The history of the American dollar, the main currency of the world, which previously was nothingBy Pictolic https://pictolic.com/article/the-history-of-the-american-dollar-the-main-currency-of-the-world-which-previously-was-nothing.html
The US dollar is the main currency of the world and a synonym of economic stability. That dollar world powers choose to accommodate their reserves. According to the International monetary Fund (IMF), at the end of the first quarter of 2020 the total amount of dollars in reserves countries in the world reached 70 percent (the second most popular currency, the Euro barely made it to 20).
However, universal and stable, he was not always the case. Becoming the official currency in the United States on 6 July 1785, the dollar has experienced several waves of crisis and for a long time did not enjoy the confidence even of American citizens. It took nearly 200 years to conquer the world and become a leader in the global foreign exchange market.
The name for the us currency was not invented in the United States: it has been known for about 500 years, came to the United States from the Old world. The word "dollar" comes from the silver coin "Thaler", which was in Europe in a wide turn from the XVI century. The coin appeared in Bohemia (in modern Czech Republic) after it has discovered rich reserves of the precious metal.
Silver thalers quickly replaced in the European market other coins with a low content of precious metals and have become so popular that their name appears in many countries and languages Europe. In the process of adapting the word changed its meaning: for example, in the Netherlands it has become a "Daalder" (daalder), and in the English-speaking world took the form of "dollar" (dollar).
On the territory of the United States the name originated with Spain. During the colonization of Latin America and North America that discovered huge reserves of silver in Peru, Bolivia and Mexico, and 300 years from 1500's to 1800 years has become a major global silver producer (it accounted for 85 percent of world production).
The Spanish silver peso, over time, surpassed in quality European thalers, since the content of the precious metal last fall. In North America, the peso became known as "Spanish dollar" and has received great popularity in the colonial period. The fact that before the War for independence (1775-1783), the official means of payment in the 13 British colonies was the British pound.
The tradition to designate a dollar $ sign was formed by American businessmen. The written records of transactions in British currency, they to used a pre-existing icon of the pound sterling £. When issued in Spanish dollars they had to repeatedly record the word "peso" in its entirety. To save their time, they started to reduce the currency name to the consonant letters "PS".
Over time, merchants began to write "P" and "S" on each other. To the 1770-ies, they are even more simplified the character, and refused the loop in the letter "P", then the icon of the peso turned into the letter "S" crossed by a vertical bar. Alternative spelling of a dollar sign with two vertical lines was the result of blending the initial letters of the words "the United States" (United States, U. S.) each other.
With the beginning of the War for independence of 13 British colonies refused the pound sterling as currency "occupier" and declared him an outlaw. After the end of the conflict and the victory of the United States a new country is thinking about starting their own monetary system.
Finally, in 1792 a law was passed on coinage, which is tied the us dollar to gold and silver and established a decimal system of money of account. To print paper dollars, the US did not start for another 70 years — the reason for this was a failed experiment during the War for independence, after which the Americans did not have any confidence in paper money.
During the struggle for independence from Britain, the American government desperately needed money to Finance a military campaign. Britain (then the world's major superpower) blocked the rebellious colonies export channels, depriving them of opportunities to earn money and to produce enough of its own currency with the software.
Then the us Congress went to the trick and in 1776 issued mainland (continentials) — in fact it was a zero coupon, not a currency. They tied paper currency to Spanish dollars, hoping that after the victory in the war and the lifting of the trade embargo will quickly be able to earn enough money to pay off debt.
In the absence of alternatives mainland was actively used as real money, they paid the military and were paid in food supplies for the army. However, the American currency did not cause any confidence, because due to the lack of real security has depreciated even before it was wet paint.
After the war, the U.S. government was not able to find the money to repay the debt, the state mainland and papers of individual States simply taken out of circulation, and the debt was written off.
Experience in financing the war of independence was a traumatic as well as for the us authorities and companies. In the American Constitution of 1787 actually plain text ordered a ban on the issuance of paper money. According to the document, the US government can mint coins and to issue Treasury bills; individual States cannot issue paper money as legal tender.
Such an attempt to avoid a repetition of default for many years hindered the development of the country, because the States, not having its own reserves of gold and silver, could not provide the coinage of metal money at a rate sufficient to cover the needs of a growing economy.
In addition, the text of the Constitution contained a loophole that for decades has resulted in a serious crisis of the us financial system. The fact that the Constitution did not forbid the printing of money by American private banks.
Savvy bankers immediately took advantage of the loophole, and in the first half of the XIX century in the country there are many banks, each of which printed its own currency with its own design. These banks received permission to issue securities backed by gold or silver, and were obliged to exchange their own money into precious metals on demand.
However, unscrupulous bankers, not having sufficient gold or silver, still held wide issue. To customers credit institutions, it was difficult to exchange money for metal, they just opened the main and only office is in a remote and deserted place where the person was hard to get.
Order to the monetary system of the country began to produce only in the 1860s, and cause large-scale changes again became a war in which America got its first full-fledged national paper currency, and the dollars were first green.
The U.S. government once again included a printing press because of the Civil war (1861-1865). To the North, as during the struggle for independence, had to borrow money from the population to Finance military action. States issued interest-free government bonds with gold and silver for security. In the US government had issued bonds, but they were first recognized as legal tender.
New papers was written that the money "on demand" can be exchanged for precious metals. However, the American authorities quickly realized that the war will not be able to fulfill all obligations, and has issued such bonds, but without the registry "on demand". That is, the paper was still with security and were legal tender, but exchanged for the metal they were not.
Money of the Civil war formed the basis of modern design of the American dollar, as was the first United States currency, is made in green color. The fact that in the second half of the nineteenth century the usual thing was the release of black and white papers. With the beginning of the era of pictures scammers have used to forge black and white currency: they just photographed it, and then gave the photo for the original.
The U.S. Treasury in preparation for bond issues, ordered them printed from the new York American Bank Note company, who owned the rights to the use of the newly invented in Canada special green paint that is designed to counteract counterfeiting of the photographic method. As a result, government bonds had a black and white front side and a green back.
However, American money during the Civil war strongly differed from the modern American currency. Besides the design, which has changed several times, notes were of great size: the length of the notes was approximately 20 centimeters and the width was about 8 inches.
The current sizes they have acquired only after 1929. Because of the great depression, which was the biggest economic shock to the United States and around the world in the twentieth century, the U.S. government was faced with the need to cut costs on the issue of currency. Then they decided to reduce the size of the banknotes to 15 centimetres wide and 5.5 centimetres in height.
After the Civil war monetary system and the US economy grew rapidly, paper dollars began again to exchange for gold and silver. After 1900 — only gold (this was done to prevent speculators who have used the volatility of metal prices). However, the status of the world currency the dollar had to earn another 50 years.
The first step in this direction was taken due to the First world war (1914-1918). Leading European economies, including Britain, whose pound sterling was considered the world's main currency, was forced to abandon the gold standard, which did not allow to indefinitely increase the emission to Finance military action.
States with a large hunting took a loan from the United States, whose currency was still underpinned by gold. During the Second world war States have already entered as the main creditor of the whole world and further consolidated their status. The dominant position of the us currency was recorded in 1944, when the beginning of the work of the Bretton woods system.
The dollar was appointed the main reserve currency of the world and were bound to gold at a fixed rate ($35 per 1 Troy ounce). Other countries have established their own exchange rate against the dollar. According to the formal rules, any country can contact US with dollars and require to convert them into metal.
The decision to include the printing press, have raised concerns in the world about the capacity of America to provide all of its currency with gold. States began to require States to convert their dollars into gold, which led to the collapse of the Bretton woods system in the early 1970s.
Despite the abandonment of the gold standard, the collapse of the Bretton woods system and transition to floating exchange rates, the demand for the dollar is not falling as from States, and from the ordinary people. For the latter, the dollar remains synonymous with stability, us currency, often buying the inhabitants of countries in economic crisis.
So, in Russia in 1990-e years people actively translated salaries into us dollars, to avoid inflation. A recent example of the role of the dollar in private life is the situation in Venezuela: against the background of hyperinflation residents of a socialist country actually moved to the dollar settlements. In 2013, when the government headed by nicolás Maduro, the Venezuelan economy contracted by more than half.
The crisis contributed to a drop in the price of oil, which is heavily dependent resource Economics, reducing the extraction of raw materials and us sanctions. On the background of the protracted crisis the country has left about 10 percent of the population or approximately 3.4 million people. Due to the constant growth of the exchange rate supermarkets switched to dollar settlements that allow you to fix prices.
50 years after the abolition of the binding of the dollar to gold demand remains at the hands of government regulators who fill us currency reserves. According to the International monetary Fund (IMF), at the end of the first quarter of 2020, the total volume of dollar reserves countries in the world reached 70 percent.
For comparison, the second most popular currency, the Euro barely made it to 20. According to us authorities, in June 2020, the turnover was of 1.91 trillion dollars. Diplomatic relations between the countries play no role in the choice of economic policy.
For Russia, whose relations with the United States began to deteriorate rapidly after the annexation of Crimea in 2014 and the introduction of sanctions by Washington, holds a significant amount of reserves in us currency. As at 31 December 2019, the Central Bank increased the dollar's share in the structure of international reserves to 24.5 percent vs. 22.7 percent from a year earlier and thus reduced the share of the Euro and the yuan.
China, which also has a complicated relationship with the United States and in 2019 was in a state of acute trade war with the world's first economy has huge foreign exchange reserves of us dollars, trillions of dollars, and ties the yuan to the U.S. currency.