Overview
Article I, Section 8 of the U.S. Constitution provides that Congress has the power "[t]o coin money."[20] Laws implementing this power are currently codified in Title 31 of the U.S. Code, under Section 5112, which prescribes the forms in which the United States dollars should be issued.[21] These coins are both designated in the section as "legal tender" in payment of debts.[21] The Sacagawea dollar is one example of the copper alloy dollar, in contrast to the American Silver Eagle which is pure silver. Section 5112 also provides for the minting and issuance of other coins, which have values ranging from one cent (U.S. Penny) to 100 dollars.[21] These other coins are more fully described in Coins of the United States dollar.
Article I, Section 9 of 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,"[22] which is further specified by Section 331 of Title 31 of the U.S. Code.[23] The sums of money reported in the "Statements" are currently expressed in U.S. dollars, thus the U.S. dollar may be described as the unit of account of the United States.[24] "Dollar" is one of the first words of Section 9, in which the term refers to the Spanish milled dollar, a coin that had a monetary value of 8 Spanish units of currency, or reales.
The Coinage Act
In 1792, the U.S. Congress passed the Coinage Act, of which Section 9 authorized the production of various coins, including:[25]:248
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 designates the United States dollar as the unit of currency of the United States:[25]:250–1
[T]he 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.
Denominations
Unlike the Spanish milled dollar, the U.S. dollar has been based upon a decimal system of values since the time of the Continental Congress.[26] This decimal system was again described in the Coinage Act of 1792, which, in addition to the dollar, officially established the following monetary units, with prescribed weights and composition of gold, silver, or copper for each:[27]
mill (₥), or one-thousandth of a dollar;
cent (¢), or one-hundredth of a dollar;
dime, or one-tenth of a dollar; and
eagle, or ten dollars.
Only cents are in everyday divisions of the dollar: dime is used solely as the name of the coin with the value of 10¢, while eagle is largely unknown to the general public.[28] Though mill is also relatively unknown, it is sometimes used in matters of tax levies, and gasoline prices, which are usually in the form of $ΧΧ.ΧΧ9 per gallon (e.g., $3.599, commonly written as $3.59 9⁄10).[29][28]
When currently issued in circulating form, denominations less than or equal to a dollar are emitted as U.S. coins, while denominations greater than or equal to a dollar are emitted as Federal Reserve Notes (with the exception of gold, silver, platinum, and palladium coins valued up to $100 as legal tender, though 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, i.e. fractional currency, was also sometimes pejoratively referred to as shinplasters.
In 1854, Secretary of the Treasury James Guthrie proposed creating $100, $50, and $25 gold coins, to be referred to as a union, half union, and quarter union, respectively,[30] thus implying a denomination of 1 Union = $100. However, no such coins were ever struck, and only patterns for the $50 half union exist.
Physical attributes
Series of 1917 $1 United States bill
Today, USD notes are made from cotton fiber paper, as opposed to wood fiber, which is most often used to make common paper. U.S. coins are produced by the U.S. Mint. USD 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 in × 3.125 in (188.5 mm × 79.4 mm), while small-sized notes introduced that year measure 6.14 in × 2.61 in × 0.0043 in (155.96 mm × 66.29 mm × 0.11 mm).[citation needed]
When the current, smaller sized U.S. currency was introduced it was referred to as Philippine-sized currency, as the Philippines had previously adopted the same size for its legal currency, the Philippine peso.[citation needed]
Etymology
Further information: Dollar
In the 16th century, Count Hieronymus Schlick of Bohemia began minting coins known as joachimstalers, named for Joachimstal, the valley in which the silver was mined. In turn, the valley's name is titled after Saint Joachim, whereby thal or tal, a cognate of the English word dale, is German for 'valley.'[31] The joachimstaler was later shortened to the German taler, a word that eventually found its way into many languages, including:[31]
Danish and Swedish as daler;
Norwegian as dalar and daler;
Dutch as daler or daalder;
Ethiopian as talari;
Hungarian as tallér;
Italian as tallero;
Arabic as دولار; and
English as dollar.
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 of Joachimsthal. The coins minted in the valley soon lent their name to other coins of similar size and weight from other places. The Dutch coin depicting a lion, for instance, was thus named leeuwendaler ('lion dollar'). The leeuwendaler was authorized to contain 427.16 grains of .75 fine silver and passed locally for between 36 and 42 stuivers. Being lighter than the large-denomination coins then in circulation, it was more advantageous for Dutch merchants to pay foreign debt in leeuwendalers, therefore making such the coin of choice for foreign trade.
The leeuwendaler was popular in the Dutch East Indies and in the Dutch North American New Netherland Colony (today the New York metropolitan area), and circulated throughout the Thirteen Colonies during the 17th and early 18th centuries. It was also separately popular throughout Eastern Europe, where it led to the current Romanian and Moldovan currency, leu ('lion').
Among the English-speaking community, the Dutch coin came to be popularly known as lion dollar—what would become the origin of the English dollar.[32] The modern American-English pronunciation of dollar is still remarkably close to the 17th-century Dutch pronunciation of daler.[33] 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.[33] By the mid-18th century, the lion dollar had been replaced by the Spanish dollar, famously known as the 'piece of eight,' which was distributed widely in the Spanish colonies of the New World and in the Philippines.[34] Eventually, dollar became the name of the official American currency.
Nicknames
See also: Slang terms for money § United States
Dollars in general
The colloquialism buck(s) (much like the British quid 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, or it may also have originated from a poker term.[35] Likewise, the $1 note has been nicknamed buck, as well as single.
Greenback is another nickname, originally applied specifically to the 19th-century Demand Note dollars, which were printed black and green on the back side, created by Abraham Lincoln to finance the North for the Civil War.[36] It is still used to refer to the U.S. dollar (but not to the dollars of other countries). The term greenback is also used by the financial press in other countries, such as Australia,[16] New Zealand,[17] South Africa,[18] and India.[19]
Other well-known names of the dollar as a whole in denominations include greenmail, green, and dead presidents, the latter of which referring to the deceased presidents pictured on most bills. Dollars in general have also been known as bones (e.g. "twenty bones" = $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.
Piastre was the original French word for the U.S. dollar, used for example in the French text of the Louisiana Purchase. Calling the dollar a piastre is still common among the speakers of Cajun French and New England French. Modern French uses dollar for this unit of currency as well. The term is still used as slang for U.S. dollars in the French-speaking Caribbean islands, most notably Haiti.
Specific to denomination
The infrequently-used $2 note is sometimes called deuce, Tom, or Jefferson (after Thomas Jefferson). Contrastly, the $5 bill has been called Lincoln, fin, fiver, and five-spot. The $50 bill is occasionally called a yardstick, or a grant, after President Ulysses S. Grant, pictured on the obverse. The $20 note has been referred to as a double sawbuck, Jackson (after Andrew Jackson), and double eagle. The $10 note can be referred to as a sawbuck, ten-spot, or Hamilton (after Alexander Hamilton).
Benjamin, Benji, Ben, or Franklin, refers to the $100 bill, which features the likeness of the eponymous Benjamin Franklin. Other nicknames include C-note (C being the Roman numeral for 100), century note, and bill (e.g. two bills = $200).
A grand (sometimes shortened to simply G) is a common term for the amount of $1,000, though the thousand-dollar note is no longer in general use. The suffix K or k (from kilo) is also commonly used to denote this amount (e.g. $10k = $10,000). Likewise, a large or stack usually references to a multiple of 1,000 (e.g. "fifty large" = $50,000).
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 $.[37][38][39][40]
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,[41] does not consider the fact that the symbol was already in use before the formation of the United States.[42]
History
See also: History of the United States dollar
Obverse of a rare 1934 $500 Federal Reserve Note, featuring a portrait of President William McKinley
Reverse of a $500 Federal Reserve Note
The American dollar coin was initially based on the value and look of the Spanish dollar or piece of eight, 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".[43]
On the 6th of July 1785, the Continental Congress resolved that the money unit of the United States, the dollar, would contain 375.64 grains of fine silver; on the 8th of August 1786, the Continental Congress continued that definition and further resolved that the money of account, corresponding with the division of coins, would proceed in a decimal ratio, with the sub-units being mills at 0.001 of a dollar, cents at 0.010 of a dollar, and dimes at 0.100 of a dollar.[26]
After the adoption of the United States Constitution, the U.S. dollar was defined by the Coinage Act of 1792, which 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).[44] 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 same coinage act also 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.[45]
The early currency of the United States did not exhibit faces of presidents, as is the custom now;[46] although today, by law, only the portrait of a deceased individual may appear on United States currency.[47] In fact, the newly formed government was against having portraits of leaders on the currency, a practice compared to the policies of European monarchs.[48] 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)
See also: Continental currency
During the American Revolution the thirteen colonies became independent states. Freed from British monetary regulations, they each issued £sd paper money to pay for military expenses. The Continental Congress also began issuing "Continental Currency" denominated in Spanish dollars. The dollar was valued relative to the states' currencies at the following rates:
5 shillings – Georgia
6 shillings – Connecticut, Massachusetts, New Hampshire, Rhode Island, Virginia
7 1⁄2 shillings – Delaware, Maryland, New Jersey, Pennsylvania
8 shillings – New York, North Carolina
32 1⁄2 shillings – South Carolina
Continental currency depreciated badly during the war, giving rise to the famous phrase "not worth a continental".[49] A primary problem was that monetary policy was not coordinated between Congress and the states, which continued to issue bills of credit. Additionally, neither Congress nor the governments of the several states had the will or the means to retire the bills from circulation through taxation or the sale of bonds.[50] The currency was ultimately replaced by the silver dollar at the rate of 1 silver dollar to 1000 continental dollars.
Silver and gold standards
This section does not cite any sources. Please help improve this section by adding citations to reliable sources. Unsourced material may be challenged and removed. (July 2018) (Learn how and when to remove this template message)
From 1792, when the Mint Act was passed, the dollar was defined as 371.25 grains (24.056 g) of silver. The gold coins that were minted were not given any denomination 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).[citation needed]
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.
In order to finance the War of 1812, Congress authorized the issuance of Treasury Notes, interest-bearing short-term debt that could be used to pay public dues. While they were intended to serve as debt, they did function "to a limited extent" as money. Treasury Notes were again printed to help resolve the reduction in public revenues resulting from the Panic of 1837 and the Panic of 1857, as well as to help finance the Mexican–American War and the Civil War.
In addition to Treasury Notes, in 1861, Congress authorized the Treasury to borrow $50 million in the form of Demand Notes, which did not bear interest but could be redeemed on demand for precious metals. However, by December 1861, the Union government's supply of specie was outstripped by demand for redemption and they were forced to suspend redemption temporarily. The following February, Congress passed the Legal Tender Act of 1862, issuing United States Notes, which were not redeemable on demand and bore no interest, but were legal tender, meaning that creditors had to accept them at face value for any payment except for public debts and import tariffs. However, silver and gold coins continued to be issued, resulting in the depreciation of the newly printed notes through Gresham's Law. In 1869, Supreme Court ruled in Hepburn v. Griswold that Congress could not require creditors to accept United States Notes, but overturned that ruling the next year in the Legal Tender Cases. In 1875, Congress passed the Specie Payment Resumption Act, requiring the Treasury to allow US Notes to be redeemed for gold after January 1, 1879. The Treasury ceased to issue United States Notes in 1971.
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[citation needed] before the U.S. dollar was allowed 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.