The first settlers in Pre-Revolutionary America were faced with a problem. There was a shortage of money in the colonies, and England prohibited settlers from minting their own coinage.
To get around this, settlers used established foreign currencies such Dutch guilders or the Spanish pieces of eight. They also began to adopt the traditional trading methods of Native Americans, who had been exchanging goods for hundreds of years before the arrival of the Europeans.
Wampum as a Currency
Wampum, or beads that were strung together, was often used as a medium of exchange for both Native American tribes and settlers during this Pre-Revolutionary era. Other commodities were also used for trade: furs, tobacco, wheat, and maize were all currencies of exchange.
As an interesting side note, wampum had tremendous inflation issues. Some tribes, such as the Narragansetts, were better at producing the beads than others. Many settlers also started comprehensive wampum manufacturing operations, and the beads were created at such a rate that they began to lose value in trade quickly.
Where does the storied history of money in the United States go from here? Today’s infographic highlights many interesting aspects of it, moving from beads all the way to virtual currency:
Image courtesy of: JPMorgan Chase
In the modern era, the concept of “money” is changing right before our eyes.
Throughout most of the history of money, it has been a tactile thing. Whether we’re talking about strange currencies such as cacao beans or wampum beads that were traded in the past, or we’re looking at more modern concepts of coinage, money has traditionally been something physical. Bank accounts, cheques, credit cards, and future digital technologies would eventually rise to prominence, making money much more abstract.
Today, everything is digital in nature.
With a few clicks, money can be created or moved around. Bitcoin and the blockchain ecosystem have evolved as new technologies that may also have a significant impact on the future of money.
The history of money in America, and the world, is constantly changing. It’s beautiful and scary all at the same time.
Original graphic by: JPMorgan Chase
De-Dollarization: Countries Seeking Alternatives to the U.S. Dollar
The U.S. dollar is the dominant currency in the global financial system, but some countries are following the trend of de-dollarization.
De-Dollarization: Countries Seeking Alternatives to U.S. Dollar
The U.S. dollar has dominated global trade and capital flows over many decades.
However, many nations are looking for alternatives to the greenback to reduce their dependence on the United States.
This graphic catalogs the rise of the U.S. dollar as the dominant international reserve currency, and the recent efforts by various nations to de-dollarize and reduce their dependence on the U.S. financial system.
The Dollar Dominance
The United States became, almost overnight, the leading financial power after World War I. The country entered the war only in 1917 and emerged far stronger than its European counterparts.
As a result, the dollar began to displace the pound sterling as the international reserve currency and the U.S. also became a significant recipient of wartime gold inflows.
The dollar then gained a greater role in 1944, when 44 countries signed the Bretton Woods Agreement, creating a collective international currency exchange regime pegged to the U.S. dollar which was, in turn, pegged to the price of gold.
By the late 1960s, European and Japanese exports became more competitive with U.S. exports. There was a large supply of dollars around the world, making it difficult to back dollars with gold. President Nixon ceased the direct convertibility of U.S. dollars to gold in 1971. This ended both the gold standard and the limit on the amount of currency that could be printed.
Although it has remained the international reserve currency, the U.S. dollar has increasingly lost its purchasing power since then.
Russia and China’s Steps Towards De-Dollarization
Concerned about America’s dominance over the global financial system and the country’s ability to ‘weaponize’ it, other nations have been testing alternatives to reduce the dollar’s hegemony.
As the United States and other Western nations imposed economic sanctions against Russia in response to its invasion of Ukraine, Moscow and the Chinese government have been teaming up to reduce reliance on the dollar and to establish cooperation between their financial systems.
Since the invasion in 2022, the ruble-yuan trade has increased eighty-fold. Russia and Iran are also working together to launch a cryptocurrency backed by gold, according to Russian news agency Vedmosti.
In addition, central banks (especially Russia’s and China’s) have bought gold at the fastest pace since 1967 as countries move to diversify their reserves away from the dollar.
How Other Countries are Reducing Dollar Dependence
De-dollarization it’s a theme in other parts of the world:
- In recent months, Brazil and Argentina have discussed the creation of a common currency for the two largest economies in South America.
- In a conference in Singapore in January, multiple former Southeast Asian officials spoke about de-dollarization efforts underway.
- The UAE and India are in talks to use rupees to trade non-oil commodities in a shift away from the dollar, according to Reuters.
- For the first time in 48 years, Saudi Arabia said that the oil-rich nation is open to trading in currencies besides the U.S. dollar.
Despite these movements, few expect to see the end of the dollar’s global sovereign status anytime soon. Currently, central banks still hold about 60% of their foreign exchange reserves in dollars.
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