USD (United States Dollar)
The United States Dollar (USD) is the official currency of the United States and one of the most powerful currencies of all economies.
In this article, we will learn more about the U.S. dollar and other aspects of it. Earlier, the dollar was not used to be much powerful currency. The interesting thing here is that after India's independence in 1947, the value of the dollar and the Indian rupee were almost at the same level. However, by 2023, 1 U.S. dollar ($) is approximately equal to Rs.82. Also, the dollar became a global currency over time.
USD was introduced under the Coinage Act of 1792. The symbol of the United States Dollar is $, and the code used for it is USD. USD is not just the official currency of the United States; some other countries have also made the USD their official currency. USD is used on a very large level in international transactions.
Like the Reserve Bank of India, U.S. Federal Reserve acts as the U.S.'s central bank. It is responsible for making monetary policies and for the proper circulation of money in the U.S.
U.S. Dollar: The Strongest Currency in the World
To understand better why the dollar is the strongest currency in the world, it is important to know its history.
The history of the United States Dollar coin can be traced back to the 16th to 19th century when Spanish Dollar was used in Spanish America. In fact, the appearance of the United States Dollar coin was inspired by the Spanish Dollar. But after the introduction of the Coinage Act of 1857, the Spanish dollar was stopped from being circulated in the country as legal currency.
To provide funding for the Civil War of 1861, U.S. dollar notes were first published as demand notes. The green colour of the notes was the reason why such notes were also commonly called greenbacks.
In 1862, the legal tender was published, which used to be known as United States Notes. Later, in the year 1869, a standard system was developed for the printing of notes.
Bretton Wood Agreement was a global monetary system, and the dollar became a global currency after the year 1944 when Bretton Wood Agreement was signed. World War II and Great Depression affected the world very badly, and therefore the need for a global monetary system was raised.
After World War II, developments in many sectors were started, and a new monetary system was formed. This new monetary system replaced the old Gold Standard System.
Under the Standard Gold System, the quantity of gold in a country was measured, and on the basis of that, everything was evaluated. But the USD replaced this as it was powerful. After some time, the IMF and World Bank were established. And from this time, America became the dominant power because it was the only country that could print dollars.
After that, the government of the USA asked people to sell their gold in exchange for dollars. New Hampshire exchanged all its currency for U.S. dollars. Even today, every country keeps dollars as a reserve currency while doing many international trade transactions.
Later in the 1970s, there was an economic slowdown and oil crisis, President Nixon asked people to sell all their gold in exchange for currencies to fight inflation, and therefore, for this reason, too, the dollar emerged as a very powerful currency.
Current United States Dollar Notes
Currently, U.S. dollar notes are available in the form of $1, $2, $5, $10, $20, $50, and $100. Earlier, there used to be notes of value more than $100, but later, in 1945, the printing of notes of value higher than $100 was prohibited, but it was not stopped from being circulated until 1969.
After that, President Nixon introduced a law to ban the printing of notes of large denominations as such notes were used by criminal organizations and also because of the emergence of electronic banking and its popularity.
Later, the notes were started printing in different colours also. The Bureau of Engraving and Printing also came up with some new fonts and designs to redesign the notes. The new notes were printed in such a way as to make it easy for visually disabled citizens to use such notes and to determine which notes they were using.
For the payment of products and services, the U.S. Mint is responsible for manufacturing and distributing coins. Currently, U.S. dollars are present in different denominations, which include 1 cent, 5 cents, 10 cents, 25 cents, 50 cents, and $1. U.S. Mint also issues remembrance coins to honour any individual, place, or event.
The Federal Reserve System of the United States controls the volume of the money being circulated in the country. For the execution of monetary policy, investment by the Federal Reserve System is made in open market activities on every business day. The monetary policy is evaluated by a committee named the Federal Open Market Committee, which consists of 12 members, and the meeting is held eight times a year.
In addition to this, Federal Reserve acquires securities from the banks in exchange for dollars if there is a need to increase the money supply in the market, whereas Federal Reserve sells the securities to the banks if there is a need to decrease the money supply in the market.
The U.S. dollar is represented by the sign $, which is often written before the number quantity. The peso, which was the general term for the Spanish dollars that were widely used in the new world from the 16th to the 19th centuries, underwent a development in the late 18th century that led to the creation of the symbol. Eventually, the p and the s were written atop one another, creating the new symbol $.
Another popular interpretation of the sign $ is that it has been derived from the pillar of Hercules, which was engraved on the Spanish dollar. These two pillars of Hercules were represented on the coin in the form of two vertical bars (||), and a swinging cloth band on the coin was in the shape of S, and these two symbols, when combined, formed the symbol of $.
There is another theory that novelist Ayn Rand and Atlas Shrugged gave. According to their theory, the symbol of the U.S. dollar is the combination of the two letters U and S. They also rejected the theory that the symbol $ was in use before the formation of the United States.
Global Trade and U.S. Dollars
U.S. Dollars play a very dominating role in global trade. In 2019, more than 88% of global transactions were done using U.S. Dollars. Not a single other currency was even close to U.S. Dollars. U.S. Dollars has its effects on almost all the countries which import or export any goods or services. Many essential commodities, like oil, gold, or coffee, are all priced in dollars no matter where they come from or what is their source of origin.
Recently, many countries have been planning to come up with alternatives to U.S. Dollars. The rival countries of America are the most frustrated ones because of the dominance of U.S. Dollars in global trade, as they have to use U.S. Dollars to make international transactions.
What makes the U.S. Dollar the most used currency by businesses is that the dollars are incredibly liquid. It means that using U.S. Dollars makes it easier for the country to buy and sell things worldwide. The U.S. Banking system is also very efficient, which also makes it cheaper for businesses to buy and sell in dollars.
The United States used the power of the dollar to advance its foreign policy goals after the terror attack of 9/11 in the country. The motive behind this was to stop the funding received by terrorist organizations. Since the United States have control over U.S. Dollars, it was easy for them to track down the flow of money globally as most countries use dollars. By tracking down the bad sectors, they started imposing restrictions on such sectors and even the nation responsible. One of the countries on which the United States imposed sanctions was Iran. However, this sanction was opposed by some countries of the E.U. (European Union).