“What is a Dollar?” A History of the United States Dollar

Have you ever stopped to think about what a dollar really is?

We know we can purchase items with it. And we know that these dollars (Federal Reserves Notes) are made out of paper and ink. But we also know that there are some dollars, like the Sacagawea dollar, that are made out of metal. How can they both be called dollars? Are they called dollars because we use them as a means of exchange or because they have their own inherent value? What exactly is a dollar and would trying to define it have serious ramifications on our monetary system? The latest documentary from Historical Spotlight deals with these questions.

We first illustrate the confusion in the current United States monetary system that has assigned the term ‘dollar’ to money of differing materials and purchasing powers. Next, we turn to history, examining colonial times to shortly after the ratification of the Constitution in order to definitively show that historically the U.S. dollar legally was defined as a silver coin consisting of 374.25 grains of fine silver. We also highlight the era from the Civil War to 1913, demonstrating the devolution of the dollar into legal tender paper money. From 1913 to the present, we look at the transformation of the dollar from a gold backed paper currency into pure fiat Federal Reserve Notes. Our epilogue warns of the dangerous federal debt and inflationary possibilities inherent in today’s type of money.

At Historical Spotlight, we believe that having a correct understanding of our monetary system is an essential part of securing our liberty.

Ludwig von Mises once wrote, “It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.”

Our documentary What is a Dollar? will give you a deeper understanding of the money you use everyday, and perhaps have you rethink what should and should not be called a dollar.

Historical Topics Covered

  • The Federal Reserve Note
  • Redemption of the Federal Reserve Note
  • Different types of current dollars
  • The U.S. Constitution’s references to the dollar
  • Early U.S. considerations on the use of the “dollar” (1776)
  • The Spanish Milled Dollar
  • United States paper currency (1775 – 1779)
  • Early development of a U.S. monetary system
  • The adoption of the dollar (Hamilton’s suggestions, the Coinage Act of 1792)
  • Legal Tender Act of 1862
  • U.S. currency (1866 – 1913) Specie Resumption Act, National Banking Acts
  • U.S. currency (1913 – present) early Federal Reserve Notes, Emergency
  • Banking Act 1933, Executive Order #6102, evolution of the Federal Reserve
  • Note, redemption suspension
  • Implications (inflation, national debt)

Questions to Ponder & Discuss

1. According to the U. S. Code what is a dollar?

2. What is the money a dollar expresses?

3. List some characteristics of a paper dollar.

4. What are some characteristics of a Federal Reserve Note?

5. Why does the federal government guarantee the Federal Reserve note?

6. What kind of lawful money would we receive as redemption for the dollar?

7. How is a Federal Reserve dollar similar or dissimilar to a Sacagawea dollar?

8. How is a Sacagawea dollar similar or dissimilar to a $1 silver eagle?

9. How is a Sacagawea dollar similar or dissimilar to a $5 gold coin?

10. Where are the two places in the U. S. Constitution that a dollar is mentioned? What do they say about the fixed value of a dollar?

11. What coin did the U.S. first adopt as a standard to measure other coins?

12. What was a Spanish dollar? What was unique about the Spanish dollar that made it useful as a standard to measure other coins and made it the most stable and least debased coin in the world?

13. What were Continental dollars, and when were they issued? What is another name for a Continental dollar?

14. A bill of credit is a promise to pay in what kind of asset?

15. Describe the history of the Continental dollar.

16. In 1784 Thomas Jefferson suggested that the money unit of the United States be equal in value to what coin?

17. By 1787 Congress determined that a dollar should contain how many grains of silver?

18. What is Alexander Hamilton’s definition of the money unit of the United States?

19. What did Alexander Hamilton say the security and steady value of property essentially depended on?

20. What is the definition of the money unit of the United States used in the Coinage Act of 1792?

21. What does Article I, Section 8, Clause 5 of the U.S. Constitution state about Congress and the United States money?

22. Briefly describe the Legal Tender Bill of 1862.

23. What is a Greenback or United States Note?

24. What does legal tender mean?

25. Did a $1 greenback equal 371 grains and 4/16 parts of a grain of fine silver?

26. In reference to the Constitution, was the greenback a dollar?

27. Describe the depreciation of the greenback.

28. Describe the Specie Payment Resumption Act of 1875.

29. What was a silver certificate and what could it be redeemed for?

30. What did the U.S. National Banking Acts of 1863 & 1864 establish?

31. Briefly describe the National Banking Acts.

32. Could National Bank Notes be redeemed?

33. Were National Bank Notes legal tender?

34. Why did the federal government place a 10% tax on state bank notes in 1866?

35. When did National Bank Notes go out of circulation?

36. When did the Federal Reserve System start issuing Federal Reserve Notes?

37. Were the Federal Reserve Notes redeemable, and if so, for what?

38. What did the Emergency Banking Act of 1933 do to the redemption of Federal Reserve Notes?

39. What did Executive Order 6102 do to the ownership of gold?

40. After 1934 what could Federal Reserve Notes be redeemed for?

41. After 1963 what could Federal Reserve Notes be redeemed for?

42. When was silver finally removed from all coins?

43. President Nixon closed the gold window in 1971. What did this mean?

44. List some implications of Federal Reserve Notes in regards to inflation.

45. List some implications of Federal Reserve Notes in regards to federal government debt.

Additional Reading

Jorg Guido Hulsmann, The Ethics of Money Production, 2008

Michael S. Rozeff, The U.S. Constitution and Money, 2010

Edwin Vieira, Jr., What Is A “Dollar”? An Historical Analysis Of The Fundamental Question In Monetary Policy, 1994

Murray N. Rothbard, What Has Government Done to Our Money? 1991

Murray N. Rothbard, A History of Money and Banking in the United States, 2002

Friedrich A. Hayek, Choice in Currency,1976

Steven Horwitz, An Introduction to US Monetary Policy, 2013 http://mercatus.org/sites/default/files/Horwitz_MonetaryPolicy_v1.pdf

Thomas E. Woods Jr., The Revolutionary War and the Destruction of the Continental, 2006

H.A. Scott Trask, Did the Framers Favor Hard Money? 2003



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