US Dollar

• Country: United States of America
• Currency: Dollar
• Alias: U.S. dollar
• ISO 4217 CODES: USD/840
• Symbol: $

Widely considered to be the most powerful and stable currency in the world today, the U.S. dollar is the most commonly traded currency, and also plays a dominant role in global business transactions. Because of this strong international influence, the values of many other national currencies have been “pegged” to the U.S. dollar at one point or another throughout their histories. In modern times, the value of the U.S. dollar was officially tied to gold bullion up until the early 1970s, when it became a free-floating currency. The dollar has earned a litany of nick-names over the years, including “buck,” “greenback,” “clam,” “dough,” and even “dead presidents.”

Background of the US Dollar

Contrary to popular belief, the term “dollar” is not an American invention, but rather dates back to 16th century Europe, and is a derivation of the term “thaler,” referring to a type of silver coin.

The American colonies had been using a mixture of British pounds and Spanish dollars for most of the 18th century, but there were also some rebellious attempts at creating a proprietary currency under British rule. In fact, paper money was banned completely in the colonies in 1764 because it was being printed without authority and without being backed by reserves of any sort.

Even though the United States won its independence from Britain in 1776, the U.S. dollar was not formally adopted as the young nation’s official currency until 1792. The Philadelphia mint began creating coins in 1794, with the intention that foreign coins would lose status as legal tender within three years, in order to give the new currency time to circulate. However, a lack of availability of gold and silver led to an extension on the legal tender status for Spanish dollars for several more years.

For most of its existence, the U.S. dollar was backed by reserves of gold bullion. The United States officially went off of the “gold standard” in 1971, the dollar became a free-floating currency subject to supply and demand.

An interesting debate surrounds the origin of the “dollar” sign which is used for both U.S. currency and by the dollar-based currencies several other countries. A popularly theory holds that the symbol is merely the letter “U” superimposed over a letter “S,” but history is unable to provide a single, definitive explanation.

The U.S. dollar is divided into 100 cents. Denominations for coins are 1¢ (the “penny”), 5¢ (the “nickel”), 10¢ (the “dime”), 25¢ (the ”quarter”). 50¢ and $1 coins are also in circulation, but have not met with much consumer popularity. Denominations for banknotes (or “bills”) are $1, $5, $10, $20, $50 and $100. A special $2 note was issued to commemorate the 200th anniversary of the nation’s independence in 1976, but has largely disappeared from circulation.