Up to WW II any creditable currency was pegged to a gold standard, which would have included the money of Washington’s time as President. During the Revolution the Continental Congress tried printing paper currency not backed by real assets to pay for the war, and hence the tern “not worth a Continental”.
When WWII destroyed most economies of the world the United States prospered. The only way to restart international economic activity was for the U.S. to take the lead, which it did with the Bretton Woods Agreement. Every currency would have a fixed value in relation to the dollar, and the U.S. would keep everything functioning by buying and selling gold at $35 an ounce. Therefore, once again there was a U.S. gold standard and the dollar became the world’s reserve currency.
The U.S. unilaterally abrogated the agreement in August 1971, allowed the dollar to float in relation to the trading whims involving other paper currencies. Also, up until about 1968 people could still trade their Silver Certificates and Federal Reserve notes for the silver coins that quickly disappeared from circulation.
The problem at the present moment is that the dollar is backed by the full faith and credit of the government and nothing else. When much of the world looses faith in the U.S. as a reliable engine driving the world economy, then the dollar’s status as a reserve currency is jeopardized. Without any real asset backing the dollar, people are troubled by this country’s behavior and can decide the dollar is “not worth a Continental”.
It's strange how so many people say that, and all of these same people turn right around to use and trust dollars in their daily lives. Nobody's running to cash every check they get to buy something immediately for fear of lost buying power. Admit it or not, everyone acts like they expect dollars to retain their value enough that they don't mind keeping a few hundred bucks in an account paying 2 or 3 percent interest.
The reason dollars are so stable and dependable is because they are in fact backed by hard assets. We're not talking printed currency here because that's just a couple percent of the money supply. We're talking about how most dollars are created in banks when people hand over title to their farm/home/business. Dollars are created by --not the falsely accused Fed-- banks, every time they make loans on held collateral. These dollars are backed by mortgaged collateral.
Works for me.