The Story of American Dollar $$$

There is a long history behind USD and how it became the currency as it is today, but we will start from the late 18th century. It all started with the American Revolutionary War, also known as the American Revolution that took place between 1765 - 1783 in which American patriots in Thirteen Colonies won independence from Great Britain. The American revolution was one of the first mile stones in the making of American Dollar. During this time period American Congress issued, what they called Continental Dollar to finance the American Revolution. Continental Dollar were a paper currency and were used until late 1700's and demised somewhere between 1779 & 1790. They were unofficially still used till 1914. The main reason behind the fall of Continental Dollar was Hyperinflation.

From 1790 up until 1913 American currency system was a mishmash of private bank notes issued by state chartered banks; special coins issued by Treasury; and also foreign coins & bank notes. In 1913 under Federal Reserve Act, US Central Bank was created to furnish elastic currency (US Dollar).

The most important thing to note here is that both, world war 1 and world war 2 played a significant role in scaling American Dollar. During world war 1 countries opted for paper currency to be used in war. This resulted in higher supply of currencies by countries involved in war, which in turn resulted in Inflation. Before this point of time Britain was the main lender to other countries and with the continuation of WW1 Britain went from Lender to Borrower. In October 1915 J,P Morgan of the US organised Anglo- French Loan to fund Allied European Powers. Since United States itself entered WW1 at a later stage after 1917, It has more money left than other countries including Great Britain. By 1925 Dollar had become the world's leading currency.

Now let's move our focus to WW2. The United states, once again entered the war at a later stage. During the initial stages of this war, the US didn't participated in the war directly. Instead the US spend this time shipping exports to its Allies (which they needed during war) and in return collected Gold from these countries. As a result of this, by the end of the war most of the World's Gold was owned by the US.

As a result of all this the World Monetary System, which was previously based on Gold was forced to change and all the advanced Economies at that time agreed to base World Monetary System on the US Dollar. In 1944 The Bretton Woods Agreement was a colossal step in establishing the US Dollar as the Global Currency.

Bretton woods Agreement: The Bretton system was a necessary and important step taken in favor of global coordination. It made sure to take the world off the Gold system and established the US Dollar as the Global Currency. This system created The World Bank and The International Monetary Fund which in turn would monitor the New Monetary System.

Bretton Woods established America as the dominant power behind these two organisations and the world economy. That is because it replaced the Gold Standard with the US Dollar. After the agreement was signed, American was the only country with the ability to print dollars. 

This in short is the story behind the dominance of American Dollar.

How exactly did Bretton Woods System came into existence and how it contributed towards the dominance of the US Dollar will be explained in my next blog.

Thank you all.