Infographic: 31 Fascinating Facts on the Early History of the U.S. Dollar
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31 Fascinating Facts on the Early History of the U.S. Dollar

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The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.

31 Fascinating Facts on the Early History of the U.S. Dollar

Today, we all know the U.S. dollar as an iconic currency that is recognizable to people around the world.

And while we’ve previously looked at the buying power of the U.S. dollar over time, as well as important events like the Great Depression, we have not looked at the history of the dollar itself.

How and why was it conceived, and why do we call it a “dollar” or a “buck”? How did the dollar’s early history help to shape today’s world?

Before the Dollar

For the early colonists, currency was a bit of a free-for-all.

Officially, cash was denominated in pounds, shillings, and pence, but in reality things were a different story. Cash was often scarce, and colonists needed to be innovative to fulfill transactions. At various points in time, they used tobacco, beaver skins, and wampum in the place of money. Some colonies even tried to issue their own fiat currencies – many of which went bust.

As it turned out, the Spanish dollar was often the most abundant form of cash – and this is what led to U.S. currency eventually being denominated in dollars.

The Revolution

During the American Revolution in 1775, the Continental Congress issued a money known as the Continental Currency to try and fund the war. The government printed too many, and the value of a Continental diminished rapidly.

Just five years later, after runaway inflation, the Continental was worth 2.5% of its face value. Benjamin Franklin rightly noted that the depreciation of the Continental had, in fact, acted as a tax to pay for the war. Holders of the currency – everyday people – were punished by losing massive amounts of buying power. Interestingly, this is where we get the phrase “Not worth a Continental”.

Birth of the Dollar

The failure of the Continental Currency must have been top of mind during the writing of the Constitution. A clause was even added, under Article 1, Section 10, to make sure such a failure would never happen again. It was written that states were not permitted to “coin Money; emit Bills of Credit; [or] make any Thing but gold and silver Coin a Tender in Payment of Debts.”

And so, the Coinage Act of 1792 created the U.S. dollar as a standard unit of currency. The U.S. Mint was authorized to oversee coinage, and the Act also established a penalty of death for debasing coinage issued by the Mint.

The Almighty Buck

In the 19th Century, a new slang term emerged for the dollar.

Especially in the Great Lakes area, different amounts of money were equated with animal skins. One particular reference showed that in Ohio in 1851, the skin of a muskrat was worth $0.25, and that of a doe was worth $0.50. Meanwhile, the skin of a buck was equal to the “almighty dollar” – and hence, the word “buck” became synonymous with the U.S. dollar.

The Civil War

Leading up to the Civil War, private banks around the country issued their own paper currencies.

With 10,000 or so of these currencies in circulation as the war broke out, governments soon found it very cumbersome to try and pay debts with many different types of notes. As a result, the $10 Demand Note was the first official paper currency issued in 1861 by the government to help finance the war.

The North began paying debts with a fiat currency called the “greenback”, while Confederate states issued their own paper currency as well. The latter was worthless by the time the Confederacy lost the war.

The Counterfeiting Problem

Around this time, counterfeiting was a widespread problem with greenbacks and all the private notes that were circulating. More than 1/3 of bills were fake at this time.

Sophisticated counterfeit operations were happening in British Canada, and some bank engravers would even moonlight as counterfeiters, using the same plates and dyes they had from their day job.

To deal with the problem, the Secret Service was formed in 1865.

The Modern Dollar

Counterfeiting measures have come a long way since the late 19th century. Today, it’s estimated that less than 0.01% of notes are fake.

Learn more about the modern U.S. dollar in the next part of this series.

The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.

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Personal Finance

Mapped: The Salary You Need to Buy a Home in 50 U.S. Cities

Is owning a home still realistic? This map lays out the salary you’d need to buy a home in 50 different U.S. metro areas.

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This is the Salary You Need to Buy a Home in 50 U.S. Cities

Depending on where you live, owning a home may seem like a far off dream or it could be fairly realistic. In New York City, for example, a person needs to be making at least six figures to buy a home, but in Cleveland you could do it with just over $45,000 a year.

This visual, using data from Home Sweet Home, maps out the annual salary you’d need for home ownership in 50 different U.S. cities.

Note: The map above refers to entire metro areas and uses Q1 2022 data on median home prices. The necessary salary was calculated by the source, looking at the base cost of principal, interest, property tax, and homeowner’s insurance.

Home Ownership Across the U.S.

San Jose is by far the most expensive city when it comes to purchasing a home. A person would need to earn over $330,000 annually to pay off the mortgage at a monthly rate of $7,718.

Here’s a closer look at the numbers:

RankMetro AreaMedian Home PriceSalary Needed
#1San Jose$1,875,000$330,758
#2San Francisco$1,380,000$249,685
#3San Diego$905,000$166,828
#4Los Angeles$792,500$149,127
#5Seattle$746,200$140,768
#6Boston$639,000$130,203
#7New York City$578,100$129,459
#8Denver$662,200$121,888
#9Austin$540,700$114,679
#10Washington, D.C.$553,000$110,327
#11Portland$570,500$109,267
#12Riverside/San Bernardino$560,000$106,192
#13Sacramento$545,000$105,934
#14Miami$530,000$103,744
#15Salt Lake City$556,900$100,970
#16Providence$406,700$88,477
#17Phoenix$474,500$86,295
#18Las Vegas$461,100$84,116
#19Raleigh$439,100$83,561
#20Dallas$365,400$81,165
#21Orlando$399,900$79,573
#22Chicago$325,400$76,463
#23Tampa$379,900$75,416
#24Houston$330,800$74,673
#25Minneapolis$355,800$74,145
#26Baltimore$350,900$73,803
#27Nashville$387,200$73,502
#28Jacksonville$365,900$73,465
#29Hartford$291,000$73,165
#30Charlotte$379,900$72,348
#31San Antonio$321,100$70,901
#32Atlanta$350,300$69,619
#33Philadelphia$297,900$69,569
#34Richmond$354,500$68,629
#35Milwaukee$298,800$65,922
#36Kansas City$287,400$60,507
#37Columbus$274,300$59,321
#38Virginia Beach$289,900$59,245
#39New Orleans$281,100$57,853
#40Birmingham$289,500$55,662
#41Indianapolis$271,600$53,586
#42Memphis$259,300$52,691
#43Cincinnati$244,300$51,840
#44Buffalo$202,300$51,525
#45Detroit$224,300$50,302
#46St Louis$216,700$48,988
#47Louisville$235,400$48,121
#48Cleveland$192,700$45,448
#49Oklahoma City$198,200$45,299
#50Pittsburgh$185,700$42,858

Perhaps surprisingly, Boston residents need slightly higher earnings than New Yorkers to buy a home. The same is also true in Seattle and Los Angeles. Meanwhile, some of the cheapest cities to start buying up real estate in are Oklahoma City and Cleveland.

As of April, the rate of home ownership in the U.S. is 65%. This number represents the share of homes that are occupied by the owner, rather than rented out or vacant.

The American Dream Home

As of the time of this data (Q1 2022), the national yearly fixed mortgage rate sat at 4% and median home price at $368,200. This put the salary needed to buy a home at almost $76,000⁠—the median national household income falls almost $9,000 below that.

But what kind of homes are people looking to purchase? Depending on where you live the type of home and square footage you can get will be very different.

In New York City, for example, there are fairly few stand-alone, single-family houses in the traditional sense⁠—only around 4,000 are ever on the market. People in the Big Apple tend to buy condominiums or multi-family units.

Additionally, if you’re looking for luxury, not even seven figures will get you much in the big cities. In Miami, a million dollars will only buy you 833 square feet of prime real estate.

One thing is for sure: the typical American dream home of the big house with a yard and white picket fence is more attainable in smaller metro areas with ample suburbs.

Buying vs. Renting

The U.S. median household income is $67,500, meaning that today the typical family could only afford a home in about 15 of the 50 metro areas highlighted above, including New Orleans, Buffalo, and Indianapolis.

With the income gap widening in the U.S., the rental market remains a more attractive option for many, especially as prices are finally tapering off. The national median rent price was down nearly 3% from June to July for two-bedroom apartments.

At the end of the day, buying a home can be an important investment and may provide a sense of security, but it will be much easier to do in certain types of cities.

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Investor Education

Countries with the Highest Default Risk in 2022

In this infographic, we examine new data that ranks the top 25 countries by their default risk.

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Countries with the Highest Default Risk in 2022

In May 2022, the South Asian nation of Sri Lanka defaulted on its debt for the first time. The country’s government was given a 30-day grace period to cover $78 million in unpaid interest, but ultimately failed to pay.

Not only does this impact Sri Lanka’s economic future, but it also raises an important question: which other countries are at risk of default?

To find out, we’ve used data from Bloomberg to rank the countries with the highest default risk.

The Sovereign Debt Vulnerability Ranking

Bloomberg’s Sovereign Debt Vulnerability Ranking is a composite measure of a country’s default risk. It’s based on four underlying metrics:

  • Government bond yields (the weighted-average yield of the country’s dollar bonds)
  • 5-year credit default swap (CDS) spread
  • Interest expense as a percentage of GDP
  • Government debt as a percentage of GDP

To better understand this ranking, let’s focus on Ukraine and El Salvador as examples.

CountryRankGovernment Bond
Yield (%)
5Y CDS SpreadInterest Expense
(% of GDP)
Government Debt
(% of GDP)
🇸🇻 El Salvador131.8%3,376 bps
(33.76%)
4.9%82.6%
🇺🇦 Ukraine860.4%10,856 bps
(100.85%)
2.9%49%

1 basis point (bps) = 0.01%

Why are Ukraine’s Bond Yields so High?

Ukraine has high default risk due to its ongoing conflict with Russia. To understand why, consider a scenario where Russia was to assume control of the country. If this happened, it’s possible that Ukraine’s existing debt obligations will never be repaid.

That scenario has prompted a sell-off of Ukrainian government bonds, pushing their value down to nearly 30 cents on the dollar. This means that a bond with face value of $100 could be purchased for $30.

Because yields move in the opposite direction of price, the average yield on these bonds has climbed to a very high 60.4%. As a point of comparison, the yield on a U.S. 10-year government bond is currently 2.9%.

What is a CDS Spread?

Credit default swaps (CDS) are a type of derivative (financial contract) that provides a lender with insurance in the event of a default. The seller of the CDS represents a third party between the lender (investors) and borrower (in this case, governments).

In exchange for receiving coverage, the buyer of a CDS pays a fee known as the spread, which is expressed in basis points (bps). If a CDS has a spread of 300 bps (3%), this means that to insure $100 in debt, the investor must pay $3 per year.

Applying this to Ukraine’s 5-year CDS spread of 10,856 bps (108.56%), an investor would need to pay $108.56 each year to insure $100 in debt. This suggests that the market has very little faith in Ukraine’s ability to avoid default.

Why is El Salvador Ranked Higher?

Despite having lower values in the two metrics discussed above, El Salvador ranks higher than Ukraine because of its larger interest expense and total government debt.

According to the data above, El Salvador has annual interest payments equal to 4.9% of its GDP, which is relatively high. Comparing to the U.S. once more, America’s federal interest costs amounted to 1.6% of GDP in 2020.

When totaled, El Salvador’s outstanding debts are equal to 82.6% of GDP. This is considered high by historical standards, but today it’s actually quite normal.

The next date to watch will be January 2023, as this is when the country’s $800 million sovereign bond reaches maturity. Recent research suggests that if El Salvador were to default, it would experience significant, yet temporary, negative effects.

Another Hot Topic for El Salvador: Bitcoin

In September 2021, El Salvador became the first country in the world to adopt bitcoin as legal tender. This means that Bitcoin is recognized by law as a means to settle debts and other obligations.

The International Monetary Fund (IMF) criticized this decision in early 2022, urging the country to revoke legal tender status. In hindsight, these warnings were wise, as Bitcoin’s value has fallen by 56% year-to-date.

While this isn’t directly related to El Salvador’s default risk, it does open potential avenues for relief. For instance, large players in the crypto space may be willing to assist the government to keep the concept of “nation-state bitcoin adoption” alive.

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