US Dollar

US Dollar, monetary unit of the United States of America. The US dollar consists of 100 cents. After the American War of Independence, the Continental Congress adopted the decimal system of coinage. The first dollars minted in the United States were issued by the federal government in Philadelphia in 1794, following passage of the Coinage Act of 1792. The act provided for two standards of value: a silver dollar containing 371.25 g of pure silver and a gold dollar containing 24.75 g of pure gold. The gold dollar, a very small coin, was minted only from 1849 to 1889. Over the years revisions in the coinage law have changed the silver and gold content in the dollar.

A congressional enactment in 1900 established the gold dollar as the monetary standard of value in the United States, thereby fixing the value of legal-tender paper money in terms of the metallic gold dollar. Before 1934, paper currency was backed by full-weight gold (or silver) coins; that is, it could be redeemed for metallic money containing gold or silver. Following the passage of the Gold Reserve Act of 1934, the gold content of the dollar was reduced to 13.71 g; all gold coins and paper-money gold certificates except those in the hands of coin dealers and private collectors were called in by the federal government and exchanged for other forms of the national currency of equal face value; and the coining of gold pieces was officially discontinued. At that time, about $311 million in gold pieces was in circulation. Since then, circulating currency, both paper and coin, has been fiat money, the worth of which is derived from its purchasing power rather than from its redeemable value. The US dollar has officially undergone devaluation several times since the Gold Reserve Act. During the 1970s the value of the dollar dropped sharply against more stable currencies, while the price of gold climbed. The US economic recovery of the early 1980s reversed this pattern. Silver dollars continued in circulation until 1965, when they almost disappeared because the value of their silver content exceeded their face value. Beginning in 1975, US citizens were allowed to own, buy, and sell gold as a commodity, but gold coins could not circulate as money.

The dollar ranks as the world's premier international reserve currency. More than 60 per cent of global foreign-exchange reserves are held in dollars, as well as more than half of global private wealth; more than two thirds of world trade is invoiced in dollars.