The history of the US Dollar
The currency of the United States can be traced back to 1690 before the birth of the country when the region was still a patchwork of colonies. The Massachusetts Bay Colony used paper notes to finance military expeditions. After the introduction of paper currency in Massachusetts, the other colonies quickly followed.
Various British imposed restrictions on the colonial paper currencies were in place until being outlawed. In 1775, when the colonists were preparing to go to war with the British, the Continental Congress introduced the Continental currency. However, the currency did not last long as there was insufficient financial backing and the notes were easily counterfeited.
Congress then chartered the first national bank in Philadelphia - the Bank of North America - to help with the government's finances. The dollar was chosen to become the monetary unit for the USA in 1785. The Coinage Act of 1792 helped put together an organised monetary system that introduced coinage in gold, silver, and copper. Paper notes or greenbacks were introduced into the system in 1861 to help finance the Civil War. The paper notes used several different techniques including a Treasury seal and engraved signatures to help diminish counterfeiting. In 1863, Congress put together the national banking system that granted the US Treasury permission to oversee the issuance of National Bank notes. This gave national banks the power to distribute money and to purchase US bonds more easily whilst still being regulated.
The Federal Reserve Act of 1913 created one central bank and organised a national banking system that could keep up with the changing financial needs of the country. The Federal Reserve Board created a new currency called the Federal Reserve Note. The first federal note was issued in the form of a ten dollar bill in 1914. Finally, a decision by the Federal Reserve board was made to lower the manufacturing costs of the currency by reducing the actual size of the notes by 30%. The same designs were also printed on all dominations instead of individual designs.
The designs of the notes would not be changed again until 1996 when a series of improvements were carried out over a ten-year period to prevent counterfeiting.
The United States Dollar has been adopted, and in some cases used as the official currency, in many different territories and countries. This process of incorporating the currency of one country into a different economic market is called 'dollarization'. Dollarization of the US Dollar has occurred in the British Virgin Islands, East Timor, Ecuador, El Salvador, Marshall Islands, Federated States of Micronesia, Palau, Panama, Pitcairn Islands, and Turks and Caicos Islands.