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Centennial Gold and Silver Coins
Aharon's Jewish
Books and Judaica
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The United States dollar (sign: $; code:
USD) is the unit of currency of the United States. The U.S. dollar
is normally abbreviated as the dollar sign, $, or as USD or US$
to distinguish it from other dollar-denominated currencies and from
others that use the $ symbol. It is divided into 100 cents (200
half-cents prior to 1857).
The U.S. dollar is the currency most used in international transactions.
Several countries use it as their official currency, and in many
others it is the de facto currency.
The U.S. dollar bill uses the decimal system, consisting of 100
equal cents (symbol ˘). In another division, there are 1,000 mills
or ten dimes to a dollar, or 4 quarters to a dollar. However, only
cents are in everyday use as divisions of the dollar; "dime"
is used solely as the name of the coin with the value of 10˘, while
"eagle" and "mill" are largely unknown to the
general public, though mills are sometimes used in matters of tax
levies and gasoline prices. When currently issued in circulating
form, denominations equal to or less than a dollar are emitted as
U.S. coins while denominations equal to or greater than a dollar
are emitted as Federal Reserve notes (with the exception of gold,
silver and platinum coins valued up to $100 as legal tender, but
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.
In 1854, James Guthrie, then Secretary of the Treasury, proposed
creating $100, $50 and $25 gold coins, which were referred to as
a "Union," "Half Union," and "Quarter Union,"
thus implying a denomination of 1 Union = $100.
Today, USD notes are made from cotton fiber paper, unlike most common
paper, which is made of wood fiber.
U.S. coins are produced by the United States Mint. U.S. dollar 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 inches (188 mm) by
3.125 inches (79.4 mm); small-sized notes, introduced that year,
measure 6.14 inches (156 mm) by 2.61 inches (66 mm) by 0.0043 inches
(0.11 mm).
History
See:
Silver Dollars
The first dollar coins issued by the United States Mint were of
the same size and composition as the Spanish dollar and even after
the American Revolutionary War the Spanish and U.S. silver dollars
circulated side by side in the United States. 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 seventeenth
and early eighteenth centuries. 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".
The U.S. dollar was created and defined by the Coinage Act of 1792.
It specified a "dollar" to be between 371 and 416 grains
(27.0 g) of silver (depending on purity) and an 'eagle" to
be between 247 and 270 grains (17 g) of gold (again depending on
purity). It set the value of an eagle at 10 dollars, and the dollar
at 1/10th eagle. It called for 90% silver alloy coins in denominations
of 1, 1/2, 1/4, 1/10, and 1/20; it called for 90% gold alloy coins
in denominations of 1, 1/2, 1/4, and 1/10.
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.
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.
Early history
The history of the dollar in North America pre-dates US independence.
Even before the Declaration of Independence, the Continental Congress
had authorized the issuance of dollar denominated coins and currency,
since the term 'dollar' was in common usage referring to Spanish
colonial 8 real coins or "Spanish Milled Dollars". Though
several monetary systems were proposed for the early republic, the
dollar was approved by Congress in a largely symbolic resolution
on August 8, 1786. After passage of the Constitution was secured,
the government turned its attention to monetary issues again in
the early 1790s under the leadership of Alexander Hamilton, the
secretary of the treasury at the time. Congress acted on Hamilton's
recommendations in the Coinage Act of 1792, which established the
Dollar as the basic unit of account for the United States. The word
"dollar" is derived from Low Saxon "daler",
an abbreviation of "Joachimsdaler" – (coin) from Joachimsthal
(St. Joachim's Valley, now Jáchymov, Bohemia, then part of the Holy
Roman Empire, now part of the Czech Republic; for further history
of the name, see dollar.) – so called because it was minted from
1519 onwards using silver extracted from a mine which had opened
in 1516 near Joachimstal, a town in the Ore Mountains of northwestern
Bohemia. The term "dollar" was widely used in reference
to a Spanish coin at the time it was adopted by the United States.
Because prices of gold and silver in the open marketplace vary independently,
the production of coins of full intrinsic worth under any ratio
will nearly always result in the melting of either all silver coins
or all gold coins. In the early 1800s, gold rose in relation to
silver, resulting in the removal from commerce of nearly all gold
coins, and their subsequent melting. Therefore, in 1834, the 15:1
ratio was changed to a 16:1 ratio by reducing the weight of the
nation's gold coinage. This created a new U.S. dollar that was backed
by 1.50 g (23.22 grains) of gold. However, the previous dollar had
been represented by 1.60 g (24.75 grains) of gold. The result of
this revaluation, which was the first-ever devaluation of the U.S.
dollar, was that the value in gold of the dollar was reduced by
6%. Moreover, for a time, both gold and silver coins were useful
in commerce.
In 1853, the weights of US silver coins (except, interestingly,
the dollar itself, which was rarely used) were reduced. This had
the effect of placing the nation effectively (although not officially)
on the gold standard. The retained weight in the dollar coin was
a nod to bimetallism, although it had the effect of further driving
the silver dollar coin from commerce.
With the enactment (1863) of the National Banking Act during the
American Civil War and its later versions that taxed states' bonds
and currency out of existence, the dollar became the sole currency
of the United States and remains so today.
In 1878, the Bland-Allison Act was enacted to provide for freer
coinage of silver. This act required the government to purchase
between $2 million and $4 million worth of silver bullion each month
at market prices and to coin it into silver dollars. This was, in
effect, a subsidy for politically influential silver producers.
The discovery of large silver deposits in the Western United States
in the late 19th century created a political controversy. Due to
the large influx of silver, the value of silver in the nation's
coinage dropped precipitously. On one side were agrarian interests
such as the United States Greenback Party that wanted to retain
the bimetallic standard in order to inflate the dollar, which would
allow farmers to more easily repay their debts. On the other side
were Eastern banking and commercial interests, who advocated sound
money and a switch to the gold standard. This issue split the Democratic
Party in 1896. It led to the famous "cross of gold" speech
given by William Jennings Bryan, and may have inspired many of the
themes in The Wizard of Oz. Despite the controversy, the status
of silver was slowly diminished through a series of legislative
changes from 1873 to 1900, when a gold standard was formally adopted.
The gold standard survived, with several modifications, until 1971.
Gold standard
Bimetallism persisted until March 14, 1900, with the passage of
the Gold Standard Act, which provided that:
"...the dollar consisting of twenty-five and eight-tenths grains
(1.67 g) of gold nine-tenths fine, as established by section thirty-five
hundred and eleven of the Revised Statutes of the United States,
shall be the standard unit of value, and all forms of money issued
or coined by the United States shall be maintained at a parity of
value with this standard..."
Thus the United States moved to a gold standard, made gold the sole
legal-tender coinage of the United States, and set the value of
the dollar at $20.67 per ounce (66.46 ˘/g) of gold. This made the
dollar convertible to 1.5 g (23.22 grains)—the same convertibility
into gold that was possible on the bimetallic standard.
The gold standard was suspended twice during World War I, once fully
and then for foreign exchange. At the onset of the war, US corporations
had large debts payable to European entities, whom began liquidating
their debts in gold. With debts looming to Europe, the dollar to
British pound exchange rate reached as high as $6.75, far above
the (gold) parity of $4.8665. This caused large gold outflows until
July 31, 1914 when the New York Stock Exchange closed and the gold
standard was temporarily suspended. In order to defend the exchange
value of the dollar, the US Treasury Department authorized state
and nationally-charted banks to issue emergency currency under the
Aldrich-Vreeland Act, and the newly-created Federal Reserve organized
a fund to assure debts to foreign creditors. These efforts were
largely successful, and the Aldrich-Vreeland notes were retired
starting in November and the gold standard was restored when the
New York Stock Exchange re-opened in December 1914.
As the United States remained neutral in the war, it remained the
only country to maintain its gold standard, doing so without restriction
on import or export of gold from 1915-1917. During the participation
of the US as a belligerent, President Wilson banned gold export,
thereby suspending the gold standard for foreign exchange. After
the war, European countries slowly returned to their gold standards,
though in somewhat altered form.
During the Great Depression, every major currency abandoned the
gold standard. Among the earliest, the Bank of England abandoned
the gold standard in 1931 as speculators demanded gold in exchange
for currency, threatening the solvency of the British monetary system.
This pattern repeated throughout Europe and North America. In the
United States, the Federal Reserve was forced to raise interest
rates in order to protect the gold standard for the US dollar, worsening
already severe domestic economic pressures. After bank runs became
more pronounced in early 1933, people began to hoard gold coins
as distrust for banks led to distrust for paper money, worsening
deflation and gold reserves [1][2].
In early 1933, in order to fight severe deflation Congress and President
Roosevelt implemented a series of Acts of Congress and Executive
Orders which suspended the gold standard except for foreign exchange,
revoked gold as universal legal tender for debts, and banned private
ownership of significant amounts of gold coin. These acts included
Executive Order 6073, the Emergency Banking Act, Executive Order
6102, Executive Order 6111, the Agricultural Adjustment Act, 1933
Banking Act, House Joint Resolution 192, and later the Gold Reserve
Act[1]. These actions were upheld by the US Supreme Court in the
"Gold Clause Cases" in 1935[3].
For foreign exchange purposes, the set $20.67 per ounce value of
the dollar was lifted, allowing the dollar to float freely in foreign
exchange markets with no set value in gold. This was terminated
after one year. Roosevelt attempted first to restabilize falling
prices with the Agricultural Adjustment Act, however, this did not
prove popular, so instead the next politically popular option was
to devalue the dollar on foreign exchange markets. Under the Gold
Reserve Act the value of the dollar was fixed at $35 per ounce,
making the dollar more attractive for foreign buyers (and making
foreign currencies more expensive to those holding US dollars).
The higher price increased the conversion of gold into dollars,
allowing the U.S. to effectively corner the world gold market.
The suspension of the gold standard was considered temporary by
many in markets and in the government at the time, but restoring
the standard was considered a low priority to dealing with other
issues.
Under the post-World War II Bretton Woods system, all other currencies
were valued in terms of U.S. dollars and were thus indirectly linked
to the gold standard. The need for the U.S. government to maintain
both a $35 per troy ounce (112.53 ˘/g) market price of gold and
also the conversion to foreign currencies caused economic and trade
pressures. By the early 1960s, compensation for these pressures
started to become too complicated to manage.
In March 1968, the effort to control the private market price of
gold was abandoned. A two-tier system began. In this system all
central-bank transactions in gold were insulated from the free market
price. Central banks would trade gold among themselves at $35 per
troy ounce (112.53 ˘/g) but would not trade with the private market.
The private market could trade at the equilibrium market price and
there would be no official intervention. The price immediately jumped
to $43 per troy ounce (138.25 ˘/g). The price of gold touched briefly
back at $35 (112.53 ˘/g) near the end of 1969 before beginning a
steady price increase. This gold price increase turned steep through
1972 and hit a high that year of over $70 (2.25 $/g). By that time
floating exchange rates had also begun to emerge, which indicated
the de facto dissolution of the Bretton Woods system. The two-tier
system was abandoned in November 1973. By then the price of gold
had reached $100 per troy ounce (3.22 $/g).
In the early 1970s, inflation caused by rising prices for imported
commodities, especially oil, and spending on the Vietnam War, which
was not counteracted by cuts in other government expenditures, combined
with a trade deficit to create a situation in which the dollar was
worth less than the gold used to back it.
In 1972, the United States reset the value to 38 dollars per troy
ounce (122.17 ˘/g) of gold. Because other currencies were valued
in terms of the U.S. dollar, this failed to resolve the disequilibrium
between the U.S. dollar and other currencies. In 1975 the United
States began to float the dollar with respect to both gold and other
currencies. With this the United States was, for the first time,
on a fully fiat currency.
The sudden jump in the price of gold after central banks gave up
on controlling it was a strong sign of a loss of confidence in the
U.S. dollar. In the absence of a gold-market-valued U.S. dollar,
investors were choosing to continue putting their faith in actual
gold. Consequently, the price of gold rose from $35 per troy ounce
(1.125 $/g) in 1969 to almost $900 (29 $/g) in 1980.
Shortly after the gold price started its ascent in the early 1970s,
the price of other commodities such as oil also began to rise. While
commodity prices became more volatile, the average exchange rate
between oil and gold remained much the same in the 1990s as it had
been in the 1960s, 1970s and 1980s.
Fearing the emergence of a specie gold-based economy separate from
central banking, and with the corresponding threat of the collapse
of the U.S. dollar, the U.S. government approved several changes
to the trading on the COMEX. These changes resulted in a steep decline
in the traded value of precious metals from the early 1980s onward.
In September 1987 under the Reagan administration the U.S. Secretary
of the Treasury James Baker made a proposal through the IMF to use
a commodity basket (which included gold) as a reference point to
manage national currencies. However, the stock market Crash of October
1987 followed by the Iran-Contra scandal distracted the administration
from such plans, and political momentum was lost.
As of May 2004[update], the U.S. reserve assets include $11,045,000,000
of gold stock, valued at $42.2222 per fine troy ounce (1.36 $/g).
Fiat standard
Today, like the currency of most nations, the dollar is fiat money,
unbacked by any physical asset. A holder of a federal reserve note
has no right to demand an asset such as gold or silver from the
government in exchange for a note. [6] Consequently, proponents
of the intrinsic theory of value believe that the dollar has little
intrinsic value (i.e., none except for the value of the paper) and
is only valuable as a medium of exchange.
In 1963 the words "PAYABLE TO THE BEARER ON DEMAND" were
removed from all newly issued Federal Reserve notes. Then, in 1968,
redemption of pre-1963 Federal Reserve notes for gold or silver
officially ended. The Coinage Act of 1965 removed all silver from
quarters and dimes, which were 90% silver prior to the act. However,
there was a provision in the act allowing some coins to contain
a 40% silver consistency, such as the Kennedy Half Dollar. Later,
even this provision was removed, and all coins minted for general
circulation are now mostly clad. The content of the nickel has not
changed since 1946.
All circulating notes, issued from 1861 to present, will be honored
by the government at face value as legal tender. But this means
only that the government will give the holder of the notes new federal
reserve notes in exchange for the note (or will accept the old notes
as payments for debts owed to the federal government). The government
is not obligated to redeem the notes for gold or silver, even if
the note itself states that it is so redeemable. Some bills may
have a premium to collectors.[citation needed]
The only exception to this rule is the $10,000 gold certificate
of Series 1900, a number of which were inadvertently released to
the public because of a fire in 1935. A box of them was literally
thrown out of a window. This set is not considered to be "in
circulation" and in fact is stolen property. However, the government
canceled these banknotes and removed them from official records.
Their value, relevant only to collectors, is approximately one thousand
dollars.[citation needed]
According to the Federal Reserve Bank of New York, there was $829
Billion in total US currency in worldwide circulation as of December
2007.
In September 2004, it was estimated that if all the gold held by
the U.S. government (261.7 million ounces = 8.14 million kilograms)
were again required to back the circulating U.S. currency ($733,170,953,704),
gold would need to be valued at $2,800/ounce (90 $/g).
Greenbacks
The federal government began issuing currency that was backed by
Spanish dollars during the American Civil War. As photographic technology
of the day could not reproduce color, it was decided the back of
the bills would be printed in a color other than black. Because
the color green was seen as a symbol of stability, it was selected.
These bills were known as "greenbacks" for their color
and started a tradition of the United States' printing the back
of its money in green. In contrast to the currency notes of many
other countries, Federal Reserve notes of varying denominations
are the same colors: predominantly black ink with green highlights
on the front, and predominantly green ink on the back. Federal Reserve
notes were printed in the same colors for most of the 20th century,
although older bills called "silver certificates" had
blue highlights on the front, and "United States notes"
had red highlights on the front.
In 1929, sizing of the bills was standardized (involving a 25% reduction
in their current sizes). Modern U.S. currency, regardless of denomination,
is 2.61 inches (66.3 mm) wide, 6.14 inches (156 mm) long, and 0.0043
inches (0.109 mm) thick. A single bill weighs about one gram and
costs approximately 4.2 cents for the Bureau of Engraving and Printing
to produce.
Microprinting and security threads were introduced in the 1991 currency
series.
Another series started in 1996 with the $100 note, adding the following
changes:
* A larger portrait, moved off-center to create more space to incorporate
a watermark.
* The watermark to the right of the portrait depicting the same
historical figure as the portrait. The watermark can be seen only
when held up to the light (and had long been a standard feature
of all other major currencies).
* A security thread that will glow red when exposed to ultraviolet
light in a dark environment. The thread is in a unique position
on each denomination.
* Color-shifting ink that changes from green to black when viewed
from different angles. This feature appears in the numeral on the
lower right-hand corner of the bill front.
* Microprinting in the numeral in the note's lower left-hand corner
and on Benjamin Franklin's coat.
* Concentric fine-line printing in the background of the portrait
and on the back of the note. This type of printing is difficult
to copy well.
* The value of the currency written in 14pt Arial font on the back
for those with sight disabilities.
* Other features for machine authentication and processing of the
currency.
Annual releases of the 1996 series followed. The $50 note on June
12, 1997, introduced a large dark numeral with a light background
on the back of the note to make it easier for people to identify
the denomination. The $20 note in 1998 introduced a new machine-readable
capability to assist scanning devices. The security thread glows
green under ultraviolet light, and "USA TWENTY" and a
flag are printed on the thread, while the numeral "20"
is printed within the star field of the flag. The microprinting
is in the lower left ornamentation of the portrait and in the lower
left corner of the note front. As of 1998[update], the $20 note
was the most frequently counterfeited note in the United States.
On May 13, 2003, the Treasury announced that it would introduce
new colors into the $20 bill, the first U.S. currency since 1905
to have colors other than green or black. The move was intended
primarily to reduce counterfeiting, rather than to increase visual
differentiation between denominations. The main colors of all denominations,
including the new $20 and $50, remain green and black; the other
colors are present only in subtle shades in secondary design elements.
This contrasts with the euro and other currencies, in which the
main banknote colors contrast strongly with one another.
The new $20 bills entered circulation on October 9, 2003, the new
$50 bills on September 28, 2004. The new $10 notes were introduced
in 2006. The new $5 bills on March 13, 2008. And the $100 note will
eventually be redesigned, but a date has not been announced. Each
will have subtle elements of different colors, though will continue
to be primarily green and black. The Treasury said it will update
Federal Reserve notes every 7 to 10 years to keep up with counterfeiting
technology. In addition, there have been rumors that future banknotes
will use embedded RFID microchips as another anti-counterfeiting
tool.
The 2008 $5 bill contains significant new security updates. The
obverse side of the bill includes patterned yellow printing that
will cue digital image-processing software to prevent digital copying,
watermarks, digital security thread, and extensive microprinting.
The reverse side includes an oversized purple number 5 to provide
easy differentiation from other denominations.
"The soundness of a nation's currency is essential to the soundness
of its economy. And to uphold our currency's soundness, it must
be recognized and honored as legal tender and counterfeiting must
be effectively thwarted," Federal Reserve Chairman Alan Greenspan
said at a ceremony unveiling the $20 bill's new design. Prior to
the current design, the most recent redesign of the U.S. dollar
bill was in 1996.
United States Dollars
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