Economy of the United States

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Constitution of USA(UNITED STATES OF AMERICA)

Economy of the United States
Economy of The United States

Rank Currency Fiscal year Trade organizations

1st United States Dollar (USD) 1 October ± 30 September NAFTA, WTO, OECD, G-20, G8 and others

Statistics

GDP

$14.266 trillion (2009)[1] (nominal; 1st) $14.266 trillion (2009)[1] (PPP; 1st) -2.4% (2009)[2] $46,442 (2009)[1] (nominal; 17th) $46,442 (2009)[1] (PPP; 6th) agriculture: (1.2%), industry: (21.9%), services: (76.9%)

GDP growth GDP per capita GDP by sector

(2009 est.) Inflation (CPI) Population below poverty line Gini index Labor force Labor force by occupation 2.2% (May 09-10)[3] 13.2% (2008)[4]

45 (List of countries) 154.5 million (includes unemployed) (2009 est.) farming, forestry, and fishing 0.6%, manufacturing, extraction, transportation, and crafts 22.6%, managerial, professional, and technical 35.5%, sales and office 24.8%, other services 16.5% note: figures exclude the unemployed (2007)

Unemployment 9.7% (May 2010)[5] Main industries petroleum, steel, motor vehicles,aerospace, telecommunications,chemicals, creative industries,electronics, food processing, consumer goods, lumber, mining,defense
External

Exports Export goods

$1.057 trillion f.o.b (2009 est.)[6] agricultural products (soybeans, fruit, corn) 9.2%, industrial supplies (organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49.0%, consumer goods (automobiles, medicines) 15.0% (2009) Canada, 13.2%; Mexico, 8.3%; China, 4.3%; Japan, 3.3%. (2009)[7] $1.558 trillion c.i.f. (2009 est.)[6] agricultural products 4.9%, industrial supplies 32.9% (crude oil 8.2%), capital goods 30.4% (computers, telecommunications equipment, motor vehicle parts, office machines, electric power machinery), consumer goods 31.8% (automobiles, clothing, medicines, furniture, toys) (2009) China, 15.4%; Canada, 11.6%; Mexico, 9.1%; Japan,

Main export partners Imports Import goods

Main import

partners FDI stock Gross external debt Public debt Revenues Expenses Economic aid

4.9%; Germany, 3.7%. (2009)[7] $2.398 trillion (31 December 2009 est.) $13.77 trillion (30 June 2008) Public finances $13.2 trillion (July 2010)[8] 88% of GDP $2.106 trillion (2009)[9] $3.515 trillion (2009)[9] ODA $19 billion, 0.2% of GDP (2004)[10]
All values, unless otherwise stated, are in US dollars

The economy of the United States is the world's largest. Its nominal GDP was estimated to be $14.3 trillion in 2009, almost three times the size of the economy of Japan. In purchasing power parity terms, it is larger than the economy of the People's Republic of China. Notwithstanding, the U.S. economy also maintains a very high level of output per capita. In 2009, it was estimated to be$46,381, the 6th highest in the world. Historically, the U.S. economy has maintained a stable overall GDP growth rate, a lowunemployment rate, and high levels of research and capital investment funded by both national and, because of decreasing savingrates, increasingly by foreign investors. In 2009, consumer spending, coupled with government health care spending constituted 70% of the American economy.[11] Since the 1960's, the United States economy absorbed savings from the rest of the world. The phenomenon is subject to discussion among economists. Like other developed countries, the United States faces retiring baby boomers who have already begun withdrawing from their Social Security accounts; however, the American population is young and growing when compared to Europe or Japan. The United States public debt is in excess of $13 trillion and continues to grow at a rate of about $3.83 billion each day.[12]Total public and private debt was $50.2 trillion at the end of the first quarter of 2010, or 3.5 times GDP.[13] Domestic financial assetstotaled $131 trillion and domestic financial liabilities totaled $106 trillion.[14]

The American labor market has attracted immigrants from all over the world and has one of the world's highest migration rates. The United States is ranked second, down from first in 2008-2009 due to the economic crisis, in the Global Competitiveness Report.[15]The country is one of the world's largest and most influential financial markets, home to major stock and commodities exchanges likeNASDAQ, NYSE, AMEX and CME. History Economic history of the United States The economic history of the United States has its roots in European settlements in the 16th, 17th, and 18th centuries. The American colonies went from marginally successful colonial economies to a small, independent farming economy, which in 1776 became theUnited States of America. In 180 years the United States grew to a huge, integrated, industrialized economy that still makes up over a quarter of the world economy. The main causes were a large unified market, a supportive politicallegal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), a cultural landscape that valued entrepreneurialism, a commitment to investing in material and human capital, and at times a willingness to exploit labor. In addition, the U.S. was able to utilize these resources due to a unique set of institutions designed to encourage utilization and extraction. As a result, the U.S.'s GDP per capita converged on and eventually surpassed that of the U.K., as well as other nations that it previously trailed economically. The economy has maintained high wages, attracting immigrants by the millions from all over the world.[16] In the 19th century, recessions frequently coincided with financial crises. Because of the great changes in the economy over the centuries, it is difficult to compare the severity of modern recessions to early recessions. Recessions after World War II appear to have been less severe than earlier recessions, but the reasons for this are unclear. The Depression of 1893 was one of the worst in American history with the unemployment rate exceeding 10% for half a decade. After the Great Depression

For many years following the Great Depression of the 1930s, when the danger of recession appeared most serious, the government sought to strengthen the economy by spending heavily itself or cutting taxes so that consumers would spend more, and by fostering rapid growth in the money supply, which also encouraged more spending. In the 1960s, economic woes brought on by the costs of the Vietnam conflict, major price increases, particularly for energy, created a strong fear of inflation. As a result, government leaders came to concentrate more on controlling inflation than on combating recession by limiting spending and tightening credit.[citation needed] Ideas about the best tools for stabilizing the economy changed substantially between the 1930s and the 1980s. From the New Dealera that began in 1933, to the Great Society initiatives of the 1960s, national policy makers relied principally on fiscal policy to influence the economy. The approach, advanced by British economist John Maynard Keynes, gave elected officials a leading role in directing the economy, since spending and taxes are controlled by the U.S. President and the Congress. The economy and living standards grew strongly during this era, but a period of high inflation, interest rates and unemployment after 1973 weakened confidence in fiscal policy as a tool for regulating the overall pace of economic activity, and instead, a combination of loose monetary policy and record budget deficits, both financed partly with foreign direct investment, became prominent as tools for reigniting economic growth after 1981. The U.S. economy grew by an average of 3.8% from 1946 to 1973, while real median household income surged 55% (or 1.6% a year). The economy since 1973, however, has been characterized by both slower growth (averaging 2.7%), and nearly stagnant living standards, with household incomes increasing by 10%, or only 0.3% annually. The worst recession in recent decades, in terms of lost output, occurred during the 2008 financial crisis, when GDP fell by 3.9% from the spring of 2008 to the spring of 2009. Other significant recessions took place in 1957±58, when GDP fell 3.7%, following the 1973 oil crisis, with a 3.1% fall from late 1973 to early 1975, and in the 1981±82 recession, when GDP dropped by 2.9%.Recent, mild recessions have included the 1990±91 downturn, when output fell by 1.3%, and the 2001 recession, in which GDP slid by 0.3%; the 2001 downturn lasted just eight months. The most vigorous, sustained periods of growth, on the other hand,

took place from early 1961 to mid 1969, with an expansion of 53% (5.1% a year), from early 1991 to late in 2000, at 43% (3.8% a year), and from late 1982 to mid 1990, at 37% (4% a year). Since 1976, the US has sustained trade deficits with other nations, and since 1982, current account deficits; the nation's long-standing surplus in its trade in services was maintained, however, and reached US$140 billion yearly in 2008 and 2009. In recent years, the primary economic concerns have centered on: high household debt ($11 trillion, including $2.5 trillion inrevolving debt), high net national debt ($9 trillion), high corporate debt ($9 trillion), high mortgage debt (over $15 trillion as of 2005 year-end), high unfunded Medicare liability ($30 trillion), high unfunded Social Security liability ($12 trillion), high external debt (amount owed to foreign lenders), high trade deficits, a serious deterioration in the United States net international investment position (NIIP) (-24% of GDP), and high unemployment In 2006, the U.S economy had its lowest saving rate since 1933. These issues have raised concerns among economists and national politicians. The United States economy experienced a crisis in 2008 led by a derivatives market and subprime mortgage crisis, and a declining dollar value. On December 1, 2008, the NBERdeclared that the United States entered a recession in December 2007, citing employment and production figures as well as the third quarter decline in GDP. The recession did, however, lead to a reduction in record trade deficits, which fell from $840 billion annually during the 2006-08 period, to $500 billion in 2009, as well as to higher personal savings rates, which jumped from a historic low of 1% in early 2008, to nearly 5% in late 2009. In 1980, the U.S. public debt was $909 billion - or an amount equal to 33.3% of America's gross domestic product (GDP). By 1990, that number had more than tripled to $3.2 trillion - or 55.9% of GDP. In 2001 the national debt was $5.7 trillion; however, the debt-to-GDP ratio remained at 1990 levels. Debt levels rose quickly in the following decade, and on January 28, 2010, the US debt ceiling was raised to $14.3 trillion dollars. Based on the 2010 U.S. budget, total national debt will grow to nearly 100% of GDP, versus a level of approximately 80% in early 2009. The White House estimates that the government¶s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion in 2009.

The U.S. Treasury statistics indicate that, at the end of 2006, non-US citizens and institutions held 44% of federal debt held by the public. China, holding $801.5 billion in treasury bonds, is the largest foreign financier of the record U.S. public debt. The U.S. economy maintains a relatively high GDP per capita, with the caveat that it relies partly on extensive borrowing and a low to moderate population growth rate; during periods of higher economic growth rates, this combination has made the nation attractive to immigrants worldwide. Overview

United States wealth compared to the rest of the world in the year 2000

Year-on-year change in total net worth of US households and nonprofit organizations 1946-2007, unadjusted for inflation or population change. A central feature of the U.S. economy is the economic freedom afforded to the private sector by allowing the private sector to make the majority of economic decisions in determining the direction and scale of what the U.S. economy produces. This is enhanced by relatively low levels of regulation and government involvement, as well as a court system that generally protects property rights and enforces contracts. From its emergence as an independent nation, the United States has encouraged science and invention. The United States is rich in mineral resources and fertile farm soil, and it is fortunate to have a moderate climate. It also has extensive coastlines on both the Atlantic and Pacific Oceans, as well as on the Gulf of Mexico. Rivers flow from far within the continent, and the Great Lakes²five large, inland lakes along the U.S. border with Canada²provide additional shipping access. These extensive waterways have helped shape the country's economic growth over

the years and helped bind America's 50 individual states together in a single economic unit. The number of workers and, more importantly, their productivity help determine the health of the U.S. economy. Throughout its history, the United States has experienced steady growth in the labor force, a phenomenon that is both cause and effect of almost constant economic expansion. Until shortly after World War I, most workers were immigrants from Europe, their immediate descendants, or African Americans who were mostly slaves taken fromAfrica, or slave descendants. Beginning in the early 20th century, many Latin Americans immigrated; followed by large numbers of Asians following removal of nation-origin based immigration quotas. The promise of high wages brings many highly skilled workers from around the world to the United States. Over 13 million people entered the United Stated during the 1990s alone. Labor mobility has also been important to the capacity of the American economy to adapt to changing conditions. When immigrants flooded labor markets on the East Coast, many workers moved inland, often to farmland waiting to be tilled. Similarly, economic opportunities in industrial, northern cities attracted black Americans from southern farms in the first half of the 20th century, in what was known as the Great Migration. In the United States, the corporation has emerged as an association of owners, known as stockholders, who form a business enterprise governed by a complex set of rules and customs. Brought on by the process of mass production, corporations, such as General Electric, have been instrumental in shaping the United States. Through the stock market, American banks and investors have grown their economy by investing and withdrawing capital from profitable corporations. Today in the era of globalization, American investors and corporations have influence all over the world. The American government is also included among the major investors in the American economy. Government investments have been directed towards public works of scale (such as from the Hoover Dam), military-industrial contracts, and the financial industry. While consumers and producers make most decisions that mold the economy, government has a powerful effect on the U.S. economy in at least four areas,

as the government uses a capitalist system. Strong government regulation in the U.S. economy started in the early 1900s with the rise of the Progressive Movement; prior to this the government promoted economic growth through protective tariffs and subsidies to industry, built infrastructure, and established banking policies, including the gold standard, to encourage savings and investment in productive enterprises. On June 26, 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce, commenting that the U.S. has outsourced too much in some areas and can no longer rely on the financial sector and consumer spending to drive demand.

Education Education in the United States There are 4,352 colleges, universities, and junior colleges in the United States. In 2007, Americans stood second only to Canada in the percentage of 35 to 64 year olds holding at least two-year degrees. Among 25 to 34 year olds, the country stands tenth. The nation stands 15 out of 29 rated nations for college completion rates, slightly above Mexico and Turkey. According to government data, one-tenth of students are enrolled in private schools. Approximately 85% of students enter the public schools.

Immigration Immigration to the United States As of 2009, the United States received 4.31 immigrants per 1000 people, ranking 25th globally. In fiscal year 2009, 1.1 million immigrants were granted legal residence.

Employment List of U.S. states by unemployment rate

Unemployment rate as a percentage of the labor force in the United States according to the U.S. Bureau of Labor Statistics. In May 2009, the unemployment rate was 9.4%. A broader measure of unemployment (taking into account marginally attached workers, those employed part time for economic reasons, and discouraged workers) was 15.9%. In 2009 and 2010, following thefinancial crisis of 2007±2010, the emerging problem of jobless recoveries resulted in record levels of long-term unemployment with over 6 million workers looking for work longer than 6 months as of January, 2010. This particularly affected older workers. In April 2010, the official unemployment rate was 9.9%, but the government¶s broader U-6 unemployment rate was 17.1%. In the period between February 2008 and February 2010, the number of people working part time for

economic reasons has increased by 4 million to 8.8 million, that is a 83% increase in part time workers during the two year period. Female unemployment continued to be significantly lower than male unemployment (7.5% vs. 9.8%). The unemployment among AfricanAmericans continues to be much higher than white unemployment (at 14.9% vs. 8.6%). The youth unemployment rate was 18.5% in July 2009, the highest July rate since 1948. 34.5% of young African American men were unemployed in October 2009. Officially,Detroit¶s unemployment rate is 27%, but Detroit News suggests that nearly half of this city¶s working-age population may be unemployed. Income and wealth Income in the United States and Wealth in the United States Personal income in the United States, Household income in the United States, Income inequality in the United States, Poverty in the United States, Affluence in the United States, and Homeownership in the United States According to the United States Census Bureau, the pretax median household income in 2007 was $50,233. The median ranged from $68,080 in Maryland to $36,338 in Mississippi. In 2007, the median real annual household income rose 1.3% to $50,233, according to the Census Bureau. The real median earnings of men who worked full time, year-round climbed between 2006 and 2007, from $43,460 to $45,113. For women, the corresponding increase was from $33,437 to $35,102. The median income per household member (including all working and non-working members above the age of 14) was $26,036 in 2006. The recently released US Income Mobility Study showed economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. Income mobility of individuals was considerable in the U.S. economy during the 1996 through 2004 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within 10 years. In addition, the median incomes of those initially in the lower

income groups increased more than the median incomes of those initially in the higher income groups. Between June 2007 and November 2008, Americans lost an estimated average of more than a quarter of their collective net worth. Since peaking in the second quarter of 2007, household wealth is down $14 trillion. The Fed also said that at the end of 2008, the debt owed by nonfinancial sectors was $33.5 trillion, including household debt valued at $13.8 trillion.[64] Sectors Economy of the United States by sector

Sales and employees by sectors of the United States economy in 2002. Energy Energy in the United States The United States is the largest energy consumer in terms of total use, using 100 quadrillion BTUs (105 exajoules, or 29000 TWh) in 2005. The U.S. ranks seventh in energy consumption per-capita after Canada and a number of other countries. The majority of this energy is derived from fossil fuels: in 2005, it was estimated that 40% of the nation's energy came from petroleum, 23%

from coal, and 23% from natural gas. Nuclear power supplied 8.4% andrenewable energy supplied 6.8%, which was mainly from hydroelectric dams although other renewables are included. American dependence on oil imports grew from 24% in 1970 to 65% by the end of 2005. At the current rate of unchecked import growth, the US would be 70% to 75% reliant on foreign oil by the middle of the next decade. Transportation has the highest consumption rates, accounting for approximately 68.9% of the oil used in the United States in 2006, and 55% of oil use worldwide as documented in the Hirsch report. Agriculture Agriculture in the United States Fishing industry in the United States, Beekeeping in the United States, and United States Department of Agriculture Agriculture is a major industry in the United States and the country is a net exporter of food. The United States controls almost half of world grain exports. Products include wheat, corn, other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy products; forest products; fish. Manufacturing Manufacturing in the United States The United States is the world's largest manufacturer, with a 2007 industrial output of US$2.69 trillion. Main industries include petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, and mining. A total of 3.2 million ± one in six U.S. factory jobs ± have disappeared since the start of 2000. Finance Finance in the United States, Banking in the United States, and Insurance in the United States The New York Stock Exchange is the largest stock exchange in the world by value of its listed companies' securities. As of October 2008, the

combined capitalization of all domestic NYSE listed companies was US$10.1 trillion. NASDAQ is another American stock exchange. It is the largest electronic screen-based equity securities trading market in the United States. With approximately 3,800 companies and corporations, it has more trading volume per hour than any other stock exchange in the world. International trade Foreign trade of the United States and Trade policy of the United States The United States is the world's largest trading nation. Since it is the world's leading importer, there are many U.S. dollars in circulation all around the planet. The dollar is also used as the standard unit of currency in international markets for commodities such as gold and petroleum (the latter sometimes called petrocurrency is the source of the term petrodollar). Large foreign economies such as China, Japan, Arab states of the Persian Gulf, and the EU own huge dollar reserves (especially as the US is more in debt) so there is a fear that they will move away from the dollar. China's reserves are more than $2 trillion, the world's largest.[76] China owns an estimated $1.6 trillion of U.S. securities. In 2008, the total U.S. trade deficit was $695.9 billion, which is $1.8 trillion in exports minus $2.5 trillion in imports. The deficit on petroleum products was $386.3 billion. The trade deficit with China was $266.3 billion, a new record and up from $304 million in 1983. The United States had a $144.1 billion surplus on trade in services, and $821.2 billion deficit on trade in goods in 2008. In order to fund the national debt (also known as public debt), the United States relies on selling U.S. treasury bonds to people both inside and outside the country, and in recent times a growing percent of buyers are international. Economic predictions and forecasting Predictions about the direction of the United States economy in the short term and long term are crucial factors in determining federal government policies, business decisions, and Federal Reserve decisions. Several institutions make economic predictions, including: Global Insight, and the UCLA Anderson

Forecast. Various state agencies, including the California Department of Finance, also make predictions. Currency and central bank United States dollar and Federal Reserve System

United States historical inflation rate 1666±2004 The United States dollar is the unit of currency of the United States. The U.S. dollar is the currency most used in international transactions. Several countries use it as their official currency, and in many others it is the de facto currency. The federal government attempts to use both monetary policy (control of the money supply through mechanisms such as changes in interest rates) and fiscal policy (taxes and spending) to maintain low inflation, high economic growth, and low unemployment. A relatively independentcentral bank, known as the Federal Reserve, was formed in 1913 to provide a stable currency and monetary policy. The U.S. dollar has been regarded as one of the most stable currencies in the world and many nations back their own currency with U.S. dollar reserves. The U.S. dollar has maintained its position as the world's primary reserve currency, although it is gradually being challenged in that role. Almost twothirds of currency reserves held around the world are held in US dollars, compared to around 25% for the next most popular currency, the Euro. Rising US national debt and the related rise of China have led to some, especially the

Chinese, to call for replacing the dollar as the world's reserved currency, but thus far this has been only speculation. The dollar used gold standard and/or silver standard from 1785 until 1975, when it became a fiat currency.

Government involvement Regulations The U.S. federal government regulates private enterprise in numerous ways. Regulation falls into two general categories. Some efforts seek, either directly or indirectly, to control prices. Traditionally, the government has sought to prevent monopolies such as electric utilities from raising prices beyond the level that would ensure them extremely large profits. At times, the government has extended economic control to other kinds of industries as well. In the years following the Great Depression, it devised a complex system to stabilize prices for agricultural goods, which tend to fluctuate wildly in response to rapidly changing supply and demand. A number of other industries²trucking and, later, airlines²successfully sought regulation themselves to limit what they considered as harmful price cutting, a process called regulatory capture. Another form of economic regulation, antitrust law, seeks to strengthen market forces so that direct regulation is unnecessary. The government²and, sometimes, private parties²have used antitrust law to prohibit practices or mergers that would unduly limit competition. Bank regulation in the United States is highly fragmented compared to other G10 countries where most countries have only one bank regulator. In the U.S., banking is regulated at both the federal and state level. The U.S also has one of the most highly regulated banking environments in the world; however, many of the regulations are not safety and soundness related, but are instead focused on privacy, disclosure, fraud prevention, anti-money laundering, antiterrorism, anti-usury lending, and promoting lending to lower-income segments.

Since the 1970s, government has also exercised control over private companies to achieve social goals, such as improving the public's health and safety or maintaining a healthy environment. For example, the Occupational Safety and Health Administration provides and enforces standards for workplace safety, and the United States Environmental Protection Agency provides standards and regulations to maintain air, water, and land resources. The U.S. Food and Drug Administration regulates what drugs may reach the market, and also provides standards of disclosure for food products. American attitudes about regulation changed substantially during the final three decades of the 20th century. Beginning in the 1970s, policy makers grew increasingly convinced that economic regulation protected companies at the expense of consumers in industries such as airlines and trucking. At the same time, technological changes spawned new competitors in some industries, such as telecommunications, that once were considered natural monopolies. Both developments led to a succession of laws easing regulation. While leaders of America's two most influential political parties generally favored economic deregulation during the 1970s, 1980s, and 1990s, there was less agreement concerning regulations designed to achieve social goals. Social regulation had assumed growing importance in the years following the Depression and World War II, and again in the 1960s and 1970s. During the 1980s, the government relaxed labor, consumer and environmental rules based on the idea that such regulation interfered with free enterprise, increased the costs of doing business, and thus contributed to inflation. The response to such changes is mixed; many Americans continued to voice concerns about specific events or trends, prompting the government to issue new regulations in some areas, including environmental protection. Where legislative channels have been unresponsive, some citizens have turned to the courts to address social issues more quickly. For instance, in the 1990s, individuals, and eventually the government itself, sued tobacco companies over the health risks of cigarette smoking. The 1998 Tobacco Master Settlement Agreement provided states with long-term payments to cover medical costs to treat smoking-related illnesses. Taxation Taxation in the United States

Taxation in the United States is a complex system which may involve payment to at least four different levels of government and many methods of taxation. Taxes are levied by thefederal government, by the state governments, and often by local governments, which may include counties, municipalities, township, school districts, and other specialpurpose districts, which include fire, utility, and transit districts.

The National Bureau of Economic Research has concluded that the combined federal, state, and local government average marginal tax rate for most workers to be about 40% of income. The Tax Foundation concluded that government at all levels will collect 30.8% of the nation's income for 2008. Tax Day, the day by which tax returns are due, is usually April 15.

Expenditure United States federal budget and United States public debt

Fiscal Year 2009 U.S. Federal Spending - Cash or Budget Basis.

Fiscal Year 2009 U.S. Federal Receipts.

The United States public sector spending amounts to about a third of the GDP. Each level of government provides many direct services. The federal government, for example, is responsible for national defense, backs research that often leads to the development of new products, conducts space exploration, and runs numerous programs designed to help workers develop workplace skills and find jobs (including higher education). Government spending has a significant effect on local and regional economies²and even on the overall pace of economic activity. State governments, meanwhile, are responsible for the construction and maintenance of most highways. State, county, or city governments play the

leading role in financing and operating public schools. Local governments are primarily responsible for police and fire protection. Overall, federal, state, and local spending accounted for almost 28% of gross domestic product in 1998. As of January 20, 2009, the total U.S. federal debt was $10.627 trillion (an increase of 85.5 percent over the previous eight years). The borrowing cap debt ceiling as of 2005 stood at $8.18 trillion. In March 2006, Congress raised that ceiling an additional $0.79 trillion to $8.97 trillion, which is approximately 68% of GDP. Congress has used this method to deal with an encroaching debt ceiling in previous years, as the federal borrowing limit was raised in 2002 and 2003. As of October 4, 2008, the "Emergency Economic Stabilization Act of 2008" raised the current debt ceiling to US$ 11.3 trillion. The federal government's debt rose by almost $1.4 trillion in 2009, and now stands at $12.1 trillion. While the U.S. public debt is the world's largest in absolute size, another measure is its size relative to the nation's GDP. As of 2009 the debt was 83 percent of GDP. This debt, as a percent of GDP, is still less than the debt of Japan (192%) (the overwhelming number of owners of JGBs are Japanese) and roughly equivalent to those of a few western European nations, including Greece.

History of the constitution of USA

THE WHITE HOUSE

Drafting and ratification requirements

The Articles of Confederation and Perpetual Union was the first constitution of the United States of America In September 1786, commissioners from five states met in the Annapolis Convention to discuss adjustments to the Articles of Confederation that would improve commerce. They invited state representatives to convene in Philadelphia to discuss improvements to the federal government. After debate, the Congress of the Confederation endorsed the plan to revise the Articles of Confederation on February 21, 1787. Twelve states, Rhode Island being the only exception, accepted this invitation and sent delegates to convene in May 1787. The resolution calling the Convention specified that its purpose was to propose amendments to the Articles, but through discussion and debate it became clear by mid-June that, rather than amend the existing Articles, the Convention decided to propose a rewritten ConstitutionThe Constitutional Convention voted to keep the debates secret, so that the delegates could speak freely. They also decided to draft a new fundamental government design. Despite Article 13 of the Articles of Confederation stating that the union created under the Articles was "perpetual" and that any alteration must

be "agreed to in a Congress of the United States, and be afterwards confirmed by the legislatures of every State," Article VII of the proposed constitution stipulated that only nine of the thirteen states would have to ratify for the new government to go into effect (for the participating states). Current knowledge of the drafting and construction of the United States Constitution comes primarily from the diaries left by James Madison, who kept a complete record of the proceedings at the Constitutional Convention.

Work of the Constitutional Convention

A diagram by Thomas paine representing usa constitution

The Virginia Plan was the unofficial agenda for the Convention, and was drafted chiefly by James Madison, considered to be "The Father of the Constitution" for

his major contributionsIt was weighted toward the interests of the larger states, and proposed among other points:
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A powerful bicameral legislature with a House and a Senate An executive chosen by the legislature A judiciary, with life-terms of service and vague powers The national legislature would be able to veto state laws

The Philadelphia Convention An alternative proposal, William Paterson's New Jersey Plan, includes the following points that countered the previous proposal that favored the larger states, among others:
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A unicameral legislature with all states represented in equal numbers in order to insure fairness An executive branch appointed by the legislature A judicial branch appointed by the executive.

Articles of the Constitution
The Constitution consists of a preamble, seven original articles, twenty-seven amendments, and a paragraph certifying its enactment by the constitutional convention.
Preamble: Statement of purpose

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
²United

States Constitution, Preamble

Article One: Legislative Power
Article One describes the Congress, the legislative branch of the federal government. The United States Congress is a bicameral body consisting of two coequal houses: the House of Representatives and the Senate.The article establishes the manner of election and the qualifications of members of each body. Representatives must be at least 25 years old, be a citizen of the United States for seven years, and live in the state they represent. Senators must be at least 30 years old, be a citizen for nine years, and live in the state they represent.

Article I, Section 1, reads, "All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives." This provision gives Congress more than simply the responsibility to establish the rules governing its proceedings and for the punishment of its members; it places the power of the government primarily in Congress.

Article I Section 8 enumerates the legislative powers. The powers listed and all other powers are made the exclusive responsibility of the legislative branch: The Congress shall have power... To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.

Article I Section 9 provides a list of eight specific limits on congressional power and Article I Section 10 limits the rights of the states. The United States Supreme Court has interpreted the Commerce Clause and the Necessary and Proper Clause in Article One to allow Congress to enact legislation that is neither expressly listed in the enumerated power nor expressly denied in the limitations on Congress. In McCulloch v. Maryland (1819), the United States Supreme Court fell back on the strict construction of the necessary and proper clause to read that Congress had´ the foregoing powers and all other powers..."

Article Two: Executive power
Section analysis

Section 1 creates the presidency. The section states that the executive power is vested in a President. The presidential term is four years and the Vice President serves the identical term. This section originally set the method of electing the President and Vice President, but this method has been superseded by the Twelfth Amendment.
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Qualifications. The President must be a natural born citizen of the United States, at least 35 years old and a resident of the United States for at least 14 years. An obsolete part of this clause provides that instead of being a natural born citizen, a person may be a citizen at the time of the adoption of the Constitution. The reason for this clause was to extend eligibility to Citizens of the United States at the time of the adoption of the Constitution, regardless of their place of birth, who were born under the allegiance of a foreign sovereign before the founding of the United States. Without this clause, no one would have been eligible to be president until thirty-five years after the founding of the United States. Succession. Section 1 specifies that the Vice President succeeds to the presidency if the President is removed, unable to discharge the powers and duties of office, dies while in office, or resigns. The original text ("the same shall devolve") left it unclear whether this succession was intended to be on

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an acting basis (merely taking on the powers of the office) or permanent (assuming the Presidency itself). After the death of William Henry Harrison, John Tyler set the precedent that the succession was permanent; this practice was followed when later presidents died in office. Today the 25th Amendment states that the Vice President becomes President upon the death or disability of the President.
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Pay. The President receives "Compensation" for being the president, and this compensation may not be increased or decreased during the president's term in office. The president may not receive other compensation from either the United States or any of the individual states. Oath of office. The final clause creates the presidential oath to preserve, protect, and defend the Constitution.

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Section 2 grants substantive powers to the president:
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The president is the Commander in Chief of the armed forces, and of the state militias when these are called into federal service. The president may require opinions of the principal officers of the federal government. The president may grant reprieves and pardons, except in cases of impeachment (i.e., the president cannot pardon himself or herself to escape impeachment by Congress).

Section 2 grants and limits the president's appointment powers:
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The president may make treaties, with the advice and consent of the Senate, provided two-thirds of the Senators who are present agree. With the advice and consent of the Senate, the President may appoint ambassadors, other public ministers and consuls, judges of the supreme Court, and all other officers of the United States whose appointments are not otherwise described in the Constitution. Congress may give the power to appoint lower officers to the President alone, to the courts, or to the heads of departments. The president may make any of these appointments during a congressional recess. Such a "recess appointment" expires at the end of the next session of Congress.

Section 3 opens by describing the president's relations with Congress:
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The president reports on the state of the union. The president may convene either house, or both houses, of Congress. When the two houses of Congress cannot agree on the time of adjournment, the president may adjourn them to some future date.

Section 3 adds:
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The president receives ambassadors. The president sees that the laws are faithfully executed. The president commissions all the offices of the federal government.

Section 4 provides for removal of the president and other federal officers. The president is removed on impeachment for, and conviction of, treason, bribery, or other high crimes and misdemeanors.

Article Three: Judicial power

Article Three describes the court system (the judicial branch), including the Supreme Court. The article requires that there be one court called the Supreme Court; Congress, at its discretion, can create lower courts, whose judgments and orders are reviewable by the Supreme Court. Article Three also creates the right to trial by jury in all criminal cases, defines the crime of treason, and charges Congress with providing for a punishment for it. This Article also sets the kinds of cases that may be heard by the federal judiciary, which cases the Supreme Court may hear first (called original jurisdiction), and that all other cases heard by the Supreme Court are by appeal under such regulations as the Congress shall make.

Article Four: States' powers and limits
Article Four describes the relationship between the states and the federal government and amongst the states. For instance, it requires states to give "full faith and credit" to the public acts, records, and court proceedings of the other states. Congress is permitted to regulate the manner in which proof of such acts, records, or proceedings may be admitted. The "privileges and immunities" clause prohibits state governments from discriminating against citizens of other states in

favor of resident citizens (e.g., having tougher penalties for residents of Ohio convicted of crimes within Michigan). It also establishes extradition between the states, as well as laying down a legal basis for freedom of movement and travel amongst the states. Today, this provision is sometimes taken for granted, especially by citizens who live near state borders; but in the days of the Articles of Confederation, crossing state lines was often a much more arduous and costly process. Article Four also provides for the creation and admission of new states. The Territorial Clause gives Congress the power to make rules for disposing of federal property and governing non-state territories of the United States. Finally, the fourth section of Article Four requires the United States to guarantee to each state a republican form of government, and to protect the states from invasion and violence.

Article Five: Amendments
An amendment may be ratified in three ways:
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The new amendment may be approved by two-thirds of both houses of Congress, then sent to the states for approval. Two-thirds of the state legislatures may apply to Congress for a constitutional convention to consider amendments, which are then sent to the states for approval. Congress may require ratification by special convention. The convention method has been used only once, to approve the 21st Amendment (repealing prohibition, 1933).

Regardless of the method of proposing an amendment, final ratification requires approval by three-fourths of the states. Today Article Five places only one limit on the amending power: no amendment may deprive a state of equal representation in the Senate without that state's consent. The original Article V included other limits on the amending power regarding slavery and taxation; however, these limits expired in 1808.

Article Six: Federal power
Article Six establishes the Constitution, and the laws and treaties of the United States made according to it, to be the supreme law of the land, and that "the judges in every state shall be bound thereby, any thing in the laws or constitutions of any state notwithstanding." It also validates national debt created under the Articles of

Confederation and requires that all federal and state legislators, officers, and judges take oaths or affirmations to support the Constitution. This means that the states' constitutions and laws should not conflict with the laws of the federal constitution and that in case of a conflict, state judges are legally bound to honor the federal laws and constitution over those of any state. Article Six also states "no religious Test shall ever be required as a Qualification to any Office or public Trust under the United States."

Article Seven: Ratification
Article Seven sets forth the requirements for ratification of the Constitution. The Constitution would not take effect until at least nine states had ratified the Constitution in state conventions specially convened for that purpose, and it would only apply to those states that ratified it

Amendments
The framers of the Constitution were aware that changes would be necessary if the Constitution was to endure as the nation grew. However, they were also conscious that such change should not be easy, lest it permit ill-conceived and hastily passed amendments. On the other hand, they also wanted to ensure that a rigid requirement of unanimity would not block action desired by the vast majority of the population. Their solution was a two-step process for proposing and ratifying new amendments. Amending the Constitution is a two-part process: amendments must be proposed then ratified. Amendments can be proposed one of two ways. To date, all amendments, whether ratified or not, have been proposed by a two-thirds vote in each house of Congress. Over 10,000 constitutional amendments have been introduced in Congress since 1789; during the last several decades, between 100 and 200 have been offered in a typical congressional year. Most of these ideas never leave Congressional committee, and far fewer get proposed by the Congress for ratification.

Alternatively, if two-thirds of the state legislatures demand one, Congress must call for a constitutional convention, which would have the power to propose amendments. As no such convention has been called, it is unclear how one would work in practice. In two instances²reapportionment in the 1960s and a balanced federal budget during the 1970s and 1980s²attempts to use this process have come extremely close to triggering a constitutional convention. The apportionment debate of the 1960s fell only one state short of the required number of states. Regardless of how the amendment is proposed, it must also be ratified by threefourths of states. Congress determines whether the state legislatures or special state conventions ratify the amendment. The 21st Amendment is the only one that employed state conventions for ratification. There are currently only a few proposals for amendments which have entered mainstream political debate. These include the Federal Marriage Amendment, the Balanced Budget Amendment, and the Flag Desecration Amendment. All three proposals are supported primarily by conservatives, but failed during periods of Republican control of Congress to achieve the supermajorities necessary for submission to the states. As such, none of these are likely to be proposed under the current Congress, which is controlled by the more liberal Democratic Party. Unlike amendments to most constitutions, amendments to the United States Constitution are appended to the body of the text without altering or removing what already exists, although nothing prevents a future amendment from doing so.

Successful amendments
The Constitution has twenty-seven amendments. The first ten, collectively known as the Bill of Rights, were ratified simultaneously by 1791. The following seventeen were ratified separately over the next two centuries. The Bill of Rights (Amendments 1 to 10) United States Bill of Rights currently housed in the National Archives. It is commonly understood that originally the Bill of Rights was not intended to apply to the states; however, there is no such limit in the text itself, except where an amendment refers specifically to the federal government. One example is the First Amendment, which says only that "Congress shall make no law...", and under

which some states in the early years of the nation officially established a religion. A rule of inapplicability to the states remained until 1868, when the Fourteenth Amendment was passed, which stated, in part, that: No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. The Supreme Court has interpreted this clause to extend most, but not all, parts of the Bill of Rights to the states, a process known as incorporation of the Bill of Rights. The balance of state and federal power under the incorporation doctrine is still an open question and continues to be fought separately for each right in the federal courts. The amendments that became the Bill of Rights were the last ten of the twelve amendments proposed in 1789. The second of the twelve proposed amendments, regarding the compensation of members of Congress, remained unratified until 1992, when the legislatures of enough states finally approved it; as a result, after pending for two centuries, it became the Twenty-seventh Amendment. The first of the twelve, which is still technically pending before the state legislatures for ratification, pertains to the apportionment of the United States House of Representatives after each decennial census. The most recent state whose lawmakers are known to have ratified this proposal is Kentucky in 1792, during that commonwealth's first month of statehood.
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First Amendment: addresses the rights of freedom of religion (prohibiting Congress from establishing a religion and protecting the right to free exercise of religion), freedom of speech, freedom of the press, freedom of assembly, and freedom of petition. Second Amendment: guarantees the right of individuals to possess weapons. The most recent Supreme Court decision interpreting the Second Amendment is McDonald v. Chicago. Third Amendment: prohibits the government from using private homes as quarters for soldiers during peacetime without the consent of the owners.

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The only existing case law directly regarding this amendment is a lower court decision in the case of Engblom v. Carey.However, it is also cited in the landmark case, Griswold v. Connecticut, in support of the Supreme Court's holding that the constitution protects the right to personal privacy. Fourth Amendment: guards against searches, arrests, and seizures of property without a specific warrant or a "probable cause" to believe a crime has been committed. Some rights to privacy have been inferred from this amendment and others by the Supreme Court. Fifth Amendment: forbids trial for a major crime except after indictment by a grand jury; prohibits double jeopardy (repeated trials), except in certain very limited circumstances; forbids punishment without due process of law; and provides that an accused person may not be compelled to testify against himself (this is also known as "Taking the Fifth" or "Pleading the Fifth"). This is regarded as the "rights of the accused" amendment, otherwise known as the Miranda rights after the Supreme Court case. It also prohibits government from taking private property for public use without "just compensation", the basis of eminent domain in the United States. Sixth Amendment: guarantees a speedy public trial for criminal offenses. It requires trial by a jury, guarantees the right to legal counsel for the accused, and guarantees that the accused may require witnesses to attend the trial and testify in the presence of the accused. It also guarantees the accused a right to know the charges against him. The Sixth Amendment has several court cases associated with it, including Powell v. Alabama, United States v. Wong Kim Ark, Gideon v. Wainwright, and Crawford v. Washington. In 1966, the Supreme Court ruled that the fifth amendment prohibition on forced self-incrimination and the sixth amendment clause on right to counsel were to be made known to all persons placed under arrest, and these clauses have become known as the Miranda rights. Seventh Amendment: assures trial by jury in civil cases. Eighth Amendment: forbids excessive bail or fines, and cruel and unusual punishment. Ninth Amendment: declares that the listing of individual rights in the Constitution and Bill of Rights is not meant to be comprehensive; and that the other rights not specifically mentioned are retained by the people.

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Tenth Amendment: reserves to the states respectively, or to the people, any powers the Constitution did not delegate to the United States, nor prohibit the states from exercising.

Subsequent amendments (11 to 27)
Amendments to the Constitution after the Bill of Rights cover many subjects. The majority of the seventeen later amendments stem from continued efforts to expand individual civil or political liberties, while a few are concerned with modifying the basic governmental structure drafted in Philadelphia in 1787. Although the United States Constitution has been amended 27 times, only 26 of the amendments are currently in effect because the twenty-first amendment supersedes the eighteenth.
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Eleventh Amendment (1795): Clarifies judicial power over foreign nationals, and limits ability of citizens to sue states in federal courts and under federal law. Twelfth Amendment (1804): Changes the method of presidential elections so that members of the Electoral College cast separate ballots for president and vice president. Thirteenth Amendment (1865): Abolishes slavery and authorizes Congress to enforce abolition. Fourteenth Amendment (1868): Defines a set of guarantees for United States citizenship; prohibits states from abridging citizens' privileges or immunities and rights to due process and the equal protection of the law; repeals the Three-fifths compromise; prohibits repudiation of the federal debt caused by the Civil War. Fifteenth Amendment (1870): Prohibits the federal government and the states from using a citizen's race, color, or previous status as a slave as a qualification for voting. Sixteenth Amendment (1913): Authorizes unapportioned federal taxes on income. Seventeenth Amendment (1913): Converts state election of senators to popular electionEighteenth Amendment (1919): Prohibited the manufacturing, importing, and exporting of alcoholic beverages (Prohibition in the United States). Repealed by the Twenty-First Amendment. Nineteenth Amendment (1920): Prohibits the federal government and the states from forbidding any citizen to vote due to their sex. Twentieth Amendment (1933): Changes details of congressional and presidential terms and of presidential succession.

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Twenty-first Amendment (1933): Repeals Eighteenth Amendment. Permits states to prohibit the importation of alcoholic beverages. Twenty-second Amendment (1951): Limits president to two terms. Twenty-third Amendment (1961): Grants presidential electors to the District of Columbia. Twenty-fourth Amendment (1964): Prohibits the federal government and the states from requiring the payment of a tax as a qualification for voting for federal officials. Twenty-fifth Amendment (1967): Changes details of presidential succession, provides for temporary removal of president, and provides for replacement of the vice president. Twenty-sixth Amendment (1971): Prohibits the federal government and the states from forbidding any citizen of age 18 or greater to vote on account of their age. Twenty-seventh Amendment (1992): Limits congressional pay raises

United States dollar-medium of exchange:OVERVIEW
United States dollar

$1 Coin

Federal Reserve Notes

Inflation 1.24%, July 2010 The Constitution of the United States of America provides that the United States Congress shall have the power "To coin Money". As an exercise of that power, Congress enacted Section 5112 of Title 31 of the United States Code. Section 5112 provides that United States dollars shall be issued in two forms: (1) a coin made of a copper alloy and (2) a coin made of pure silver. Those coins are both designated in Section 5112 as "legal tender" in payment of debts. The Sacagawea dollar is one example of the copper alloy dollar. The pure silver dollar is known as the American Silver Eagle. Section 5112 also provides for the minting and issuance of other coins, which have values ranging from one-hundredth of one dollar to fifty dollars. These other coins are more fully described in Coins of the United States dollar. The word "dollar" is one of the words in the first paragraph of Section 9 of Article 1 of the U.S. Constitution. In that context, "dollars" is a reference to the Spanish milled dollar, a coin that had a monetary value of 8 Spanish units of currency, or reales. In 1792 the U.S. Congress adopted legislation titled An act establishing a mint, and regulating the Coins of the United States. Section 9 of that act authorized the production of various coins, including "DOLLARS OR UNITS²each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver". Section 20 of the act provided, "That the money of account of the United States shall be expressed in dollars, or units... and that all accounts in the public offices and all proceedings in the courts of the United States shall be kept and had in conformity to this regulation". In other words, this act designated the United States dollar as the unit of currency of the United States. When currently issued in circulating form, denominations equal to or less than a dollar are emitted as U.S. coins while denominations equal to or greater than a dollar are emitted as Federal Reserve notes (with the exception of gold, silver and platinum coins valued up to $100 as legal tender, but worth far more as bullion). Both one-dollar coins and notes are produced today, although the note form is significantly more common. In the past, "paper money" was occasionally issued in denominations less than a dollar (fractional currency) and gold coins were issued for circulation up to the value of $20 (known as the "double eagle," discontinued in the 1930s). The term eagle was used in the Coinage Act of 1792 for the

denomination of ten dollars, and subsequently was used in naming gold coins. In 1854, James Guthrie, then Secretary of the Treasury, proposed creating $100, $50 and $25 gold coins, which were referred to as a "Union," "Half Union," and "Quarter Union," thus implying a denomination of 1 Union = $100. Today, USD notes are made from cotton fiber paper, unlike most common paper, which is made of wood fiber. U.S. coins are produced by the United States Mint. U.S. dollar banknotes are printed by the Bureau of Engraving and Printing, and, since 1914, have been issued by the Federal Reserve. The "large-sized notes" issued before 1928 measured 7.42 inches (188 mm) by 3.125 inches (79.4 mm); small-sized notes, introduced that year, measure 6.14 inches (156 mm) by 2.61 inches (66 mm) by 0.0043 inches (0.11 mm).

Dollar sign
The symbol , usually written before the numerical amount, is used for the U.S. dollar (as well as for many other currencies). The sign's ultimate origins are not certain, though it is possible that it comes from the Pillars of Hercules which flank the Spanish Coat of arms on the Spanish dollars that were minted in the New World mints in Mexico City, Potosí, Bolivia, and in Lima, Peru. These Pillars of Hercules on the silver Spanish dollar coins take the form of two vertical bars and a swinging cloth band in the shape of an "S". An equally accepted, and better documented, explanation is that this symbol for peso was the result of a late eighteenth-century evolution of the scribal abbreviation "ps." The p and the s eventually came to be written over each other giving rise to $.

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A fictional possibility suggested is that the dollar sign is the capital letters U and S typed one on top of the other. This theory, popularized by novelist Ayn Rand in Atlas Shrugged, does not consider the fact that the symbol was already in use before the formation of the United States.

History
The first dollar coins issued by the United States Mint (founded 1792) were similar in size and composition to the Spanish dollar. The Spanish, U.S. silver dollars, and Mexican silver pesos circulated side by side in the United States, and the Spanish dollar and Mexican peso remained legal tender until 1857. The coinage of various English colonies also circulated. The lion dollar was popular in the Dutch New Netherland Colony (New York), but the lion dollar also circulated throughout the English colonies during the seventeenth and early eighteenth centuries. Examples circulating in the colonies were usually worn so that the design was not fully distinguishable, thus they were sometimes referred to as "dog dollars".[25] The U.S. dollar was created and defined by the Coinage Act of 1792. It specified a "dollar" to be based in the Mexican peso at 1 dollar per peso and between 371 and 416 grains (27.0 g) of silver (depending on purity) and an 'eagle" to be between 247 and 270 grains (17 g) of gold (again depending on purity). The choice of the value 371 grains arose from Alexander Hamilton's decision to base the new American unit on the average weight of a selection of worn Spanish dollars (and later Mexican peso). Hamilton got the treasury to weigh a sample of Spanish dollars and the average weight came out to be 371 grains. A new Spanish dollar was usually about 377 grains in weight, and so the new U.S. dollar was at a slight discount in relation to the Spanish dollar. The gold equivalent of the Spanish dollar in sterling was 1 = $4.80, whereas the gold equivalent of the U.S. dollar was 1 = 4.86 . This exchange rate with sterling remained right up until Britain abandoned the gold standard in 1931. The Coinage Act of 1792 set the value of an eagle at 10 dollars, and the dollar at 1/10th eagle. It called for 90% silver alloy coins in denominations of 1, 1/2, 1/4, 1/10, and 1/20 dollars; it called for 90% gold alloy coins in denominations of 1, 1/2, 1/4, and 1/10 eagles. The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the value of things to remain fairly constant over time, except for the influx and outflux of gold and silver in the nation's economy.

The early currency of the USA did not exhibit faces of presidents, as is the custom now. In fact, George Washington was against having his face on the currency, a practice he compared to the policies of European monarchs. The currency as we know it today did not get the faces they currently have until after the early 20th century; before that "heads" side of coinage used profile faces and striding, seated, and standing figures from Greek and Roman mythology and generic native Americans. The last coins to be converted to profiles of historic Americans were the dime (1946) and the Dollar (1971).

Silver and gold standards

From 1792, when the Mint Act was passed, the dollar was pegged to silver at 371.25 grains, or 24.75 grains (1.604 g) of gold. Many historians erroneously assume gold was standardized at a fixed rate in parity with silver, however there is no evidence of Congress making this law. This has to do with Alexander Hamilton's suggestion to Congress of a fixed 15:1 ratio of silver to gold, respectively. The gold coins that were minted however, were not given any denomination whatsoever and traded for a market value relative to the Congressional standard of the silver dollar. 1834 saw a shift in the gold standard to 23.2 grains (1.50 g), followed by a slight adjustment to 23.22 grains (1.505 g) in 1837 (16:1 ratio). In 1862, paper money was issued without the backing of precious metals, due to the Civil War. Silver and gold coins continued to be issued and in 1878 the link between paper money and coins was reinstated. This disconnection from gold and silver backing also occurred during the War of 1812. The use of paper money not backed by precious metals had also occurred under the Articles of Confederation from 1777 to 1788. With no solid backing and being easily counterfeited, the continentals quickly lost their value, giving rise to the phrase "not worth a continental". This was a primary reason for the "No state shall... make any thing but gold and silver coin a tender in payment of debts" clause in article 1, section 10 of the United States Constitution. The Gold Standard Act of 1900 abandoned the bimetallic standard and defined the dollar as 23.22 grains (1.505 g) of gold, equivalent to setting the price of 1 troy

ounce of gold at $20.67. Silver coins continued to be issued for circulation until 1964, when all silver was removed from dimes and quarters, and the half dollar was reduced to 40% silver. Silver half dollars were last issued for circulation in 1969. Gold coins were confiscated in 1933 and the gold standard was changed to 13.71 grains (0.888 g), equivalent to setting the price of 1 troy ounce of gold at $35. This standard persisted until 1968. Between 1968 and 1975, a variety of pegs to gold were put in place. The price was at $42.22 per ounce before August 15, 1971 saw the U.S. dollar freely float on currency markets. According to the Bureau of Engraving and Printing,The largest note it ever printed was the $100,000 Gold Certificate, Series 1934. These notes were printed from December 18, 1934 through January 9, 1935, and were issued by the Treasurer of the United States to Federal Reserve Banks only against an equal amount of gold bullion held by the Treasury. These notes were used for transactions between Federal Reserve Banks and were not circulated among the general public.

Coins
Official United States coins have been produced every year from 1792 to the present.
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Half-cent 1792 - 1857 Penny 1793±present 2-cent 1864±1873 3-cent 1851-1873 Half Dime 1792-1873 (Not to be confused with the Nickel below also worth 5 cents) Nickel 1866±present Dime 1792±present 20-cent 1875-1878 Quarter 1796±present Half dollar 1794±present Dollar coin (United States) 1794±present Quarter Eagle ($2.5 gold coin) 1792-1929 Three-dollar piece 1854-1889 Half Eagle ($5 gold coin) 1795-1929 Eagle ($10 gold coin) 1795-1929 Double Eagle ($20 gold coin) 1850-1933

Collector coins for which everyday transactions are non-existent.

Dollar coins

FLOWING HAIR DOLLAR

The first United States dollar was minted in 1794. Known as the Flowing Hair Dollar, it contained 416 grains of "standard silver" (89.25% silver and 10.75% copper), as specified by Section 13 [27] of the Coinage Act of 1792. It was designated by Section 9 of that Act as having "the value of a Spanish milled dollar". Dollar coins have not been very popular in the United States. Silver dollars were minted intermittently from 1794 through 1935; a copper-nickel dollar of the same large size, featuring President Dwight D. Eisenhower, was minted from 1971 through 1978. Gold dollars were also minted in the 19th century. The Susan B. Anthony dollar coin was introduced in 1979; these proved to be unpopular because they were often mistaken for quarters, due to their nearly equal size, their milled edge, and their similar color. Minting of these dollars for circulation was suspended in 1980 (collectors' pieces were struck in 1981), but, as with all past U.S. coins, they remain legal tender. As the number of Anthony dollars held by the Federal Reserve and dispensed primarily to make change in postal and transit vending machines had been virtually exhausted, additional Anthony dollars were struck in 1999. In 2000, a new $1 coin, featuring Sacagawea, (the Sacagawea dollar) was introduced, which corrected some of the mistakes of the Anthony dollar by having a smooth edge and a gold color, without requiring changes to vending machines that accept the Anthony dollar. However, this new coin has failed to achieve the popularity of the still-existing $1 bill and is rarely used in daily transactions. The failure to simultaneously withdraw the dollar bill and weak publicity efforts have been cited by coin proponents as primary reasons for the failure of the dollar coin to gain popular support. There are indications that the dollar coin's failure was also due to the reluctance of armored transport companies

to make the necessary adjustments to handle the new coins, and the government's reluctance to mandate it. The result of the armored carriers' unwillingness to handle the new coins was that they virtually never reached merchants in quantities sufficient to be given out as change on a routine basis, or for retail clerks to become used to handling them. In February 2007, the U.S. Mint, under the Presidential $1 Coin Act of 2005, introduced a new $1 U.S. Presidential dollar coin. Based on the success of the "50 State Quarters" series, the new coin features a sequence of presidents in order of their inaugurations, starting with George Washington, on the obverse side. The reverse side features the Statue of Liberty. To allow for larger, more detailed portraits, the traditional inscriptions of "E Pluribus Unum," "In God We Trust," the year of minting or issuance, and the mint mark will be inscribed on the edge of the coin instead of the face. This feature, similar to the edge inscriptions seen on the British £1 coin, is not usually associated with U.S. coin designs. The inscription "Liberty" has been eliminated, with the Statue of Liberty serving as a sufficient replacement. In addition, due to the nature of U.S. coins, this will be the first time there will be circulating U.S. coins of different denominations with the same President featured on the obverse (heads) side. (Lincoln/penny, Jefferson/nickel, Franklin D. Roosevelt/dime, Washington/quarter and Kennedy/half dollar.) Another unusual fact about the new $1 coin is Grover Cleveland will have two coins with his portrait issued due to the fact he was the only U.S. President to be elected to two non-consecutive terms. Early releases of the Washington coin included error coins shipped primarily from the Philadelphia mint to Florida and Tennessee banks. Highly sought after by collectors, and trading for as much as $850 each within a week of discovery, the error coins were identified by the absence of the edge impressions "E PLURIBUS UNUM IN GOD WE TRUST 2007 P". The mint of origin is generally accepted to be mostly Philadelphia, although identifying the source mint is impossible without opening a mint pack also containing marked units. Edge lettering is minted in both orientations with respect to "heads", some amateur collectors were initially duped into buying "upside down lettering error" coins. Some cynics also erroneously point out that the Federal Reserve makes more profit from dollar bills than dollar coins because they wear out in a few years, whereas coins are more permanent. The fallacy of this argument arises because new notes printed to replace worn out notes which have been withdrawn from circulation bring in no net revenue to the government to offset the costs of printing new notes and destroying the old ones. As most vending machines are incapable of making change in banknotes, they commonly accept only $1 bills, though a few will give change in dollar coins.

Mint marks

Most U.S. coins bear a mint mark as part of the design, usually found on the front of the coin near the date although in the past it was more commonly found on the reverse. The Philadelphia Mint issues coins bearing a letter P (or no mark at all), while the Denver Mint uses a letter D. The San Francisco Mint uses an S, though no coins have been released from that mint for general circulation since 1980. It does, however, continue to strike proof coins for collectors. The West Point Mint uses a W, though this is rarely seen as the West Point mint generally only makes high denomination coins (with face values over $1.00) which are not meant for everyday use. A CC mark, for the Carson City Mint, was used for a short time in the mid-19th century, but the mint at that location was only a temporary establishment. The New Orleans Mint used a mint mark O. It operated from the 1830s until the American Civil War, and again from 1879 to 1909. The letter D was also used for coinage of the Dahlonega Mint from 1837 to 1861, and C was used for the Charlotte Mint during the same timespan. The latter two mints struck gold coins only.

Banknotes
The U.S. Constitution provides that Congress shall have the power to "borrow money on the credit of the United States". Congress has exercised that power by authorizing twelve private companies²the Federal Reserve Banks²to issue Federal Reserve Notes. Those notes are "obligations of the United States" and "shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank." Federal Reserve Notes are designated by law as "legal tender" for the payment of debts. Congress has also authorized the issuance of more than 10 other types of banknotes, including the United States Note and the Federal Reserve Bank Note. The Federal Reserve Note is the only type that remains in circulation since the 1970s. The largest denominations of currency currently printed or minted by the United States are the $100 bill and the $100 one troy ounce Platinum Eagle.
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$1 and $2 color: White and rich gray $5 color: Gray and some purple $10 color: Light yellow

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$20 color: Light green $50 color: Deep blue and purple $100 color: Rich light blue (Series 2009 redesign is scheduled for release on February 10, 2011)

Currently printed denominations are $1, $2, $5, $10, $20, $50, and $100. Notes above the $100 denomination ceased being printed in 1946 and were officially withdrawn from circulation in 1969. These notes were used primarily in inter-bank transactions or by organized crime; it was the latter usage that prompted President Richard Nixon to issue an executive order in 1969 halting their use. With the advent of electronic banking, they became less necessary. Notes in denominations of $500, $1,000, $5,000, $10,000, and $100,000 were all produced at one time; see large denomination bills in U.S. currency for details. These notes are now collector's items and are worth more than their face value to collectors. The design of the notes has been accused of being unfriendly to the visually impaired. A U.S. District Judge ruled on November 28, 2006 that the American bills gave an undue burden to the blind and denied them "meaningful access" to the U.S. currency system. The judge ordered the Treasury Department to begin working on a redesign within 30 days

Means of issue
New dollars are issued when the Federal Reserve elects to fund the purchase of debt, primarily U.S. Treasury Bonds, by creating new reserves rather than financing the purchase with existing reserves. When the bond issuer spends the money, new dollars enter circulation. In theory, Federal Reserve Notes are like checks: liabilities drawn on the Federal Reserve Bank. The Fed offsets these liabilities by holding U.S. Treasury Bonds as assets, which are backed by the U.S. Government's ability to levy taxes and repay. When compared to hard money backed by gold or silver, this debt-based approach has the advantage of making the currency elastic, giving the government a means of expanding or contracting the money supply in response to changing economic conditions. The disadvantage of this approach is inflation. The money supply must be continually expanded in order to finance interest payments on the debt by which it is issued. This devalues the currency, causing inflation.

Value
Buying power of one U.S. dollar compared to 1774 USD Equivalent Equivalent Equivalent buying buying buying Year Year Year power power power 1774 $1.00 1860 $0.97 1950 $0.33 1780 $0.59 1870 $0.62 1960 $0.26 1790 $0.89 1880 $0.79 1970 $0.20 1800 $0.64 1890 $0.89 1980 $0.10 1810 $0.66 1900 $0.96 1990 $0.06 1820 $0.69 1910 $0.85 2000 $0.05 1830 $0.88 1920 $0.39 2007 $0.04 1840 $0.94 1930 $0.47 2008 $0.04 1850 $1.03 1940 $0.56 2009 $0.04

International use

Worldwide use of the U.S. dollar and the euro: United States External adopters of the US dollar Currencies pegged to the US dollar Currencies pegged to the US dollar w/ narrow band Eurozone External adopters of the euro Currencies pegged to the euro Currencies pegged to the euro w/ narrow band Note that the Belarusian ruble is pegged to the Euro, Russian Ruble, and U.S. Dollar in
a currency basket.

The dollar is also used as the standard unit of currency in international markets for commodities such as gold and petroleum (the latter sometimes called petrocurrency is the source of the term petrodollar). Some non-U.S. companies dealing in globalized markets, such as Airbus, list their prices in dollars. The U.S. dollar is the world's foremost reserve currency. In addition to holdings by central banks and other institutions, there are many private holdings, which are believed to be mostly in onehundred-dollar banknotes (indeed, most American banknotes actually are held outside the United States). All holdings of U.S.-dollar bank deposits held by non-residents of the United States are known as "eurodollars" (not to be confused with the euro), regardless of the location of the bank holding the deposit (which may be inside or outside the U.S.). Economist Paul Samuelson and others (including, at his death, Milton Friedman) have maintained that the overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate or the flow of trade to readjust. But Samuelson recently has said he now believes that at some uncertain future period these pressures will precipitate a run against the U.S. dollar with serious global financial consequences.[49]

The dollar as international reserve currency
Main article: Reserve currency

Percentage of global currencies

The U.S. dollar is an important international reserve currency along with the euro. The euro inherited this status from the German mark, and since its introduction, has increased its standing considerably, mostly at the expense of the dollar. Despite the dollar's recent losses to the euro, it is still by far the major international reserve currency, with an accumulation more than double that of the euro. In August, 2007, two scholars affiliated with the government of the People's Republic of China threatened to sell its substantial reserves in American dollars in response to American legislative discussion of trade sanctions designed to revalue the Chinese yuan.[50] The Chinese government denied that selling dollar-denominated assets would be an official policy in the foreseeable future. Former Federal Reserve Chairman Alan Greenspan said in September 2007 that the euro could replace the U.S. dollar as the world's primary reserve currency. It is "absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency."

http://en.wikipedia.org/wiki/United_States_dollar

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