There is no question that the U.S. dollar is the most famous currency in today’s world, for trading, collecting and storing, and just discussing. The US national currency has been around since the late 1700s and has as rich a history as the country itself.
This article will take you through the history of the U.S. Dollar currency, its many forms, and its value.
Perhaps once you’ve read through this, you will have a new appreciation for the dollar bills in your pockets and understand what makes your bank account more (or less) valuable each day.
When Did America Start the Dollar?
The United States of America started its national currency in 1785, less than ten years after declaring independence from England.
What Did the US Use Before the Dollar?
Before money was invented, commodity trading and trade exchanges were made via barter. People started using metals for money as soon as 1500 BC. Paper money originated in 1690 in the United States and represents IOUs.
When was the US Dollar Created?
The Spanish Dollar era
To understand the history of the U.S. dollar, a passing understanding of the Spanish peso helps. The peso was referred to by the English as the Spanish “dollar” (more on the meaning of the dollar below).
Post – American Revolution Coinage
You might think that as soon as the U.S.A. rid itself of England, it was quickly churning out dollars. It took almost two decades to get the U.S. dollar in place.
During the 1776-1792 period, there were multiple currencies in use throughout the country. The Spanish dollar was prevalent from the 16th century through the 19th century.
Coinage Act of 1792
This is where it all began, people. If you read one section of this article, this is it.
The Constitution ratified by Congress in 1792 created and regulated the coinage system of the United States with the dollar being the primary unit of currency. It is also the first currency in the world which adopt decimal systems.
Coinage Act of 1852
An additional act sealed the deal and made the U.S. dollar the only currency (ie the only legal tender) valid in the United States.
Who Invented the U.S.A. Dollar Bill?
The actual dollar note was first issued in 1862 by the Federal Government with a portrait of Secretary of State Salmon Chase (1861 – 1863).
The $1 U.S. Note was redesigned with a portrait of George Washington at the center.
Why is the Dollar Called the Dollar?
The word dollar originates from the German term ‘thaler’. This word refers to Joachimst(h)aler, the coins from silver mines first made in 1519 in Bohemia (now part of the Czech Republic).
Why Does the U.S. Dollar Use the $ Symbol?
The earliest U.S. dollar coins did not have the $ symbol. The origin of this symbol and its association with the United States goes back to Spain.
There are records of the dollar sign ($) being used for the Spanish peso as early as the 1770s. When the U.S. created its dollar in the Coinage Act of 1792, it referred to its value as similar to that of the Spanish peso.
The first occurrence in print of the U.S. using the dollar sign for its dollar comes in the 1790s, but it is not until the 1869 dollar note that something close to the symbol is first seen. The back of this dollar note has a U overlapped with an S, looking quite a lot like the $ sign.
What Does the Dollar ($) Sign Mean?
So, what does the $ sign mean? Well, the jury’s still out on this one!
Several theories are still in play:
An abbreviation of the Spanish peso “PS”, where originally the letter ‘S’ was a superscript (Ps). It later evolved into the overlapping version of $, where the P became simply a line on the letter ‘S’.
The dollar sign may have originated as an abbreviation for “United States” (U.S.), where the two letters were merged together, one on top of the other. The letter ‘U’ formed two vertical lines, resembling pillars, while the ‘S’ acted like a ribbon wrapped around them. Over time, both the ‘U’ and ‘S’ were simplified, evolving from two lines on the ribbon-like ‘S’ (the double-barred dollar or the Cifrão sign) to just one pillar framed by the ‘S’ for simplicity. This symbolism can be traced back to the Pillars of Hercules, which are associated with the Strait of Gibraltar.
It could have originated from the mint mark from Potosí (now Bolivia) was “P T S I,” which was monogrammed as the $ sign.
The symbol originated from the snake and cross symbols on the thaler coins (where the term “dollar” comes from).
What Backs the U.S. Dollar?
Throughout history, the answer has varied from gold to silver, to absolutely nothing.
Continental Currency
After the American Revolution, each of the thirteen colonies started issuing their own paper money. The Continental Congress also began issuing their currency based on the Spanish dollar.
Silver and Gold Standards (19th century)
Next came, the silver-and-gold standard, which started with the 1792 Mint Act, which allowed for the minting of silver dollar coins. This standard was defined as either 371.25 grains (24.056 g) of fine silver or 24.75 grains of fine gold (gold-silver ratio 15).
The standard was redefined several times with the Coinage Act of 1853 reducing silver coins less than $1 from 412.5 grains to 384 grains (24.9 g), 90% silver per 100 cents.
United States Notes (19th century)
Wartime has had a significant effect on the demand for paper notes.
Notes popped back up with the War of 1812 and its financial demands, Congress approved issuing Treasury Notes.
The U.S. Civil War was yet another historic moment that demanded the production of paper notes. These notes did not have any kind of precious metal backing them.
Gold Standard (20th century)
The Coinage Act of 1873 ended silver mining and brought the US into its gold standard phase. This has been dubbed the “Crime of 73” and was highly controversial at the time.
The Gold Standard Act of 1900 defined the U.S. Dollar solely as 23.22 grains (1.505 g) of fine gold.
There were three (3) types of gold coins made. The gold dollar was minted from 1849 to 1889. Type I gold dollars, produced from 1849 to 1853, measured ~13 mm in diameter. Type II coins, made from 1854 to 1855, were larger at ~15 mm but thinner. The more common Type III, which was the same size as Type II but easier to produce, was minted from 1856 to 1889.
The Nixon Shock of August 15, 1971, ended the ability to convert of dollars to gold. Ever since the U.S. Dollar has not been backed by a precious metal.
Federal Reserve Notes (20th Century to Today)
The Federal Reserve Act of 1913 authorized the issuing of Federal Reserve Notes. This kind of paper money became the exclusive note for the US since the discontinuation of other kinds of notes (as late as the 1970s!).
When the Federal Reserve was created, the notes could have been redeemed for gold or “lawful money”) included were the other notes considered legal tender. In 1933, the gold obligation was removed with the Emergency Banking Act.
The Federal Reserve Notes we use today are not backed by any specific commodity, but only by the collateral assets that Federal Reserve Banks post to obtain them.
A Federal Reserve noteholder does not have to pay government money in exchange for a government-issued bank note or a commodity.
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Are Old U.S. Dollars Still Valid?
Yes! Regardless of how long ago it was issued, all currencies remain legal tender.
How Much is an Original Dollar Bill Worth?
If you were to buy something with a dollar bill, its face value is whatever is printed on the Federal Reserve note itself.
However, some bills are worth more than others to avid collectors. Read on to learn more!
Are Some Dollar Bills Rarer Than Others?
There are some bills that you may want to keep for collection purposes.
Here are some special bills to keep an eye out for:
Red Seal $2 bills – Two dollar bills aren’t that rare, but if you find one with a red seal…hold on to it! These were made in 1928 and if you have one in excellent condition, it could be worth a few hundred dollars.
1933 $10 silver certificate bill – If you somehow end up with a $10 silver certificate on your hands, don’t let it go! Those in good condition can go for $5000 and a pristine one can go for as much as $70,000.
Also, keep an eye out for curious serial numbers:
Low serial numbers – A modern bill with serial number 00000001 can go up to $15,000 at auction. Paper Currency with serial number under 00000100 is less rare, but can still fetch a good amount.
Ladder Serial Numbers – Bills with sequential numbers like “12345678” can go for up to $5000!
Repeat Serial Numbers – Bills with repeated numbers like “55555555” can sell for a few hundred dollars. Not bad for a dollar bill in your pocket!
2006 serial number misprint – A printing error on some bills made this year resulted in the serial number being printed twice. These kinds of bills can sell for a few hundred dollars online.
Star Serial Number – When a faulty bill is replaced, the original serial number is appended with a star so the bills can never be confused. These can go for up to $500.
Why Do We Not Have a 1000-Dollar Bill?
The United States used to have a 1000-dollar bill, and in fact, bills of much higher denominations. The country had paper money for $5,000, $10,0000, and even 100,000 dollars!
The original $1,000 bill featured Alexander Hamilton, but his portrait was replaced with President Grover Cleveland’s to avoid confusion with other denominations. This bill was discontinued in 1969, along with a 500-dollar bill (featuring President William McKinley) that was in existence.
The 5,000-dollar bill featured James Madison. The 10,000-dollar bill had Salmon P. Chase on it. He was a governor, senator, and most importantly, Abraham Lincoln’s Secretary of Treasury. Both of these bills were removed from public circulation in 1969.
These bills are immensely rare to find in circulation today. While they are legal tender, you probably want to hold on to any of these and add to your collection.
The $100,000 note, featuring Woodrow Wilson, was a gold certificate created in 1934 during the Great Depression. Although it was legal tender, it was never issued to the public and was intended solely for official transactions between Federal Reserve banks. If you want to see this bill in person, you can find some on display at museums like The Smithsonian and the Museum of American Finance.
What Year Was the USD the Strongest?
American currency had a historical high of 154.73 in February 1985.
How Much Value Has the Dollar Lost in the Last 50 Years?
In 1950 the dollar fell 22%. This makes current pricing 12.35 times the average prices since 1950 according to the Consumer Price Index. The dollar now only buys 9.85% of its value when compared to the dollar it bought at that time. Compared to 1950, it had been 1.16 percent inflation.
Other US Currency of Note
Texas Dollars
Texas first issued paper money in 1837 to its residents and businessmen. The money was named Star Money after the star etched into the side of each coin.
Star Money was not face value currency but rather an investment-related note similar to an American Treasury bill and circulated as a monetary gift to its next paying recipient.
The “Texas Redback” was published in 1839 with the naming being inspired by the reddish color on the front of the notes. These notes were bearer promissory notes to fund the national debt of the Texas Republic.
The Redback was worth around 37 cents for an American dollar.
Confederate Currency
In the Civil War period, the Confederacy issued Treasury documents from the new federal government.
The Confederate States’ dollar was introduced immediately after the Civil War onset.
It didn’t contain tangible assets – just promises for the bearer in exchange for their money after the war.
During wars against the United States, the currency remained unstable, and inflation was rising.
In 1864 the currency had almost zero value. Confederate bills contained an enormous array of images, including slaves, naval vessels, railways, animals, and Confederate political figures.
Final Notes
In this article, we’ve seen how paper currency is affected by wars, economic uncertainty, and even human error.
It’s important to understand the history of how we got the paper money we have today to understand what’s unusual, what’s commonplace, and what could make us a few extra dollars!
This History of the U.S. Dollar also sheds light on how many decisions have impacted the paper currency landscape we have today.
One thing is for certain, you’ll never look at the paper money in your wallet the same way again!
