A Short History of The United States Dollar ($)
Updated: Nov 19, 2021
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No less than 16 countries outside the US use the USD as either legal tender or their actual circulating currency. You may not know this, either, but the American dollar, today's most prevalent currency in international trade and the number one global reserve currency, officially became the United States of America's national currency in 1792, therefore turning 230 next year (2022)!
In this article, we propose to trace the origin of the most well-known currency in the world, from the issuing of the very first coins to the printing of the bills we are all so familiar with today.
The origins of the USD ($)
Before the American Revolutionary War (1775–1783), the original thirteen East Coast British colonies were using a wide variety of currencies: Spanish reals, French Louis d'or, coins manufactured by private individuals, copper tokens, etc.
"Dollar" apparently comes from a phonetic distortion of the word "thaler", an old Austrian currency that prevailed from the 15th century onward within the Habsburg Empire. Made of excellent quality silver, the thaler was tremendously popular in central Europe. So popular in fact that it managed to reach the Americas. The currency seems to have made its way to Latin America through the conquistadors, where it later took the name "dólar". When the former American colonies officialized their independence in 1776, they too picked the dollar as their currency of choice.
As for the famous $ symbolizing it, interpretations differ: it could have to do with the coat of arms of Spain, as two pillars with s-shaped wounded banners used to be minted on the old silver colonial Spain reals issued in Mexico, Peru, Chile, and Bolivia between the years 1732-1771.
More on the thaler
The thaler itself is an abbreviation of Joachimsthaler. The silver of which the currency was made of came from Joachimsthal, an Austrian town neighboring ore mountains rich in silver deposits, and is said to have given its name to the Spanish coin, which resembled it by size and weight.
The birth of the American dollar (USD)
At the root of the 1775 Continent Congress' decision to create a national currency is the American Revolutionary War. And it was Paul Revere (1737-1818) who first came forth with the idea of engraving the printing plates for a currency that would be called "the Continental". Its depreciated value, however, made the saying "not worth a Continental" widely popular.
After the ratification of the Constitution in 1788, on the initiative of Alexander Hamilton (1757-1804) - Treasury Secretary under the presidency of George Washington (1789-1797) -, Congress passed a law on coinage called the Mint Act on April 2nd, 1792, which established an official decimal system of currency for the United States based on the dollar as reference. The very first American coins were issued in 1793 in Philadelphia.
From 1793 to 1861, 1'600 private banking institutions were given permission, under state charters, to release banknotes: over 7'000 different kinds of notes were then in circulation. It is not until the start of the American Civil War (1861-1865) that the Government allowed the Treasury Department to issue money, mainly to help finance the war effort.
Before a second Bureau of production would even be opened in Fort Worth (Texas), for over a century - 1862-1991 - it was agreed that the production of paper money would be centralized in Washington, D.C.
In 1913, the United States Congress approved the Federal Reserve System. The law they had passed authorized federal banks to mint coins and issue notes. The following year, in 1914, the same banks started issuing the banknotes we are all familiar with today.
The US dollar today
Since the Federal Reserve System was instituted back in 1913, 12 operating Federal Reserve Districts of the Bureau of Engraving and Printing - a division of the Treasury Department - are now tasked with issuing money.
Each of the 12 FRDs has a representative office, affiliated banks, and every banknote issued by either one is branded with the letter and corresponding number printed on the left-hand side fringe of the black-colored seal of the Federal Reserve:
1A - Boston (Massachusetts)
2B - New York (New York)
3C - Philadelphia (Pennsylvania)
4D - Cleveland (Ohio)
5E - Richmond (Virginia)
6F - Atlanta (Georgia)
7G - Chicago (Illinois)
8H - Saint-Louis (Missouri)
9I - Minneapolis (Minnesota)
10J - Kansas City (Missouri)
11K - Dallas (Texas)
12L - San Francisco (California)
A green eight-digit serial number is placed on both sides of a note and is bordered by either one or two prefix letters and one suffix letter. Notes of denomination above 1$ that were introduced in 1996 have systematically two letters at the beginning: the first one corresponding to the series and the second (A-L) linking back to the FRD of origin. The last letter can be anything except O and Z.
Characteristics of the United States Dollar (USD)
While there existed 500, 1'000, 5'000, and 10'000$ banknotes, there has been no reprint since 1946. The only denominations in use today are those of 1, 2, 5, 10, 20, 50, and 100 dollars. Each of said bills bears the portrait of a famous figure of American history on its front and an emblematic building or symbol on its back:
The 1$ bill represents George Washington (1731-1799), the first-ever president of the United States, from 1789 to 1797.
The 2$ bill represents Thomas Jefferson (1743-1826), the third president of the United States, from 1801 to 1809.
The 5$ bill represents Abraham Lincoln (1809-1865), the sixteenth president of the United States, from 1860-1865.
The 10$ bill represents Alexander Hamilton (1755-1804), the first Treasury Secretary of the United States, from 1789-1795.
The 20$ bill represents Andrew Jackson (1767-1845), the seventh president of the United States, from 1829-1837.
The 50$ bill represents Ulysses S. Grant (1822-1885), the eighteenth president of the United States, from 1869-1877.
The 100$ bill represents Benjamin Franklin (1706-1790), one of the influential founding fathers of the United States.
Extra interesting facts about the USD
The world-famous motto "In God, We Trust" first made its apparition on the two-cent coin of 1864 and is, ever since 1955, systematically printed onto every single banknote.
All Federal Reserve banknotes are made from a mixture of cotton (75%) and linen (25%) intertwined with red and blue fibers and reinforced with polyester thread. The ink formula used for the characters is kept secret and is exclusively manufactured at the Bureau of Engraving and Printing.
That about concludes our non-exhaustive history of the American dollar. If you found it interesting, make sure to read our other article on the pound sterling or scroll your way through our other business and economy-related articles!