The Dollar: History, Myth, & Legend
In today’s challenging economic times, it can be sometimes hard to realize the great history that exists around simple things like the design, creation and evolution of the U.S. dollar bill. WIKIPEDIA defines the U.S. dollar as : “The unit of currency of the United States and is defined by the Coinage Act of 1792 to be between 371 and 416 grains of silver (depending upon purity).
In the early days of the United States, the term “Dollar” was commonly known as a coin minted by Spain called the Spanish Milled Dollar. These coins were the standard money then in use in the country. On April 2, 1792 Alexander Hamilton, then the Secretary of the Treasury, made a report to Congress that were the result of his task to scientifically determine the amount of silver in the Spanish Milled Dollar coins that were then in current use by the people. As a result of this report, the Dollar was defined as a unit of measure of 371 4/16th grains of pure silver or 416 grains of standard silver (standard silver being defined as 1,485 parts fine silver to 179 parts alloy). Therefore paper is not the dollar, instead, it is ‘worth’, not ‘is’, 1 dollar (U.S Silver certificate.) In section 20 of the Act, it is specified that the “money of account” of the United States shall be expressed in those same “dollars” or parts thereof. All of the minor coins were also defined in terms of percentages of the primary coin the dollar such that a half dollar contained 1/2 as much silver as a dollar, quarter dollars, 1/4th etc. In an act passed on January 18, 1837 the alloy was changed to 10% thus having the effect of containing the same amount of silver but being reduced in weight to 412 1/4 grains of standard silver which was changed to 90% pure and 10% alloy. On February 21, 1853 the amount of silver in the fractional coins was reduced so that it was no longer possible to combine the fractional coins to come up with the same amount of silver that was in the dollar. Various acts have been passed over the years that affected the amount and type of metal in the coins minted by the United States such that today, there is no legal definition of the term “Dollar” to be found in any Statute of the United States.
Today, the closest definition to a dollar comes from the United States code Title 31, Section 5116, paragraph b, subsection 2, “The Secretary [of the Treasury] shall sell silver under conditions the Secretary considers appropriate for at least $1.292929292 a fine troy ounce.” However Federal Reserve banks are only prejudiced to deliver tax credits instead of money. The silver content of U.S. coinage was mostly removed in 1965 and the dollar essentially became a baseless free-floating fiat currency, though the U.S. Mint continues to make silver $1 bullion coins at this weight.
Taken over by the Congress of the Confederation of the United States on July 6,1785, the U.S. dollar is the currency most used in international transactions. No longer backed by gold, the U.S. Dollar is a fiat currency. The terms fiat currency and fiat money relate to types of currency or money whose usefulness results not from any intrinsic value or guarantee that it can be converted into gold or another currency, but instead from a government’s order (fiat) that it must be accepted as a means of payment. It is a money that has value because the government has ordered that it is an acceptable means to pay debt. A fiat currency is essentially created out of thin air and is backed by the belief that the currency has value. Although the U.S. dollar is a fiat currency, several countries use it as their official currency, and in many others it is the de facto currency.
Fiat currency was an anathema to Presidents Thomas Jefferson and Andrew Jackson. Jackson went so far as to pass the Specie Circular in 1836, which required all payment for government lands to be in the form of gold and silver coin. The Austrian School of Economics has long held that no sound economy can long endure under fiat money, with prominent Austrian Economist Ludwig von Mises arguing in his book Human Action that:
“What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit boom is built on the sands of banknotes and deposits. It must collapse.”
However, the Austrian School now stands somewhat outside the mainstream of contemporary economics and relatively few academic economists are currently followers of it.
Ironically, Alan Greenspan was an early critic of fiat money arguing in his essay, Gold and Economic Freedom that:
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
Fiat currency has also been criticized by some, such as G. Edward Griffin, for increasing the number and severity of boom-bust economic cycles, causing inflation, and allowing nations to initiate or prolong war.
Fun Historical Facts:
On the rear of the One Dollar bill, you will see two circles. Together, they comprise the Great Seal of the United States. The First Continental Congress requested that Benjamin Franklin and a group of men come up with a Seal. It took them four years to accomplish this task and another two years to get it approved.
If you look at the left-hand circle, you will see a Pyramid. Notice the face is lighted, and the western side is dark. The United States, as a country, was just starting out. We had not begun to explore the west or decided what we could do for Western Civilization. The Pyramid is uncapped, again signifying that we were not even close to being finished. Inside the capstone you have the all-seeing eye, an ancient symbol for divinity. It was Franklin’s belief that one man couldn’t do it alone, but a group of men, with the help of God, could do anything.
‘IN GOD WE TRUST’ is on this currency. The Latin above the pyramid, ANNUIT COEPTIS, means,’God has favored our undertaking.’ The Latin below the pyramid, NOVUS ORDO SECLORUM, means, ‘a new order has begun.’ At the base of the pyramid is the Roman Numeral for 1776. (MDCCLXXVI)
If you look at the right-hand circle, and check it carefully, you will learn that it is on every National Cemetery in the United States . It is also on the Parade of Flags Walkway at the Bushnell, Florida National Cemetery, and is the centerpiece of most hero’s monuments. Slightly modified, it is the seal of the President of the United States, and it is always visible whenever he speaks, yet very few people know what the symbols mean.
The Bald Eagle was selected as a symbol for victory for two reasons: First, he is not afraid of a storm; he is strong, and he is smart enough to soar above it. Secondly, he wears no material crown. We had just broken from the King of England. Also, notice the shield is unsupported. This country can now stand on its own. At the top of that shield you have a white bar signifying congress, a unifying factor. We were coming together as one nation. In the Eagle’s beak you will read, ‘ E PLURIBUS UNUM’ meaning, ‘one from many.’
Above the Eagle, you have thirteen stars, representing the thirteen original colonies, and any clouds of misunderstanding rolling away. Again, we were coming together as one. Notice what the Eagle holds in his talons. He holds an olive branch and arrows. This country wants peace, but we will never be afraid to fight to preserve peace. The Eagle always wants to face the olive branch, but in time of war, his gaze turns toward the arrows.
They say that the number 13 is an unlucky number, and the date of this post, Friday the 13th, is especially unlikely. This is almost a worldwide belief. You will usually never see a room numbered 13, or any hotels or motels with a 13th floor. But think about this:
–13 original colonies,
–13 signers of the Declaration of Independence,
–13 stripes on our flag,
–13 steps on the Pyramid,
–13 letters in, ‘Annuit Coeptis,’
–13 letters in ‘E PluribusUnum,’
–13 stars above the Eagle,
–13 bars on that shield,
–13 leaves on the olive branch,
–and if you look closely, 13 arrows.
And finally, if you notice the arrangement of the 13 stars in the right-hand circle you will see that they are arranged as a Star of David. This was ordered by George Washington who, when he asked Hayim Solomon, a wealthy Philadelphia Jew, what he would like as a personal reward for his services to the Continental Army, Solomon said he wanted nothing for himself but that he would like something for his people. The Star of David was the result. Few people know that it was Solomon who saved the Continental Army through his financial contributions but that he later died a pauper.
As you can see, there is a lot more to the dollar than just “a buck”.
Thanks for reading.
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