The United States dollar is the most-used currency for international transactions and exchanges. It has been accepted by most countries as the international exchange standard since the end of World War II. The U.S. dollar is not only the official currency of the United States of America, but several other countries and British territories have also adopted it as their nation’s official currency, including Ecuador, El Salvador, Panama, the British Virgin Islands and Bermuda. In addition, the exchange rates of many countries are in a fixed ratio to U.S. dollars. As most modern currency systems, the U.S. dollar is a decimalized system with 100 cents, or pennies, equal to one dollar. Denominations under one dollar are issued as the following coinage: pennies are 1 cent, nickels are 5 cents, dimes are 10 cents, quarters are 25 cents and half-dollars are 50 cents.
U.S. dollars are known colloquially and around the world by several nicknames, the most popular of which is the buck. Another popular nickname is the greenback, which originated because all denominations are printed in green and black ink on cotton-fiber paper. The first U.S. dollar was issued in 1792, 16 years after colonists declared independence from Britain. The original value was set equal to the Mexican peso, which was 27 grams of silver at the time. Another denomination, the eagle, was based on gold rather than silver and was originally set at $10. After over 100 years of a bimetallic standard, the silver standard was abolished in 1900, making U.S. currency totally gold-based. The gold standard remained in effect until it was abandoned in 1971, and along with it went the Bretton Woods System. The Bretton Woods System was enacted after World War II to create a stable exchange system in the post-war era.
In the decade following the abandonment of the gold standard, the U.S. economy faltered until the Federal Reserve Bank learned how to influence the economy. Today, the Federal Reserve Bank is responsible for issuing all currency and setting interest rates. A little over 800 billion USD is currently kept in circulation. The U.S. Federal Reserve increases the money in circulation by buying securities from banks for cash. When U.S. dollars need to be taken out of circulation, securities are sold back to the banks. Most commercial banks in the United States keep a cash reserve held by the Federal Reserve, and the banks can withdraw funds on-demand, which are paid by the reserve with currency freshly printed by the U.S. Mint.