The US Dollar

The United States dollar ($, USD) is the official currency of the United States and the main reserve means of payment in world trade used by the IMF member states in various transactions.

History

The Dutch were among the first European settlers in the North American continent. They brought the money called the thaler and began to use it in transactions of buying and selling.

Local citizens of various nationalities used to hear that currency name in their own manner and thus pronounced it according to the phonetic norms of their native languages. Eventually, the currency of a new continent obtained its current name - the dollar.

On April 2, 1972, the dollar was given the status of the United States official currency. That was enshrined in the Coinage Act adopted by the US Congress. The first American legal tender was made of metals and circulated for seventy years. From 1849 to 1889, gold dollar coins were minted and contained 9% of pure gold. They were in circulation till 1933 when the gold standard was abolished. It was the world’s monetary system where the unit of account was based on a certain quantity of gold.

Till 1975, there was also the possibility to exchange the dollar for gold. Exchange rates varied: from 0.88865 to 0.81853 grams of gold for 1 USD. The peg was annulled in 1976, and now the fluctuating exchange rate functions.

Paper money started circulating in August 1862.

A year earlier, in 1861, the US banking system emerged after the beginning of the four-year Civil War. Large budget allocations were necessary for the needs of the warring sides.

The first banknotes were called Demand Notes, which meant ‘banknotes for the needs’. They were in circulation till 1862, and during 1862-1865 United States Notes replaced them. People called US Notes ‘green backs’ because of their peculiar design. The obverse was of black color, and the reverse, or ‘back’, was green. ‘Green backs’ were being issued till 1971.

During the war, the government ordered the print of banknotes from private banks. There were 1,600 of them, and each created its own design. As a result, more than 30 thousand design options became available.

Circulation of those banknotes, called State Bank Notes, was limited solely to the state where they were issued. It became impossible to control such monetary supply, and in 1866, the issuance of single paper money under the name of National Bank Notes began. Since then, only this inscription has been engraved on the US banknotes.

At present, the US dollar is the most popular and the most influential currency in the world. It is the basis of many financial transactions like calculation of cross rate, entering into the currency, trade, and stock exchange agreements (for example, Forex).

Design

The US dollars are issued in several denominations that correspond to the portrait of one of the American presidents:

• $1 bill features the portrait of George Washington on the obverse and both sides of the Great Seal of the United States (the US national symbol) on the reverse. In common terms, the Americans call $1 bill ‘a single’ and ‘an ace’. 
• $5 bill depicts the portrait of Abraham Lincoln, the 16th US President who abolished slavery, on the obverse and the Lincoln Memorial on the reverse. The common names are ‘fives’ and ‘fivers’. 
• $10 bill features the portrait of Alexander Hamilton on the obverse and the US Treasury Building on the reverse. In common language, the banknotes are often called ‘Hamiltons’, ‘tenners’, and ‘sawbucks’. The latter stems from the name of a device to hold woods that looks like the Roman numeral ‘X’. 
• $20 bill shows the portrait of Andrew Jackson on the obverse and the White House building on the reverse. Americans call these notes ‘Jacksons’ or just ‘dubs’ that stems from the idiom ‘to dub up’.   
• $50 bill has the portrait of Ulysses Grant on the obverse and the Capitol on the reverse. The banknote also has the jargon names ‘a frog’ and ‘half-a-yard’. ‘Frog’ originates from the slang of horse racing frequenters who believe that a fifty-dollar bill is unlucky if to bet it on a race. 
• $100 bill features the portrait of Benjamin Franklin on the obverse and the Independence Hall on the reverse. The latter is a very sacred place for every American because the United States Declaration of Independence and the United States Constitution were adopted in that building. In common language, the Americans call the banknote ‘Benjamin’, ‘a C-note’, and ‘Cs’. 

There is also the United-States two-dollar bill that depicts the portrait of Thomas Jefferson and the very moment of signing the US Declaration of Independence. However, it is not regularly issued, and getting such a banknote is a stroke of great luck. People usually keep the $2 banknotes and try not to use them for payments. 

The bills of big denominations like $500, $1,000, $5,000, and $10,000 are issued as well, but in order to be used merely in banking transactions.

Rare Banknotes

Private collectors still retain the money issued at the beginning of the first half of the 20th century. Indeed, the $500 banknote of the year 1918 features the portrait of John Marshall, the US Chief Justice. The one of 1934 depicts the portrait of the 25th US President William McKinley. The $5,000 bill is issued with the portrait of James Madison who served as the US President after President Thomas Jefferson. 

All the US banknotes are of the same size and measure 155.956 mm by 66.294 mm. There are no outdated bills; banknotes of every year of issuance are legal tender in different financial transactions and exchanges.

Coins

One dollar ($1) equals 100 cents (100c), or pennies. Fractional coins of the USA have the denominations of 1c, 5c, 10c, 25c, 50c, and $1.

Security Features

The American currency is of fundamental importance in the business and financial world, so its security is very strict. The US dollar banknotes are not printed on simple paper: they consist of 75% cotton and 25% linen. Besides, the composition also comprises synthetic threads so that the bills could be resistant to damage. The exact composition of fiber paper is known only to the one factory where the dollars are produced. But its precise location is unknown.

The banknotes are immensely wearproof: a bend will appear only after 4,000 times of folding. The greenish ink used for printing is also of a secret composition, and it is not possible to reproduce it without special knowledge. All features have been developed by the Bureau of Engraving and Printing. To strengthen the security elements, the latest technologies like microprinting and intaglio printing are utilized. 

Some elements, for example, the eyes of Presidents, are intricately engraved, so it will be very difficult to reproduce the other subtleties of the picture. 

US Currency Circulation in the World 

The US dollar monetary stock in the world is not less than $1.2 trillion, half of which functions outside the United States. Monetary aggregate comprises monetary stock, major deposits, securities, and promissory notes and is worth an enormous amount of $10,500,000,000,000. 

More than half of the world’s gold and currency reserves are kept in this currency. The United States has a strong interest in maintaining this status quo since it will provide multiple benefits: 

• Sound liquidity of the US dollar is provided, which enables to save on interest rates of foreign loans and fees;
• The low inflation rate is kept;
• More opportunities to overvalue the US currency exchange rate speculatively appear.

The main competitor of the US dollar is the euro, however, this does not deter the United States of America from remaining the world leader in economy and business.