8    Jul 20103 comments

Czech-German roots of American “green”

The US Dollar was established on 6 July, 1785 and became the official monetary unit of the U.S...

A few days ago the whole USA celebrated its 225th birthday! Congrats!

On July 6, 1785, the United States baptized "green" as its national tender. At that time nobody could have imagined that the dollar would become the most important currency in the global economy.

The Dollar's family tree has its roots in the Czech city Jáchymov where its name originated from: Joachimsthaler. Silver coins were launched into circulation by the German princes in the sixteenth century in Europe. Over time the name changed from coins to thalers. Germany had its own official name for it: Reichsthaler and in England they were called rix-dollar. With the popularity of silver coins in the American colonies, the dollar finally reached American territory.

Immediately after the declaration of independence, the United States established its own currency: the Dollar. Unlike British silver coins the Dollar changed its form to a one color, paper banknote. The primary objective was to provide a currency for young America, a convenient way of payment to cover the high costs of the war with England. Each banknote guaranteed a nominal exchange value of the Spanish peso or the equivalent in silver or gold. The parity of gold proved to be the salvation of the U.S. in 1934, when America tried to recover from the effects of the Great Depression.

Printing of the dollar and its characteristic green face we are familiar with today initially began in 1928. Interestingly, since the origination of the U.S. dollar the company Crane&Company of Dalton has had a monopoly on the printing of banknotes. For 225 years, Dollars have been printed on high quality paper consisting of 75 percent of cotton and 25 percent of flax. The banknote with the highest value was the $100,000 bill. It was printed in the 30's in a limited number of about 300 notes. It was printed to served the settlement of federal fiscal services.

It appears that the viability of U.S. dollars varies depending on the value of the note. 100 dollar banknotes in circulation are around 9 years old, the 20-dollar banknote is able to survive for only four years, and the 1 dollar banknote is destroyed after about two years from printing. The king of all currencies bravely defends his throne.

The U.S. dollar is the most widely used currency in international settlements. The dollar plays a significant role in the global economy. It gained so much popularity after the Second World War in 1945 that 26 other countries borrowed the name "dollar" for their currencies, including Canada, Australia and Singapore.

The international nature of American currency is also apparent in that over two thirds of U.S. dollars are currently situated outside the United States. The size and stability of the U.S. economy has encouraged other countries to develop their foreign exchange reserves in this successful currency. As the United States has been severely affected by the financial crisis in recent times competition between American "green" and the Euro has increased. In December 2006, European currency outstripped U.S. in terms of value of cash in circulation. Dethroning the dollar from the position of the leading world currency, however, seems to be impossible for now.

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