turn sends these requests to the Bureau of Engraving and Printing (to print new dollar bills) and the Bureau of the Mint (to stamp the coins).

Usually, the short-term goal of open market operations is to achieve a specific short-term interest rate target. In other instances, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency or else relative to gold. For example, in the case of the United States the Federal Reserve targets the federal funds rate, the rate at which member banks lend to one another overnight. The other primary means of conducting monetary policy include: (i) Discount window lending (as lender of last resort); (ii) Fractional deposit lending (changes in the reserve requirement); (iii) Moral suasion (cajoling certain market players to achieve specified outcomes); (iv) "Open mouth operations" (talking monetary policy with the market).

Value

Buying power of one U.S. dollar compared to 1774 USD
 Year   Equivalent  buying power
1774 $1.00
1780 $0.59
1790 $0.89
1800 $0.64
1810 $0.66
1820 $0.69
1830 $0.88
1840 $0.94
1850 $1.03
1860 $0.97
 Year   Equivalent  buying power
1870 $0.62
1880 $0.79
1890 $0.89
1900 $0.96
1910 $0.85
1920 $0.39
1930 $0.47
1940 $0.56
1950 $0.33
1960 $0.26
 Year   Equivalent  buying power
1970 $0.20
1980 $0.10
1990 $0.06
2000 $0.05
2007 $0.04
2008 $0.04
2009 $0.04
2010 $0.035
2011 $0.034
2012 $0.03
U.S. Consumer Price Index 1913–2014

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 as the same is now current".[53]

The table to the right shows the equivalent amount of goods that, in a particular year, could be purchased with $1. The table shows that from 1774 through 2012 the U.S. dollar has lost about 97.0% of its buying power.[54]

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.[55] A consumer price index (CPI) is a measure estimating the average price of consumer goods and services purchased by households. The United States Consumer Price Index, published by the Bureau of Labor Statistics, is a measure estimating the average price of consumer goods and services in the United States.[56] It reflects inflation as experienced by consumers in their day-to-day living expenses.[57] A graph showing the U.S. CPI relative to 1982–1984 and the annual year-over-year change in CPI is shown at right.

The value of the U.S. dollar declined significantly during wartime, especially during the American Civil War, World War I, and World War II.[58] The Federal Reserve, which was established in 1913, was designed to furnish an "elastic" currency subject to "substantial changes of quantity over short periods", which differed significantly from previous forms of high-powered money such as gold, national bank notes, and silver coins.[59] Over the very long run, the prior gold standard kept prices stable—for instance, the price level and the value of the U.S. dollar in 1914 was not very different from the price level in the 1880s. The Federal Reserve initially succeeded in maintaining the value of the U.S. dollar and price stability, reversing the inflation caused by the First World War and stabilizing the value of the dollar during the 1920s, before presiding over a 30% deflation in U.S. prices in the 1930s.[60]

Under the Bretton Woods system 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, resulting in the "Nixon shock".[61]

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.[61] Between 1965 and 1981, the U.S. dollar lost two thirds of its value.[54]

In 1979, President Carter appointed Paul Volcker Chairman of the Federal Reserve. The Federal Reserve tightened the money supply and inflation was substantially lower in the 1980s, and hence the value of the U.S. dollar stabilized.[61]

Over the thirty-year period from 1981 to 2009, the U.S. dollar lost over half its value.[54] This is because the Federal Reserve has targeted not zero inflation, but a low, stable rate of inflation—between 1987 and 1997, the rate of inflation was approximately 3.5%, and between 1997 and 2007 it was approximately 2%. The so-called "Great Moderation" of economic conditions since the 1970s is credited to monetary policy targeting price stability.[61]

There is ongoing debate about whether central banks should target zero inflation (which would mean a constant value for the U.S. dollar over time) or low, stable inflation (which would mean a continuously but slowly declining value of the dollar over time, as is the case now). Although some economists are in favor of a zero inflation policy and therefore a constant value for the U.S. dollar,[60] others contend that such a policy limits the ability of the central bank to control interest rates and stimulate the economy when needed.[62]

Exchange rates

Historical exchange rates

Currency units per U.S. dollar, averaged over the year
19703 19803 19853 19903 1993 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Euro1  —  —  — 0.6571 0.6734 0.9387 1.0832 1.1171 1.0578 0.8833 0.8040 0.8033 0.7960 0.7293 0.6791 0.7176 0.6739 0.7178 0.7777 0.7530 0.7520
Japanese yen 357.6 240.45 250.35 146.25 111.08 113.73 107.80 121.57 125.22 115.94 108.15 110.11 116.31 117.76 103.39 93.68 87.78 79.70 79.82 97.60 105.74
Pound sterling 8s 4d
=0.4167 		0.4484[63] 0.8613[63] 0.6207 0.6660 0.6184 0.6598 0.6946 0.6656 0.6117 0.5456 0.5493 0.5425 0.4995 0.5392 0.6385 0.4548 0.6233 0.6308 0.6393 0.6066
Canadian dollar 1.081 1.168 1.321 1.1605 1.2902 1.4858 1.4855 1.5487 1.5704 1.4008 1.3017 1.2115 1.1340 1.0734 1.0660 1.1412 1.0298 0.9887 0.9995 1.0300 1.1043
Mexican peso 0.01250–0.026502 2.802 2.672 2.502 3.1237 9.553 9.459 9.337 9.663 10.793 11.290 10.894 10.906 10.928 11.143 13.498 12.623 12.427 13.154 12.758 13.302
Renminbi yuan 2.46 1.7050 2.9366 4.7832 5.7620 8.2783 8.2784 8.2770 8.2771 8.2772 8.2768 8.1936 7.9723 7.6058 6.9477 6.8307 6.7696 6.4630 6.3093 6.1478 6.1620
Indian rupee 7.56 8.000 12.38 16.96 31.291 43.13 45.00 47.22 48.63 46.59 45.26 44.00 45.19 41.18 43.39 48.33 45.65 46.58 53.37 58.51 62.00
Singapore dollar  —  — 2.179 1.903 1.6158 1.6951 1.7361 1.7930 1.7908 1.7429 1.6902 1.6639 1.5882 1.5065 1.4140 1.4543 1.24586 1.2565 1.2492 1.2511 1.2665
South African rand 0.7182 0.7780 2.2343[64] 2.5600 3.2729 6.1191 6.9468 8.6093 10.5176 7.5550 6.4402 6.3606 6.7668 7.0477 8.2480 8.4117 7.3159 7.2510 8.2014 9.6436 10.8420

Notes:
1. Before 1999 use Irish pound
2. Mexican peso values prior to 1993 revaluation
3. Value at the start of the year

Sources:

Current exchange rates

Current USD exchange rates
From Google Finance: AUD CAD CHF EUR GBP HKD JPY RUB INR CNY
From Yahoo! Finance: AUD CAD CHF EUR GBP HKD JPY RUB INR CNY
From XE: AUD CAD CHF EUR GBP HKD JPY RUB INR CNY
From OANDA: AUD CAD CHF EUR GBP HKD JPY RUB INR CNY
From fxtop.com: AUD CAD CHF EUR GBP HKD JPY RUB INR CNY
From Currency.Wiki: AUD CAD CHF EUR GBP HKD JPY USD RUB INR CNY

See also

Notes

  1. ↑ Alongside East Timor centavo coins
  2. ↑ Alongside Ecuadorian centavo coins
  3. ↑ Alongside Panamanian balboa coins
  4. ↑ Official currency for Zimbabwean government transactions
  5. ↑ U.S. Dollar and Pakistani rupees are widely accepted.
  6. ↑ Bahamian dollar tied 1:1 to USD, both accepted interchangeably.
  7. ↑ Barbados dollar tied at about 2:1, both accepted. Visiting Barbados FAQ: What is the local currency?, Invest Barbados
  8. ↑ Alongside the Cambodian riel
  9. ↑ Alongside the Iraqi dinar
  10. ↑ Alongside the Jamaican Dollar
  11. ↑ U.S. dollar is widely used alongside the Lebanese Pound at a fixed exchange rate of 1:1,500
  12. ↑ U.S. dollar is widely used alongside the Nicaraguan Córdoba
  13. ↑ U.S. dollar is widely used alongside the Nuevo Sol
  14. ↑ U.S. dollar is widely used alongside the Uruguayan Peso
  15. ↑ U.S. dollar is widely used alongside the Vietnamese Dong
  16. ↑ Alongside the Bermudian dollar
  17. ↑ The U.S. Dollar is used on par with the Canadian Dollar.
  18. ↑ The U.S. Dollar and the Chinese Yuan are the only accepted currencies in most Pyongyang stores.
  19. ↑ The U.S. Dollar is widely used by locals.
  20. ↑ The U.S. Dollar is widely used by locals.

References

  1. ↑ "Central Bank of Timor-Leste". Retrieved May 22, 2013. The official currency of Timor-Leste is the United States dollar, which is legal tender for all payments made in cash.
  2. ↑ "Ecuador". CIA World Factbook. October 18, 2010. Retrieved October 27, 2010. The dollar is legal tender
  3. ↑ "El Salvador". CIA World Factbook. October 21, 2010. Retrieved October 27, 2001. The US dollar became El Salvador's currency in 2001
  4. ↑ "Frequently asked questions".
  5. ↑ "Frequently asked questions". Retrieved January 1, 2011.
  6. ↑ FCO country profile
  7. ↑ "British Indian Ocean Territory Currency". Wwp.greenwichmeantime.com. March 6, 2013. Retrieved May 5, 2013.
  8. ↑ "The Implementation of Monetary Policy – The Federal Reserve in the International Sphere" (PDF). Retrieved August 24, 2010.
  9. ↑ Benjamin J. Cohen, The Future of Money, Princeton University Press, 2006, ISBN 0-691-11666-0; cf. "the dollar is the de facto currency in Cambodia", Charles Agar, Frommer's Vietnam, 2006, ISBN 0-471-79816-9, p. 17
  10. ↑ "Paragraph 5 of Section 8 of Article 1 of the Constitution of the United States of America". Topics.law.cornell.edu. Retrieved August 24, 2010.
  11. 1 2 3 "Section 5112 of Title 31 of the United States Code". Retrieved March 16, 2010.
  12. ↑ "Paragraph 7 of Section 9 of Article 1 of the Constitution of the United States of America". Topics.law.cornell.edu. Retrieved August 24, 2010.
  13. ↑ "Section 331 of Title 31 of the United States Code". Law.cornell.edu. August 6, 2010. Retrieved August 24, 2010.
  14. ↑ "2009 Financial Report of the United States Government" (PDF). Retrieved August 24, 2010.
  15. ↑ Mehl, B. Max. "United States $50.00 Gold Pieces, 1877", in Star Rare Coins Encyclopedia and Premium Catalogue (20th edition, 1921)
  16. 1 2 National Geographic. June 2002. p. 1. Ask US.
  17. ↑ "Dutch Colonial – Lion Dollar". Coins.lakdiva.org. Retrieved May 5, 2013.
  18. 1 2 "etymologiebank.nl". etymologiebank.nl. Retrieved May 5, 2013.
  19. ↑ Julian, R.W. (2007). "All About the Dollar". Numismatist: 41.
  20. ↑ "Buck". Online Etymology Dictionary. Retrieved November 10, 2011.
  21. ↑ "Paper Money Glossary". Littleton Coin Company. Retrieved November 7, 2011.
  22. ↑ Cajori, Florian ([1929]1993). A History of Mathematical Notations (Vol. 2). New York: Dover, 15–29. ISBN 0-486-67766-4
  23. ↑ Aiton, Arthur S. and Benjamin W. Wheeler (May 1931). "The First American Mint", The Hispanic American Historical Review 11 (2), 198 and note 2 on 198.
  24. ↑ Nussbaum, Arthur (1957). A History of the Dollar. New York: Columbia University Press. p. 56. The dollar sign, $, is connected with the peso, contrary to popular belief, which considers it to be an abbreviation of 'U.S.' The two parallel lines represented one of the many abbreviations of 'P,' and the 'S' indicated the plural. The abbreviation '$.' was also used for the peso, and is still used in Argentina.
  25. ↑ "What is the origin of the $ Sign?", U.S. Bureau of Engraving and Printing website
  26. ↑ Rand, Ayn. Atlas Shrugged. 1957. Signet. 1992. p628
  27. ↑ James, James Alton (1970) [1937]. Oliver Pollock: The Life and Times of an Unknown Patriot. Freeport: Books for Libraries Press. p. 356. ISBN 978-0-8369-5527-9.
  28. ↑ "The Lion Dollar: Introduction". Coins.nd.edu. Retrieved August 24, 2010.
  29. ↑ Mint, U.S. "Coinage Act of 1792". U.S. treasury.
  30. ↑ "United States Dollar". OANDA. Retrieved December 19, 2013.
  31. ↑ "Engraving and printing currency and security documents:Article b". Legal Information Institute. Retrieved December 19, 2013.
  32. ↑ Matt Soniak (July 22, 2011). "On the Money: Everything You Ever Wanted to Know About Coin Portraits". Mental Floss. Retrieved December 19, 2013.
  33. ↑ "IRS Court Case Shakes the Foundations of the Debt Money System". Beyondmoney.net. November 8, 2007. Retrieved August 24, 2010.
  34. ↑ Christian Zappone (July 18, 2006). "Kill-the-penny bill introduced". CNN Money. Retrieved February 13, 2016.
  35. ↑ Weinberg, Ali (February 19, 2013). "Penny pinching: Can Obama manage elimination of one-cent coin?". NBC News. Retrieved February 13, 2016.
  36. ↑ "The United States Mint Coins and Medals Program". Department of the Treasury. Retrieved August 1, 2012.
  37. ↑ "Section 13 of the Coinage Act of 1792". Memory.loc.gov. Retrieved August 24, 2010.
  38. ↑ CNN Money Congress tries again for a dollar coin. Written by Gordon T. Anderson. Published April 25, 2005.
  39. ↑ "Report to the Subcommittee on Treasury and General Government, Committee on Appropriations, U.S. Senate" (PDF). USGAO. Retrieved May 5, 2013.
  40. ↑ Pub. L. No. 109-145, 119 Stat. 2664 (December 22, 2005).
  41. ↑ The United States Mint. "The United States Mint Pressroom". Usmint.com. Retrieved August 24, 2010.
  42. ↑ Godless Dollars
  43. ↑ "Paragraph 2 of Section 8 of Article 1 of the United States Constitution". Topics.law.cornell.edu. Retrieved August 24, 2010.
  44. ↑ "Section 411 of Title 12 of the United States Code". Law.cornell.edu. June 22, 2010. Retrieved August 24, 2010.
  45. ↑ "Section 5103 of Title 31 of the United States Code". Law.cornell.edu. August 6, 2010. Retrieved August 24, 2010.
  46. ↑ "Section 5115 of Title 31 of the United States Code". Law.cornell.edu. August 6, 2010. Retrieved August 24, 2010.
  47. ↑ See Federal Reserve Note for details and references
  48. ↑ "St. Louis Adjusted Monetary Base". Federal Reserve Bank of St. Louis. Retrieved May 3, 2013.
  49. ↑ "The Federal Reserve's Beige Book". The Federal Reserve Bank of Minneapolis. Retrieved January 6, 2008.
  50. ↑ Davies, Phil. "Right on Target". Retrieved January 7, 2008. Federal Reserve Bank of Minneapolis
  51. ↑ "Open Market Operations". Federal Reserve Bank of New York. Retrieved January 11, 2008. Open market operations enable the Federal Reserve to affect the supply of reserve balances in the banking system.
  52. ↑ "Fact Sheets: Currency & Coins". United States Department of the Treasury. Retrieved January 22, 2008.
  53. ↑ "Section 9 of the Coinage Act of 1792". Memory.loc.gov. Retrieved August 24, 2010.
  54. 1 2 3 "Measuring Worth – Purchasing Power of Money in the United States from 1774 to 2010". Retrieved April 22, 2010.
  55. ↑ Olivier Blanchard (2000). Macroeconomics (2nd ed.), Englewood Cliffs, N.J: Prentice Hall, ISBN 0-13-013306-X
  56. ↑ "Consumer Price Index Frequently Asked Questions". Retrieved July 17, 2010.
  57. ↑ "Consumer Price Index Frequently Asked Questions". Retrieved July 17, 2010.
  58. ↑ Milton Friedman, Anna Jacobson Schwartz. A monetary history of the United States, 1867–1960. p. 546. ISBN 978-0691003542.
  59. ↑ Friedman 189–190
  60. 1 2 "Central Banking—Then and Now". Retrieved July 17, 2010.
  61. 1 2 3 4 "Controlling Inflation: A Historical Perspective" (PDF). Retrieved July 17, 2010.
  62. ↑ "U.S. Monetary Policy: The Fed's Goals". Retrieved July 17, 2010.
  63. 1 2 1970–1992. 1980 derived from AUD–USD=1.1055 and AUD–GBP=0.4957 at end of Dec 1979: 0.4957/1.1055=0.448394392; 1985 derived from AUD–USD=0.8278 and AUD–GBP=0.7130 at end of Dec 1984: 0.7130/0.8278=0.861319159
  64. ↑ "Exchange Rates Between the United States Dollar and the South African Rand". Measuring Worth. Retrieved December 5, 2011.
  65. ↑ "FRB: Foreign Exchange Rates – G.5A; Release Dates". Board of Governors of the Federal Reserve System. Retrieved July 23, 2014.

Further reading

  • Prasad, Eswar S. (2014). The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance. Princeton, NJ: Princeton University Press. ISBN 978-0-691-16112-9. 

External links

Images of U.S. currency and coins

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