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The U.S. Dollar

Nearly 85 percent of the transactions in foreign exchange markets involve the dollar. Until the establishment of the Federal Reserve System in 1913, various currencies were issued in the U.S.

In the late 18th century and during the American Revolution, the Continental Congress printed its first paper money, known as continentals. But inflation was rapidly increasing and continentals were becoming worthless pretty quickly.

The First Bank of the United States established in 1791 was the first attempt to central banking, which was not well-received by a mostly agrarian electorate. When the bank’s 20-year charter expired in 1811, votes in Congress were not enough to renew it.

The Second Bank of the United States of 1816 had a similar story. The Free Banking Era (1836–1865) had state-chartered banks and unchartered “free banks,” issuing their own notes, redeemable in gold or specie. Following the financial panics of the late 19th and early 20th century, the American public was ready for a central bank. In 1913, President Woodrow Wilson signed the Federal Reserve Act into law.

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