The History of the US Dollar

1690

The British-controlled Massachusetts Bay Colony used paper money to finance military expeditions into Canada. However, counterfeiting and a lack of backing (determines the value of the money) led to its demise. States often distributed their forms of cash until the Revolutionary War.

1739

After witnessing severe counterfeiting in the 13 Colonies, founding father, Benjamin Franklin, set out to battle this by adding extra details to the currency to make it harder to copy. He ordered the Philadelphia printing firm to create raised patterns in the style of a plant leaf.

1775

To fund the Revolutionary war effort, the US authorized the creation of money, called “Continental currency”. Following the war, corruption and inflation led to a serious devaluation of money, leading to the phrase “not worth a Continental,” referring to the worthlessness of a bill.

1785

The dollar sign ($) is now the official monetary symbol of America. It is from the Spanish sign for pesos.

1792

Congress passes the Mint Act which establishes the coin and decimal system. The US was the first country to adopt this system. The Philadelphia Mint starts to produce coins. Copper, silver, and gold are used in these coins.

1793

The government allowed newly-founded state banks to create their variations of the dollar bill, under the observation of their respective state government. However, this created discrepancies with the flow and type of currency around the country. At its height, over 7,000 varieties of currencies were circulating around the US!

1861

With the civil war looming ever-larger over America, the government belatedly signed the Act of July 17th, allowing the US Treasury to print national currency. These notes are called “demand notes” (greenbacks). They were soon retired and replaced with US notes (legal tender notes).

1863

The National Banks Act allowed thousands of banks create their own currency again. However, the national government monitored the flow of cash carefully and ensured that the state bills adhered to national standards.

1871 to 1923

The use of silver coins was becoming increasingly unpopular in the United States, as they were big and clunky. Congress passes the Congressional Acts of 1871 and 1886 to produce “silver certificates”. Silver certificates are essentially checks received in return for cashing in one’s silver coins.

1913

Congress passes the Federal Reserve Act. It establishes the Federal Reserve System and authorizing it to print federal reserve notes. The Reserve’s job is to influence credit and currency conditions, supervising banks, and maintaining economic stability.

1914

To save manufacturing costs, the Federal Reserve reduced the size of bills by over 30%. In addition, bill designs are now standardized.

The dollar bill’s design has changed over the years.

1996

In 1996, a ten-year plan starts to add embellishments and improvements to the bill to make counterfeiting more difficult. Additions include watermarks, serial numbers, optically variable ink (OVI), microprinting, and fine-line printing.

Today

The strength and consistency of the US dollar have prompted many other countries to adopt the US dollar, sometimes as their national currency. “Dollarization” is the process of the introduction of one national currency into another. Countries that have adopted the US dollar include East Timor, Ecuador, the British Virgin Islands, Federated States of Micronesia, Palau, Panama, Pitcairn Islands, El Salvador, Marshall Islands, and Turks and Caicos.

Conclusion

The US dollar is arguably one of the most important currencies in the world, contributing to the distribution of wealth everywhere. By understanding the past and development of this influential bill, we can better assess and improve both our banknotes and financial situation in the future.