“The Story” of GreenBack
The Beginning
We all know how the dollar dominates the global currencies. It is known as the most accepted currency for international trade and transactions. Central banks around the world keep dollars as reserves.
But what makes Dollar special? And why we are calling it a Greenback?
All of the queries will be answered in this article. If you are willing to know more, let’s get started.
Content
· The Beginning
· Before the Independence of the U.S
· Introduction of the U.S Dollar
· A Monetary System for the Dollar
· Why Greenback?
· Domination of the U.S Dollar
· Conclusion
Before the Independence of the U.S
The origin of the Dollar is not necessarily associated with the United States. At first, the currency was known as Thalers in Central Europe. Thalers or Taler was the coin first minted in 1519.
Even the original name was not Thalers. It was Joachimsthaler. And then the English version of Thaler — Dollar became more popular;
The name “Dollar” was not only applied to Central European currencies but also to the Spanish Pesos.
Afterward, the coins with the name Dollar got widely circulated in North American British colonies. Interestingly, it landed in the new land since official British coins were scarce.
And what happened then?
The newly independent United States took the name Dollar instead of choosing the British Pound.
Introduction of the U.S Dollar
Now, we know that North American British colonies accepted Dollar as a currency since the British Pound was scarce in the land. The specific date we traced back when the usage of the Dollar started was 1690.
In those days, The Massachusetts Bay Colony launched a paper note to finance military expeditions.
However, other colonies also followed the trend and started printing paper money.
As the British colonies started to fight against the motherland they introduced the Continental Currency. But the currency lacked banking support.
As a result, the first national bank, the Bank of North America was chartered to solve the issue. In 1785, the Dollar was chosen as the first monetary unit for the U.S.
A Monetary System for the Dollar
An organized monetary system was needed to finance the construction of the new American economy. In 1972, The Coinage Act came up with a solution to introduce a novel coinage system including gold, copper, and silver.
Finally, the act gave birth to the greenbacks and financed the Civil War in 1861. This is the paper currency that the world use as a currency benchmark today. Treasury seals and engraved signatures were introduced to reduce currency counterfeit.
Why Greenback?
The name Greenback is actually a slang term for the U.S Dollar. It is derived from the color of the backside of the currency. We’ve already mentioned how continental currency lacked proper banking support.
In those days, banks wanted to give a reduced face value of Dollars to the customers. That’s why Greenback became a negative word in the new world. However, the Federal Government backed the currency to pay back the public and private debts.
A notable thing about Greenback in those days was it wasn’t exchangeable for Gold or Silver.
Domination of the U.S Dollar
Slowly the U.S Dollar became the prime mover of the world finances. Countries started to keep dollars as reserves; even major oil holdings are kept in the U.S Dollar.
Anyhow, the domination of the currency started to go big when the allies brought a victory in World War II.
The Bretton Woods system in 1944 allowed the United States to take the monitoring power of the world financial systems using the U.S backed organizations.
At the time, the U.S had the most gold reserves and this worked well for them as Bretton Woods System forced the member countries to maintain exchange rates within a fixed Gold price range.
After the Vietnam War in the 1970s, the U.S resigned from the Bretton Woods System to create a path for making Dollar a political currency. The demand for commodity trading (Particularly, Oil)using the Dollar increased making Dollar the most valuable currency in the world.
Conclusion
Recently, China started to think that a digital Chinese yuan can replace the domination of the Dollar forever. It might be a debatable issue whether China could achieve it or not.
But you can always re-read “The Story” of the Greenback here and support my cause to share more stories with you in the future.
“The Story” is a regular Medium Blog by Ehsanul Hoq.
Ehsan is a Content Marketer, Financial Researcher, and Musician from Bangladesh.
