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United States dollar

From Academic Kids

Contemporary United States Coins and Notes
Unit ($) Design on Obverse Design on Reverse
Coins
0.01 (penny, cent) Abraham Lincoln Lincoln Memorial
0.05 (nickel) Thomas Jefferson Westward Journey Commemorative Designs
0.10 (dime) Franklin D. Roosevelt torch, oak branch, olive branch
0.25 (quarter) George Washington Statehood designs
0.50 (half dollar) John F. Kennedy Presidential Coat of Arms
1.00 Sacagawea Eagle in flight
Federal Reserve Notes
1 George Washington Great Seal of the United States
2 Thomas Jefferson Declaration of Independence
5 Abraham Lincoln Lincoln Memorial
10 Alexander Hamilton Treasury building
20 Andrew Jackson White House
50 Ulysses S. Grant U.S. Capitol
100 Benjamin Franklin Independence Hall

The United States dollar, or American dollar, is the official currency of the United States. It is also widely used as a reserve currency outside of the United States. Currently, the issuance of currency is controlled by the Federal Reserve Banking systems. The most commonly used symbol for the U.S. dollar is the dollar sign ($). The ISO 4217 code for the United States Dollar is USD; the U.S. dollar is also referenced as US$ by the International Monetary Fund. In 1995, over $380 billion (380 G$) in U.S. currency was in circulation, two-thirds of it overseas. As of April 2004 nearly 700 G$ [1] (http://www.federalreserve.gov/boarddocs/speeches/2004/20040426/default.htm) was in circulation, with an estimated half to two-thirds of it still being held overseas [2] (http://www.federalreserve.gov/paymentsystems/coin/default.htm).

The United States is one of many countries that use a currency known as a dollar. Several countries use the U.S. dollar as their official currency, and many others allow it to be used in a de facto legal capacity. See dollar.

The slang term buck is often used to refer to a U.S. dollar. This term, dating to the 18th century, may have originated with the colonial fur trade. Grand, sometimes shortened to simply G, is a common term for the amount of 1,000 of several currencies, including dollars.

Contents

Overview

The U.S. dollar is most commonly divided into 100 cents (symbol ). In another division, there are 1,000 mills to a dollar; additionally, an amount of ten dollars has been referred to as an eagle. However, only cents are in everyday use as divisions of the dollar; "eagle" and "mill" are largely unknown to the general public, though mills are sometimes used in matters of tax levies. 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. (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 twenty dollars.

U.S. coins are produced by the United States Mint. U.S. dollar banknotes have been printed by the Bureau of Engraving and Printing for the Federal Reserve since 1914. They began as large-sized notes. In 1928, they switched to small-sized notes, for reasons that are to be explained.

Missing image
One_US_dollar_1917.jpg
One US dollar (1917)

Notes above the $100 denomination ceased being printed in 1946 and were officially withdrawn from circulation in 1969. These notes were used primarily either in inter-bank transactions or by organized crime; it was the latter usage that prompted President Richard Nixon to issue an executive order in 1969 halting their use. With the advent of electronic banking, they became unnecessary. Notes in denominations of $500, $1,000, $5,000, $10,000, and $100,000 were all produced at one time; see large denomination bills in U.S. currency for details. See History of the American dollar for more info about the currency's history.

United States coins

In normal circulation, there are coins in the denominations 1 (penny), 5 (nickel), 10 (dime), 25 (quarter), 50 (half dollar; uncommon), and $1 (uncommon).

Dollar coins have never been popular in the United States. Silver dollars were created from 1794 through 1935 with a few short gaps; then a copper-nickel dollar of the same large size was minted from 1971 through 1978. The Susan B. Anthony dollar coin was introduced in 1979; these proved to be unpopular because they were often mistaken for quarters, thanks to their nearly-equal size, their milled edge, and their similar color. Minting of these dollars quickly stopped, but, as with all past U.S. coins, they remain legal tender. In 2000, a new $1 coin featuring Sacagawea was introduced, which corrected some of the mistakes of the Anthony dollar by having a smooth edge and a gold color. However, this new coin has failed to achieve the popularity of the still-existing $1 bill and is rarely used in daily transactions. The failure to simultaneously withdraw the dollar bill and weak publicity efforts have been cited by coin proponents as primary reasons for the failure of the dollar coin to gain popular support.

Reaching into the past, the United States has minted other coin denominations since 1793: half-cent, two-cent, three-cent, twenty-cent, $2.50, $3.00, $4.00, $5.00, $10.00, and $20.00. Technically, all these coins are still legal tender at face value, though they are all worth far more to any coin collector.

The United States also produces gold and platinum bullion coins, all of which are legal tender though their use in everyday transactions is virtually non-existent. The reason for this is that they are not intended for use in transactions and thus the face value of the coins are much lower than the worth of the precious metals in them. The gold bullion coins are products of the American Eagles Gold Proof program, and the denominations (with gold content) are: $5 (1/10 troy oz), $10 (1/4 troy oz), $25 (1/2 troy oz), and $50 (1 troy oz). The platinum bullion coins are products of the American Eagles Platinum Proof program, and the denominations (with platinum content) are: $10 (1/10 troy oz), $25 (1/4 troy oz), $50 (1/2 troy oz), and $100 (1 troy oz). The gold coins are 91.67% gold (22 karat) and the platinum coins are 99.95% platinum. It may be interesting to note that the largest denomation of currency currently printed or minted by the United States is the $100 bill and the $100 troy ounce Platinum Eagle.

Criticisms of U.S. coins

Uniquely for a major currency, the value of U.S. coins is not inscribed on them with a number. Instead, the value is written in English words, presenting potential difficulties for visitors to the country that do not speak the language well. Furthermore, the coins' inscriptions do not follow a consistent pattern of describing the value in cents: "One Cent" (penny), "Five Cents" (nickel) "One Dime" (dime, worth 10 cents), "Quarter Dollar" (quarter, worth 25 cents), and "Half Dollar" (worth 50 cents); knowledge of these terms is required for visitors. (It may also be necessary for visitors to learn the coins' colloquial names.)

For historical reasons, the size of the coins does not increase consistently with their face value. Both the one cent (penny) and the five cent (nickel) are larger than the dime, worth ten cents, and the less common 50-cent coin is larger than the recent Sacagawea and Susan B. Anthony dollar coins. The sizes of the dime, quarter, and half dollar are holdovers from before 1964, when they were made from 90% silver; their sizes thus depended upon the amount of silver which cost their respective values, and helps explain why the dime is the smallest of the coins. The current diameter used in dollar coins was introduced after 1964, so their size was not dependent upon silver, and was thus chosen somewhat arbitrarily, with no relation to the Morgan silver dollars of the previous century.

Criticisms of U.S. banknotes

Despite the relatively late addition of color and other anti-counterfeiting features to U.S. currency, critics hold that it is still a straightforward matter to counterfeit the bills. They point out that the ability to reproduce color images is well within the capabilities of modern color printers, most of which are affordable to many consumers. These critics suggest that the Federal Reserve should incorporate holographic features, as are used in most other major currencies, such as the Canadian dollar, Swiss franc, and euro banknotes, which are much more difficult and expensive to forge. Another robust technology, developed in Australia and adopted by several countries, produces polymer banknotes.

However, U.S. currency may not be as vulnerable as it is said to be. Two of the most critical anti-counterfeiting features of U.S. currency are the paper and the ink. The exact composition of the paper is confidential, as is the formula for the ink. The ink and paper combine to create a distinct texture, particularly as the currency is circulated. These characteristics can be hard to duplicate without the proper equipment and materials. U.S. notes, however, remain less secure than most other notes, and while a bank might be able to detect fine differences in paper and ink technology, counterfeit notes generally receive far less scrutiny at a point of sale.

Critics also note that U.S. bills are often hard to tell apart: They use very similar designs, are printed in the same colors, and are the same size. Advocates for the blind have argued that they should be printed in increasing sizes according to value and employ braille codes to make the currency more usable by the vision-impaired, since the denominations cannot easily be distinguished from one another nonvisually. Though some vision-impaired or blind individuals say that they have learned to determine the different denominations by feel, many others rely on currency readers; still others have their bills each folded differently to quickly identify the denomination. This, however, initially requires the assistance of a sighted person and is thus not a complete solution.

By contrast, other major currencies, such as the euro feature notes of differing sizes: the size of the note increases with the denomination and are printed in different colors. This is useful not only for the vision-impaired. They nearly eliminate the risk that, for example, someone might fail to notice a high-value note among low-value ones, a common problem in the United States. Tourists also frequently encounter difficulties with U.S. money, as they are less familiar with the design cues that distinguish the various denominations.

Multiple currency sizes were considered for U.S. currency, but makers of vending and change machines successfully argued that implementing such a wide range of sizes would greatly increase the cost and complexity of such machines. Similar arguments were made in Europe prior to the introduction of multiple note sizes, but these arguments were obviously not successful.

Alongside the contrasting colors and increasing sizes, many other countries' currencies contain tactile features missing from U.S. banknotes to assist the blind. For example, Canadian banknotes have a series of raised dots (though not standard braille) in the upper right corner to indicate denomination.

Apart from their value in helping users to tell notes apart, the differing sizes of other currency banknotes are a security feature that eliminates one form of counterfeiting to which U.S. currency is prone: Counterfeiters can simply bleach the ink off a low-denomination note, typically a single dollar, and reprint it as a higher-value note, such as a $100 bill. To counter this, the U.S. government has debated making lower-denomination notes slightly smaller than those of higher denomination. Current proposals suggest making the $1 and $5 bills an inch shorter in length and a half-inch shorter in height; however, having two sizes of banknotes but six denominations, rather than incrementally increased sizes, would not eliminate the problem of their usability for the blind.

International use

U.S. $100 note, featuring a picture of .
U.S. $100 note, featuring a picture of Benjamin Franklin.

A few nations besides the United States use the U.S. dollar (USD) as their official currency. Ecuador, El Salvador, and East Timor all adopted the currency independently. The former members of the US-administered Trust Territory of the Pacific Islands, including Palau, the Federated States of Micronesia and the Marshall Islands, did not choose to issue their own currency after becoming independent.

Additionally, the local currencies of Bermuda, the Bahamas, Panama, and a few other states can be freely exchanged at a 1:1 ratio for USD. The currency of Barbados is similarly convertible at a 2:1 ratio. Argentina used a fixed 1:1 exchange rate between the Argentine peso and the U.S. dollar from 1991 until 2002. In Lebanon, one dollar is equal to 1500 Lebanese lira, and is used interchangeably with local currency as a de facto legal tender. The exchange rate between the Hong Kong dollar and the United States dollar has also been linked since the early 1983 at HK$7.8/USD, and Pataca of Macao, pegged to Hong Kong dollar at MOP1.03/HKD, indirectly linked to the US dollar roughly at MOP8/USD. The renminbi used by the People's Republic of China has been informally and controversially pegged to the dollar since the mid-1990s at Y8.28/USD. Malaysia has formally pegged its ringgit at MR3.8/USD since 1997.

The dollar is also used as the standard unit of currency in international markets for commodities such as gold and oil. Even foreign companies with little direct presence in the United States, such as the European company Airbus, list and sell their products in dollars.

At the present time, the U.S. dollar remains the world's foremost reserve currency, primarily held in $100 denominations. The majority of U.S. notes are actually held outside the United States. According to economist Paul Samuelson, the overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate and the flow of trade to readjust.

Not long after the introduction of the euro (€; ISO 4217 code EUR) as a cash currency in 2002, the dollar began to steadily depreciate in value on the international scene. After the euro started to rise in value in March 2002, the U.S. trade and budget deficits continued to increase. By Christmas 2004 the dollar had fallen to new lows against all major currencies, especially its rival the euro. The euro rose above $1.36 /€ (under 0.74 €/$) for the first time in late December 2004, in sharp contrast to its lows in early 2003 (rate of $0.87/€). Beginning in late May into early June though the Dollar rose sharply against the Euro as European states reported stagnation in the overall EU economy and doubts were raised over the EU Constitution which was voted down in two member states: France and The Netherlands. As unemployment rates rise in the Euro zone and economic growth slows the EU may see a drop in the value of the Euro against the Dollar for at least part of 2005 although the Euro is expected to maintain its strength if not in a slightly diminished manner.

Origin of the name dollar

The name for the United States dollar comes from the Spanish dollar (which itself derived from the thaler). The Spanish dollar was the silver coin widely circulated in the United States during the time of the American Revolutionary War. Although private banks issued currency that was backed in Spanish dollars, the federal government did not do so until the American Civil War.

For further history of the name, see Dollar.

The dollar symbol

Full article: Dollar sign

The origin of the "$" sign has been variously accounted for. Perhaps the most widely accepted explanation, according to the U.S. Bureau of Engraving and Printing, is that it results from the evolution of the Mexican or Spanish "P's" for pesos, or piastres, or pieces of eight. This theory, derived from a study of old manuscripts, explains that the "S" gradually came to be written over the "P," developing a close equivalent to the "$" mark. It was widely used before the adoption of the U.S. dollar in 1785.

A dollar symbol with two vertical strokes is sometimes used. This is sometimes attributed to the idea of superimposing "U" and "S," but the form appears already to have existed when the future United States was still a number of British colonies. The two slashes are thought to represent the two pillars at the original temple of Solomon in Jerusalem.

For further information about the symbol, see Dollar.

Current USD exchange rates

AUD (http://finance.yahoo.com/currency/convert?amt=1&from=AUD&to=USD&submit=Convert) | CAD (http://finance.yahoo.com/currency/convert?amt=1&from=CAD&to=USD&submit=Convert) | EUR (http://finance.yahoo.com/currency/convert?amt=1&from=EUR&to=USD&submit=Convert) | GBP (http://finance.yahoo.com/currency/convert?amt=1&from=GBP&to=USD&submit=Convert) | INR (http://finance.yahoo.com/currency/convert?amt=1&from=INR&to=USD&submit=Convert) | NZD (http://finance.yahoo.com/currency/convert?amt=1&from=NZD&to=USD&submit=Convert) | BRL (http://finance.yahoo.com/currency/convert?amt=1&from=BRL&to=USD&submit=Convert) | Lots of exchange rates (http://www.exchangerate.com)

External links

United States currency and coinage
Topics: Federal Reserve note | United States Notes | United States coinage | United States dollar
Currency: $1 | $2 | $5 | $10 | $20 | $50 | $100 | Larger denominations
Coinage: Cent | Nickel | Dime | Quarter | Half-dollar | Dollar

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